What to Look for in Choosing a Bank

By Acceler8now.com Investing Education Team
Updated September, 2007

If you haven't operated a bank account before, you may be denying yourself a very important resource that can, in many ways, help contribute your advancement. Starting a relationship with a bank has tremendous value to offer you in the long-term and the earlier you get familiar with banking services and how to use them, the sooner you begin to tap into this strategic resource. Whether you will be getting into a bank account relationship for the first time or may just want additional accounts or a switch, it is still a weighty decision which you need to think over in terms of choosing a bank to deal with.

Why a Choice Still Counts
A lot of structural change, considered immensely positive, has taken place in the Nigerian banking industry in the last few years, especially as regards better capitalisation for banks. With more financial strength for all, you wonder if there is still need to bother about a choice? Well, you still have good reasons to screen.

  • Everyone's needs for business and personal banking differ, depending on what they do and banks too have core strengths in diverse areas, meaning that you need a bank that matches your need.
  • The scope and nature of our transactions also vary. If you're going for big transactions - the typical big account - you probably have more need for circumspection. Besides, if, for instance, you are depositing and not borrowing, your risk is also higher.
  • Even today, the financial strengths of banks still differ and, while we feel generally comfortable, reasonable caution is never a vice. Learn something from Barings Bank.
  • Quality of service is much improved across the board, but nothing says the delivery is uniform.

Choosing the Right Bank for You
Selecting a good bank - one that best fits your purpose and serves your long-term interest is what to aim for. That simply means you need to research the banks. Trust that, in due course, you will learn more about different banks in this section of this website. For now, what should guide your choice? These are some points to consider:

  • Key business focus areas of the bank matters. This is easy to understand. Are you deeply engaged in ECOWAS regional trade? Not every bank is well-positioned to serve you well in the related banking needs. Some already have regional spread, others have dedicated products, some may not yet be keen on supporting such activity. This is just an example. There are many core areas banks show individual strengths. Union Bank is known to be good in agriculture (among others), as another example. First Bank and Oceanic have won accolades in the past for supporting SMEs. Find out a bank that has products and a track record that show a potential to add value to your engagement.
  • Strong customer care will save your nightmares. Don't mind the noise every organisation makes about their customer care. The reality is that many, including banks, are weak on this. Harrowing experiences are still common. Yet, some banks have managed to build a tradition of quality service that not only helps accelerate your business transactions or other requirements but also takes much hassles off them. Your need a supportive and caring bank and that should be in reality, not slogan. Make enquiries.
  • Strength still counts. While basking in the benefit of recapitalisation, as an individual, be sure to cover your back. Barings Bank was alluded to earlier, and if you know its story, you will understand the need for caution. With increased capitalisation, banks are also taking on increased exposures. So, nothing is foolproof. Recall the First Bank experience with IILL. It took the long-accumulated strength of the bank to absorb and be unscathed. That shows that one huge bad lending could easily rock the boat. Okay, don't get scared - we're simply talking caution here. Even a heavily capitalised bank can run into such troubled waters. The difference is that it possibly has a lot of internal capacity and market standing to withstand shocks.
  • The quality of the board, management and staff is a factor to evaluate carefully. How do you judge these and the also important factor of the internal systems of the bank? Do you have to commission a rating just because you want to open an account? Not really. Just realise that if you intend to put your hard-earned money into a bank, you owe yourself a duty to know a bit about that bank, beyond the noise of promos and gifts. By asking questions, checking some easily available records and keeping your ears open, you can gain useful information that can help you judge the quality of those running a bank. The reason is that a damaging problem or action that affect your personal transactions, can result from weaknesses in systems, staff, management or the board.
  • Technology bent should interest you. Some banks are gradually getting up to speed on this. Today, I easily use the GTBank's online banking platform to get routine and not-so-routine things done, right from my desk. I don't need to go to the bank to effect a transfer to another account held by anybody with that bank. And with the NIBBS interface, you can now transfer to other banks, though value is not instantaneous. Good technology can shave a lot of time and effort off what you put into transactions with banks. Every bank sings technology, right? Does that place them on the same platform. You bet, not. Consider working with those that are technology friendly. That's if you are.
  • Spread is not too critical if a bank is strong on technology, but ensure you can access your bank when you need it and that includes from different locations, nationally and beyond. This much depends on the geographical scope of your activities. Think ahead before you lock into a bank you can't reach when you need them.
  • Finally, it won't hurt to know about ownership. You know they quarrel sometimes and that could hurt the institution. Or is it public? Too concentrated? Be sure to feel comfortable, from an investment perspective, with the ownership structure.

You need the banks for many good reasons and learning to use them effectively will give your activities a lift, no doubt. Our banking system has also been substantially strengthened since the bank consolidation process. The Central Bank was on record recently as assuring that all currently operational banks are safe to deal with. What we see generally points to this. When it comes to your personal transactions and finances, however, you need to go the extra mile in taking protective care. That bad era of bank failures cost many dearly, so, you can't err in being demanding on standards. The benefit of using a bank also goes beyond their financial capacity as other critical areas as technology, customer care, business focus, etc are important to the account holder. Besides, you still have to make a choice since you may not need to use all the banks. Whichever way you look at it, you need some selection criteria. Hopefully, our guide here will help out.