HSBC Powervantage Costs

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  1. #11

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    sleuth,

    But for you to regard HSBC as a suitable bank there is a very large fixed cost which has to be covered - just paying for the branches, ATMs, technical infrastructure, people, etc. which is going to be there whether you keep one dollar in the bank or one million. As a general rule of thumb in a free market you need to keep your revenues from providing a service broadly following the same pattern as the cost base otherwise you have one group of customers cross-subsidising another group (in this case the ones who have lots of money in the bank cross-subsidising those who have little). And this opens up potential for competitors with revenue structures more closing matching their costs to win away your customers with lots of money which drives you into a vicious circle.

    Think it through with some simple numbers:
    assume that the bank's costs are $500 per year per customer (for the infrastructure) plus 1% of the money they have with you. If you charge $0 + 2% of the customer balance ("charge" in this case by offering interest 2% below inter-bank) then customers with a balance of more than $50,000 will be cross-subsidising those with a balance less than that. When a competitor comes along and offers a charging structure of $500 per year plus 1.5% then high balance customers will start to move to them and the bank with the unbalanced tariffs will need to raise its 2% charge to maintain the same amount of cross-subsidy from a reduced number of high balance customer. This drives more of them away, and so on. Where the costs of switching suppliers are low significant cross-subsidies of this type are unlikely to survive long. They have only been around as long as they have in the banking market because many people (particularly those with large complex portfolios) find that the hassle of switching banks would be significant and put up with a less than ideal charging structure.


  2. #12

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    I haven't received this notice either, and my min Powervantage balance is HK$50000.

    What the hell is wrong with banks; what complete math idiot would keep US$25k sitting in a low interest bank account? Are banks really that clueless? They are just going to drive all their business away, because me and I'm gathering everyone else on this post will just close their accounts and take our deposits to a competitor. Frickin greedy, short-sighted, blind, penny-pinching bean counting dimwits.


  3. #13

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    PDLM : All good .. but then you look at quality of service and even one incident or situation with better service from a smaller bank is worth switching for.

    A couple of days ago .. discovered I had less than $100 and tried to get some money out of their Wanchai Branch at around Lunch time .. each ATM (I think there are six cash machines) had about 10-12 people in line. Not worth the wait when I could easily walk a few meters to a Jetco and withdraw from my SCB account.

    The math part is good.. but knowing some bankers in HSBC, they can tell you for sure .. that their profit margins would not dip even if they lowered their charges. Their strategy seems to be to lower the number of retail customers (<HKD xxK on an average) and focus on better things in life.

    All about figuring out what the ARPU is and discouraging those who are at a lower ARPU than what the strategists have figured is worth the time, from doing business with you.


    The average per user figure of $500 is too high in the internet / electronic world. Costs structures as the we all know are very different when you remove the retail rent and human factors out of the equation.

    >> cross-subsidizing

    There are not many businesses that I can think of that do not do this. To what level.. like I said, the strategists figure it out.

    I'm going to try hard not to post my gripe about being on hold for 10-12 minutes and giving up yesterday when I tried to get through to the hotline of the other company you love defending.


  4. #14

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    Ok, so that explains the $120 charge i saw on my stmt this month, fackin bastids. Its not enough they charge service fees and give low interest...odd banks make billions in profits every year eh, yet plead poverty and high admin costs...wankers!

    So...anyone got any recommendations on banks that actually provide customer service so we can move our accounts en masse?


  5. #15

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    KIA,

    I think you more or less summed it up. The problem is that people seem to feel there is some sort of "universal service obligation" (to use the telecoms term) on banks: there isn't. HSBC makes a commercial decision to focus its business offer on those customers that it feels it can make an adequate return from. It's not doing anything wrong. Nobody knocks, say, the Peninsula for not providing rooms for people who only have HK$300 per night to spend. Why should HSBC be knocked for doing the same for banking services?

    As with Cathay, if you're worth enough to them then the service is there. Whenever something unexpected appears on my HSBC statement it's in the other direction - this week I got a credit from them for over $500 which I vaguely remember was some sort of bonus promised for certain volumes of business over the quarter. They're also giving me several tens of thousands of AsiaMiles per year in the form of Reward Points. I'm happy to continue giving them essentially all of my banking and the majority of my investment business as a result. Similarly with Cathay when I call I have never had to wait more than a minute to be answered, I'm running over 50% for upgrades recently, and I get to fly in economy on their cheap fares whenever I want - no capacity constraint. As a result they too get essentially all of my travel.

    It's a free market - move to wherever you find the service that best fits your needs - but don't knock commercial companies for focusing on certain customer segments rather than trying to be "all things to all men".


  6. #16

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    wait. does it start in 2008 or fy 07/08.
    i guess i had just thrown away the card. nevermind time to close my account.


  7. #17

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    whether cx or hsbc, if you really ask me, i agree with what pdlm said. its a free market economy anyway.
    risk versus profit they can obtain from you, and when the numbers are good u'd get the service you require.

    the only problem with pdlm's theory is, end of the day, u are one of the prioritised list of customer. don't come and tell us here that u get all you want. cos the others cannot get it. analogically, its similar to maybe someone who insist that island resort is the best place in hk, cos that guy can afford to drive everywhere he goes, and ridicule ppl who take bus and commented about island resort being inaccessible.

    Last edited by freeier; 13-04-2007 at 10:13 AM.

  8. #18

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    freeier,

    Well yes, but I only respond to other people's comments. And there are no doubt people out there who spread their banking/travel across, say, 5 banks/airlines without realising the benefits that might be available to them if they consolidated it all into one.

    And of course I don't get all I want - I have some gripes about CX and HSBC too.


  9. #19

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    >> the Peninsula for not providing rooms for people who
    >> only have HK$300 per night to spend
    and
    >> Why should HSBC be knocked for doing the same for
    >> banking services?

    Because of a disconnect with its advertising and marketing messages.

    When you deal with the Penninsula, they make it pretty clear .. if you don't have money don't bother. But, once *anyone* enters our property they will be treated with courtesy and respect and as a customer. While the guy in the presidential suite gets some more benefits and better services, the lifts are the same, the doorman who greets you is the same and well, you all eat in the same restaurant.

    The Peninsula experience is fairly uniform across the board and no one is made to feel inadequate or poor.

    Going back to CX and HSBC. They pitch premium tier services and experience as their overall brand and people's expectations are set at that level.


  10. #20

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    well, like i said, i agree with your economical theory.
    but many people take banking services for granted. i have been to countries where each usage of ATM charges like 7hkd, and countries where u need to pay the bank to take a deposit. everyone seems to think that putting 10k hkd in a bank looks like you are giving them your money.. yes, its true, but how many of the 10k hkd the bank wld need in order to finance a 3mil hkd housing loan... the numbers will not match.

    the same issue was discussed in great details in sg a few years back when they tried to do similar things.

    but i think there is also a social responsibility of the system and everyone else to be sympathetic to the needs of different classes of people.


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