Innovations in Customer Services in Indian Banking Sector

Satisfied customers are the best guarantee for the stability and growth. Customers will be satisfied only when the banks provide the customized and innovative products and services at responsible cost. This article focuses on the kind of services provided by developed countries and level of innovative services provided by Indian banks. Many innovative services are currently available from Indian banks like E-Banking, ATMs, Anywhere Banking etc., but there is a wast6 scope of improvement. Globalization, the buzzword, which engulfed all the nations of the world since the beginning of the last decade of the past millennium, did not leave the banking industry untouched. The opening of the world trade has brought out several changes in the global banking map.

The continuing evolution of the banking and financial market has created opportunities both for providers and for users of financial products and this evolution have proven beneficial to the economy. However, innovations in financial products also have given rise to some new challenges for market participants and their supervisors in the areas of corporate governance and compliance. The changes that are taken place in the last decade demonstrate again the technical weakness and weak corporate governance at a few firms can dramatically change the cost of capital and impose additional regulatory burden on even well managed organizations.

A conventional bank may treat its customer as coldly as they cash they deposits or borrow. Many banks have conveniently used control and security as reasons for their remarkable slow and impersonal services. In recent, other service industries, not ably fast food an airlines, have proven that customer service can be a swift and enjoyable experience for both the clients and employees without sacrificing control, costs, and profits. Some banks have finally adopted these new services Paradigms, and are now branch marking with non-bank institution to learn about their best practice. The growing concern about the improvement in service quality can be gauged by recent news in the business standard dated June 1, 2005 where it was given that “Banks are putting their best face forward for improving service quality. While some like the Oriental Bank of Commerce have prepared a detailed dress code of their employees, others have gone a step forward and are recruiting people from the airline and hospitality industries to improve the quality of front line sales staff.”

The major brakes in the internal controls of big corporate and institutions such as share market in the past few years. And the role of bankers has led bank regulators to change their view of bankers’ relationships with there corporate clients. Technological innovation has helped in overcoming any such problems. There was a time when we used to hear that duplicate share certificates were flooding the market and large amount of money was being embezzled. Now with demat accounts this risk is taken off.

Let’s see the currently booming plastic card market. In India the growth is not that phenomenal but among the emerging economies, India is picking well.

Technology is rapidly transforming the banking industry- and expanding its ability to reach the unbanked. Employers in the developed countries are turning increasingly to electronic payroll cards as a cost-effective way to reduce the burden of writing and processing checks. Consumers are using their payroll cards and other versions of prepaid debit card- also know as stored value cards- as a substitute for cash and checking accounts. Monitoring this trend, the American Bankers Association reported last December that in 2003, for the first time, electronic payments surpassed cash and chques as consumers preferred payment method for in store purchases- an “evolution of payment behavior,” the ABA noted, “driven by the increasing popularity of debit cards.”

In a country like America, Debit cards accounted for nearly one-third (31%) of in-store purchases in 2003, up from 21% only four years ago. Reliance on credit cards held steady during that time, at about 21%. Cash and checks, which accounted for 57% of in-store purchases in 1999, dropped to about 47% last year. In India, if we see then, people still prefer to pay by cash. The reason behind this mindset is safety for money. Still we are far behind in terms of Internet security and E-money security.

Coming across through the performance of Banking Institutions of the west and seeing their performance in the use of innovative methods to make themselves more customer-friendly we would have no doubts about their strong banking mail-order company L.L. Bean, know for its superb order-taking and service delivery systems, as its model for change. A major result of this functional benchmarking was the establishment of a 24-hour customer service center that can not only respond to queries and complaints but also promote and sell the bank’s products and services. The center even allows customers to open a checking account anytime or negotiate an overdraft at 2 am. The ATM was also reconfigured from mere cash dispenser to a versatile and tireless account executive. The machine can even buy and sell mutual funds. Inspired by LL Bean, Banks published a 50-page catalogue to help customers appreciate and select from its more than 160 financial services.

Seafirst Bank in Seattle redefined itself from a “retail bank” to a “retailer” and has benchmarked with retailers know for world-class customer service such as fast-food restaurant chains. Insider by these models, one other bank instituted a 5-mintue guarantee that says, “wait any longer than 5 minutes in line and the bank guarantees $5 to your account.” Moreover, if the customer complains of any other inconvenience, he or she gets a $5 “I’m sorry coupon”. Its branch offices have official “greeters” to greet and guide customers to the right tellers or desks, much like the Guest Relation Officers (GRO) or receptionists of 5-star hotels. The greeter mans a kiosk at the entrance of the bank. To reinforce this service philosophy, branch managers are rated not only on sales but on service goals. Achieving or even exceeding sales targets without achieving customer satisfaction goals will not qualify a branch manager to receive the bank’s prestigious “Gold Club” award. Executives from the CEO down are encouraged and expected to visit branches regularly to monitor service and get a first-hand fell of the action. When Seafirst decide to redesign and re-layout its offices to improve services, it acquired the services of an expert from the Godfather’s Pizza chain. One result making the teller counter waist-high. It is now more open and personal than the traditional counter that is intimidating and creates a barrier between the client and the teller.

Back offices of banks are knows for snail-pace bureaucracy that hampers front line operations and ultimate customer service. By applying the concept of “mass production”, streamlining, and standardization of tasks, Citicorp aims to remove this critical bottleneck. The bank also benchmarked with Chrysler in getting its functional departments work effectively as teams.

Other banks in the west have, sledded their conversation “finance and control” images, have likewise adopted innovative service strategies and practices. Many Banks have established an information center or “encyclopedia” in the waiting lounge. Here customers can browse through various bits and pieces of important service information like the average time to finish a transaction and the company’s products and services. Information about the busiest day or days in the branch is displayed so that the customers who want to avoid these periods may do so. Phone lines dedicated to customer service have been installed. Many Indian banks have also adopted some of these systems. Any customer can pick up this phone and relay his or her complains, questions, or difficulties. The facility is designed to represent the company’s commitment to services and also serve as the customer’s last resort in case everything else fails. Similarly, modern day banks have established phone centers to accept, process, and resolve customer complaints. They also have a customer feedback program whereby whoever the customer complaints to, say a staff employee or manager, will be responsible for giving the client feedback on the status and progress of his or her complaint. The banks have customer service centers where they have created two customer flows or lines to deliver services more effectively. One was for loans and similar products that require customized and personalized services. The other was for the standard and repetitive service like deposits and withdrawals. By creating two service environments that cater to two different types of needs, service is enhanced and speeded up.

Modern day banks have extended the concept of “Mobile Banking.” Some banks in the European and American continents have launched floating branches on boats that provide full branch bank services, to the convenience and delight of customers living in longhouses along the river banks. To further enhance service, banks have also reconfigured their Automated Teller Machines to dispense not only cash, but also commodity prices and information about its products and services. The Korean Technology Banking Corporation (KTB) is setting up a Technology Financing Information Center to serve the various needs of its clients, most of which are setting up joint-venture overseas. The centers will contain a huge database of information analyzed from various data from internal and external sources. By accessing this database, clients will get information about specific technologies, local information, and other data relevant to the ventures they are setting up. To facilitate processing, development financial institutions like the Industrial Development Bank on India requires borrowers to submit loan application forms in electronic floppy disks.

Some banks and financial institutions have done such a remarkable job in improving and reinventing customer service that they themselves have become the benchmarks of other companies outside the banking sector. For instance, American Express, the credit card company, is the recognized benchmark to emulate when it comes to improving a company’s billing process. Amex’s billing is reportedly the fastest and most accurate in the world in any industry. Xerox, the benchmark for many quality practices, used the Amex model in enhancing its billing system. In China, the benchmark for customer service and customer courtesy is surprisingly a bank; The Industrial and Commercial Bank. Hundreds of retail shops and department stores, many of which are known for rude service, visit the bank’s branches to learn a few lessons on satisfying and delighting customers. Before sweeping changes were made, the Industrial and Commercial Bank was also known for bad service and discourteous front line employees who even swore at clients. One radical and highly effective policy it instituted was coming about with a list of words and phrases their employees were forbidden to use when dealing with customers. For instance, the popular expression, “when will you sleep complaining?” was included in the banned list. While other banks may refuse to change or accept soiled or old currency notes, the bank will replace these without question.

Even clearinghouses have adopted the new service paradigms to support the banks’ initiatives. For instance, the Singapore clearing House Association has cut the clearing of US $ checks deposited in Singapore from two weeks to 3 days. The new system requires participating banks to open US dollar accounts with Citibank to service their respective clients.

Innovation banking in customer service is indeed a welcome and long-waited development. Our Article focused on the kind of services provided by the banks in the developed countries but this is not to deny the fact that the banking sector in India and other developing countries has also started doing up well in terms of providing innovative and modern day banking facilities along with good customer service. We hope that other left out banks and financial institutions will follow suit soon. Satisfied customers are the best guarantee of stability and growth. As in other service sectors, bank customers deserve the very best. In the past, banks have rarely treated customers as people, preferring to treat them as account numbers, passbooks, and loan applications. Customer service, in contrast to customer processing, is a concept whose time has come for the banking industry worldwide.

Therefore, to conclude, the banking sector should start emphasizing on its service part and to implement the concept of CRM in their institutions.

About Abey Francis

Abey Francis is the founder of MBAKnol - A Blog about Management Theories and Practices - and he's always happy to share his passion for innovative management practices. You can found him on Google+ and Facebook. If you’d like to reach him, send him an email to: [email protected]

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