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. Last Updated: 07/27/2016

Lousy Service Keeps Some Away From Banks

When Dmitry Abbasov's company started paying its employees through Citibank, he and his wife decided to apply for Citibank credit cards. Even though his salary was several times higher than hers, she was accepted for a card while his application was declined. After several months, the bank changed its mind and hand-delivered Abbasov a card with a credit limit of 15,000 rubles ($560).

But a problem remained: Instead of seeing his own smiling face printed on the card, he saw a photograph of an unknown woman. "Everyone in my office was laughing at this card," he said.

When Abbasov tried to explain the problem at the Citibank branch near the Paveletskaya station, an employee cut him off. "The receptionist said, 'We don't change credit cards because you don't like the photo,'" he said.

Abbasov eventually got a card with the correct photo, but the experience two years ago left a bad taste in his mouth. A recent disagreement with the bank over a hidden fee was the last straw, and he decided to take his business elsewhere.

Joel Kornreich, Citibank's head of consumer banking, said Abbasov's situation was "really exceptional" and that the bank had focused recently on boosting customer service. "We've taken some pretty drastic action," Kornreich said. Calls to customer service are now answered within 13 seconds on average last week, he said.

But as long as customer service remains a problem in the banking system, some customers will undoubtedly have another reason to avoid banks altogether. Even in the age of deposit insurance, an estimated 32 percent of cash savings is kept outside the banking system.

Much of the population is still scarred from bad experiences with banks during the turbulent 1990s. But many are turning to banks -- the retail banking sector grew 84 percent last year -- and getting their first taste of the banking system and its peculiar problems. Among the chief concerns are deposit interest rates that trail inflation, fees charged on everything from card transactions to cash withdrawals and, of course, poor customer service.

"My personal opinion is there is no such thing as customer service at Russian banks," said Benedikt Morak, a chef at Guilly's restaurant who has previously worked in South Africa, the United States, Indonesia, China and Greece. Morak said consumer banking here was the worst he had seen, and that he routinely had to fill out pages of forms at Raiffeisen Bank every time he wanted to send money to a company storing his belongings in Indonesia.

To be sure, the difficulty Morak and others have in transferring money is not the fault of local banks. The paperwork is required by law. In addition, federal regulations prohibit foreign-owned banks from establishing direct branches in Russia -- they have to establish and fund a subsidiary in Russia, which in turn can open branch offices that connect with the subsidiary but not directly with the parent company abroad. In practical terms, that means you cannot open a Citibank account in New York and use the same account for banking in Moscow.

To get around this restriction, a foreigner living in Moscow could open an account at a Russian bank and use that account when traveling abroad, but in practice that would not help much because Russian banks are relatively small by global standards and do not have much of a presence outside of former Soviet republics.

Also, the notion of using a Russian bank when traveling abroad sounds far-fetched when many bank branches aren't even integrated within the same city in Russia. Sberbank has branches in every hamlet from Kaliningrad to Kamchatka, but a customer would still face red tape if he wanted to divide his banking between two Moscow branches. Dmitry Tarasov, head of strategic planning at Sberbank, said the bank's Moscow branches would be fully integrated "in the very near future."

The root of the problem is outdated information technology, said Natalya Orlova, a banking analyst at Alfa Bank. Traditionally, Russian banks kept customers' account information and balances in basic computer spreadsheets, one for every branch. Bank employees at one branch had no easy way to access the spreadsheets at another branch.

Now, the IT systems of Russian banks are getting better, but continue to trail those in the West.

In a fragmented banking system, customer service necessarily suffers. Web sites and message boards are full of horror stories of insufferably long lines and rude tellers. Savvy customers have learned to avoid branches in favor of telephone banking and Internet banking.

On, a popular web site for the banking industry, online users have ranked Citibank last and Sberbank third-to-last for customer satisfaction. "If you're the major player, you get the largest part of the criticism -- you're always blamed," Tarasov said. Sberbank holds 54 percent of Russian retail deposits.

Avangard tops the list as the best bank, followed by International Moscow Bank and Raiffeisen Bank. Johann Jonach, chairman of the board at Raiffeisen, linked the bank's favorable ranking to its decision in the late 1990s to focus on the upper crust of the Russian retail market. It realized at the time that it would have to provide good customer service to keep those people happy. "Other banks are targeting more mass segments of the market, and it's natural that they do it in a different way," Jonach said.