special treatment

More preferred banking services mean better options for high net worth customers and bigger business for banks
Nazia Khan

The face of modern banking increasingly offers options that do not involve dealing with an actual human face. Take your pick from ATMs, telephone banking with interactive voice response systems, Internet banking – all features that, for better or worse, effectively take the person out of personal banking. So, privilege banking services are, in a way, a return to roots for bankers; and an old-style experience for customers. There is no need to go to your bank because your bank can come to you, complete with preferred services.

Need for differentiation
Over the last three years, the GCC economy has grown by 74 per cent with the combined GDP aggregating over US$600bn. With high oil prices and diversification efforts creating abundant liquidity, there has been a tremendous growth in high net worth (HNW) and ultra high net worth (UHNW) business in the Middle East. Privilege banking essentially refers to services catering to this business segment, though the definition of ‘high’ in the high net worth varies from bank to bank.

With the advent of the Dubai International Financial Centre, Qatar Financial Centre and the Bahrain Financial Harbour, as well as the institutions they will house, there is greater choice than ever for customers. Which is why banks in Oman, as elsewhere in the region, have introduced further specialised services that they offer to HNW and UHNW individuals and institutions.

Says Ahmed al Ibrahim, head of private clients, Bank Dhofar, “HNWs are becoming increasingly sophisticated investors, seeking global opportunities for investments, but though a trusted local partner. We believe that we can help our clients avail of global investment opportunities and, in the process, generate some business locally. With this objective in mind, we set up our private banking services a year ago.”
     
In some banks in Oman, the terms privilege banking and private banking are used interchangeably. In others, they mean different things. At Bank Dhofar, for instance, customers with a salary income between RO500-RO1000 per month qualify for privilege banking services, including a special counter for them at the bank. For private banking services, the criteria are different. Continues Ibrahim, “Since our unit is in a nascent stage, we do not want to be too restrictive in accepting clients. Any individual/institution with a net worth of RO500,000 is welcome to try our services.”  

Oman Arab Bank, which launched its services in this category under the name Club Elite in January 2007, did so to differentiate between high net worth clients and other clients, and to deliver specialised services to the former group. Says Louma Atassi, relationship officer-private banking, Oman Arab Bank, “Through Club Elite, we offer a wide range of services, primary among which are investments.” Club Elite services are open to any individual/institution able to invest an amount of RO100,000. Adds Atassi, “But the base is flexible as we want to be as open as possible to special clients.”

The key features of NBO’s privilege banking proposition, which was launched in June 2000, include a dedicated personal account manager, a specially designed NBO card, representative cards (so that customers do not need to visit the bank personally for small transactions), personalised cheque book, and access to international airport lounges. Informs Asif al Radhvi, head of distribution channels and business development, NBO, “Customers must maintain an average monthly balance of RO15,000 or above in any deposit account with the bank to qualify for the privilege banking package.”

What’s so special
Privilege customers across banks are entitled to special rates on other products like loans and credit cards. They also get preferential rates on their deposits. We ask OAB’s Atassi how different these rates are from what regular customers pay, and she replies that they are different depending on the volume and worth of transactions, as well as other factors that are confidential. Confidentiality, she says, is the whole point of private banking. “It is what clients want and enjoy. Trust is a main concern for an investor.” The trust factor extends to other banks, and there were no figures forthcoming from any of them on the percentage of their total clients that privilege customers make up, or the extent of their deposits compared to other customers.

What banks are willing to talk about is the variety of their offerings in this area. Atassi cont-inues that the range of their services really depends on the client’s needs. Bank Dhofar’s Ibrahim adds that clients have varying degrees of risk tolerance. “This is something that we take into serious consideration, and so we carefully adapt our services to meet the needs of customers belonging to different categories and segments.”

Of course, client confidence is not built in a day or through one sound investment decision. Privilege banking customers test their banks, often starting out with the minimum investable funds, gradually increasing amounts. But the competition is hotting up to assist them anyway.

Says NBO’s Redhavi, “Traditionally, wealthy individuals explored investment avenues in other markets due to lack of investment products in the local market. But this scenario is rapidly changing, with banks offering innovative investment products – both local and overseas. There is tremendous growth potential to offer such products that will not only control the outflow of wealth but also work towards attracting funds back into the country.” Put that way, it becomes more of a win-win situation than it already is.