MANAGING THE CUSTOMER ACCOUNT LIFECYCLE

Types of Accounts Offered by Banks

A bank doesn't offer just one "bank account"; it offers a variety of accounts, each designed to meet a specific financial need. As a banking professional, you need to understand all the different products the bank offers so you can help each customer choose the one that is perfect for their needs.

Five Main Types of Bank Accounts

1. Current Accounts (Transactional Accounts): For individuals and small businesses to manage day-to-day income and frequent payments. Features include high liquidity, a debit card, and often an overdraft facility, but they typically earn little to no interest.
2. Savings Accounts: For individuals who want to put money aside for the future. Their purpose is to encourage saving and help money grow by earning interest. They usually have limits on withdrawals.
3. Loan Accounts: For individuals or businesses that have borrowed money. This account's sole purpose is to manage the repayment of the loan, tracking the balance and interest charged.
4. Investment Accounts (or Fixed Deposit Accounts): For people with a lump sum of money they won't need for a fixed period. They offer a higher interest rate than savings accounts, but the money is locked away for the agreed-upon term.
5. Corporate Accounts (or Business Accounts): For registered businesses and organisations. They are designed to separate business finances from personal ones and handle a high volume of complex transactions like payroll and international trade.

Characteristics, Advantages, and Disadvantages of Various Bank Accounts

Each type of bank account has a unique set of characteristics designed for a specific job. To give your customers the best advice, you need to be an expert on the specific features—the good and the bad—of each account.

1. Current Account (The "Spending" Account)

• Advantages: Maximum convenience for daily payments, easy access to money, and the option for an overdraft facility for emergencies.
• Disadvantages: Earns little to no interest, meaning your money loses value in an inflationary environment. Often has higher monthly service and transaction fees.

2. Savings Account (The "Accumulating" Account)

• Advantages: Your money earns interest and grows over time. Withdrawal limits encourage saving discipline. It is a very safe place to keep funds for future goals.
• Disadvantages: Lower liquidity (less instant access) than a current account. The interest rate is typically lower than what investment accounts offer.

3. Investment Account / Fixed Deposit (The "Growing" Account)

• Advantages: Offers the highest interest rates, leading to faster growth of your money. The rate is usually guaranteed for the fixed term.
• Disadvantages: Zero liquidity. Your money is locked away for the entire term, and you face a significant penalty for early withdrawal. Usually requires a larger lump sum to open.

4. Loan Account (The "Repaying" Account)

• Advantages (for the customer): Enables large purchases like a car or house. Provides a structured, predictable repayment schedule.
• Disadvantages (for the customer): The cost of interest means you always pay back more than you borrowed. Failure to make payments (default) can damage your credit history and lead to the repossession of the asset.

5. Corporate Account (The "Business" Account)

• Advantages: Creates a legal separation between business and personal finances. Enhances the company's professional image. Provides access to essential business services like POS machines and business loans.
• Disadvantages: Has higher fees than personal accounts. The application process is more complex and requires extensive documentation.

Types of Bank Customers and Their Needs

To provide excellent service, you must first learn to identify the different types of customers and understand the world from their perspective. This helps you anticipate their needs and provide relevant financial solutions.

1. Individuals (Personal / Retail Banking): This largest group includes Youths/Students (needing low-cost, digital accounts), Salaried Employees (needing transactional accounts and loans), Self-Employed Individuals (needing flexible accounts), High-Net-Worth Individuals (needing private banking and investment advice), and Pensioners (needing secure accounts for retirement funds).
2. Small and Medium-sized Enterprises (SMEs): Small businesses that need formal business accounts, access to credit for growth, and ways to accept customer payments (POS machines).
3. Large Corporations: Big companies with complex, often international needs, requiring sophisticated tools for cash flow management, international trade, and large-scale financing.
4. Institutions and Non-Profit Organisations (NGOs): Includes schools, churches, and NGOs that need accounts with multiple signatories for security and accountability to manage grants and donations.

Types of Loans Offered by Banks

A loan is a sum of money that is borrowed and is expected to be paid back with interest. By lending money, banks help individuals achieve major life goals and help businesses grow.

• Personal Loans (Unsecured): Flexible, multi-purpose loans for individuals, granted based on salary and credit history. They typically have higher interest rates due to not being backed by collateral.
• Mortgages / Home Loans (Secured): Long-term loans for buying property, where the property itself acts as collateral.
• Vehicle Finance / Car Loans (Secured): Medium-term loans to purchase a vehicle, with the vehicle serving as collateral.
• Business Loans (Secured or Unsecured): Loans for business needs, such as buying machinery (asset finance) or managing daily costs (working capital loans).
• Agricultural Loans: Specialised loans for farmers, with flexible repayment terms often timed to coincide with the harvest season.
• Overdrafts: A facility on a current account allowing you to withdraw more than your balance up to a limit. It's for short-term cash flow gaps and usually has a very high interest rate.

Circumstances Which May Lead to the Termination of Bank Accounts

An account's termination can be initiated by either the customer (voluntary) or the bank (involuntary).

A. Termination Initiated by the Customer (Voluntary)

A customer may close their account due to dissatisfaction with service, relocating, a change in banking needs, or if the account's purpose is complete.

B. Termination Initiated by the Bank (Involuntary)

A bank may close an account to protect itself from risk. Key reasons include:

• Suspicion of Fraudulent or Illegal Activity: The most serious reason, such as money laundering, which legally obligates the bank to close the account and report it.
• Providing False Information: If a customer used fake documents to open the account.
• Dormant Account Status: If an account is inactive for a very long period and the customer is unreachable.
• Abusive or Threatening Behaviour: The bank has a duty to protect its staff.

Documents Required When Opening a Bank Account

The process of gathering and verifying a customer's documents is known as KYC (Know Your Customer). Its purpose is to prevent financial crime and protect the customer's account.

Documents for an Individual

1. Proof of Identity: A valid, government-issued document with a photo, such as a National ID card, passport, or driver's licence.
2. Proof of Residence: A recent document (less than 3 months old) confirming the customer's address, such as a ZESA or City Council utility bill.
3. Proof of Income: A recent payslip or a letter from an employer, often required for current accounts or loan applications.
4. Passport-Sized Photographs: For the customer's physical file and digital system for visual verification.

Documentation for a Corporate/Business Account

Opening a business account is more complex and requires verifying the legal entity. Key documents include:

• Certificate of Incorporation
• Memorandum and Articles of Association
• CR5 (List of Directors) and CR6 (Registered Address)
• A Board Resolution authorising the account opening and specifying signatories
• Full personal KYC documents for all directors and signatories