Banks should focus on providing quality customer service

Muhammad Abdul Jabbar Banks have traditionally played a key role in the financial system by acting as financial intermediaries between the depositors or savers and the borrowers. As asset transformers, they accepted deposits with one set of characteristics and created assets by providing loans with a different set. For these and other reasons, banks have traditionally been regarded as 'special' within the financial system and are subject to more intensive regulation than other types of financial institutions. The nature of what a bank does or its operation has changed radically in recent years, and it will change further in the years ahead. Banks now conduct a much wider range of business than simply taking in deposits and providing loans--their traditional financial intermediation business. In many countries, off-balance sheet income of banks exceeds income earned from traditional financial intermediation. To cope with the changing trends, banks now need to provide a wider range of services and make them popular through effective marketing campaigns. Many new financial institutions have begun to provide traditional banking services like savings deposits, loans and other transactions. There is little, if anything, that banks do that cannot be done now by other non-bank financial institutions and other firms. In other words, banks have lost their traditional monopoly advantages. Meanwhile, to contain high inflation, Bangladesh Bank raised bank reserve requirements -- its preferred tool to mop up excessive cash in the economy. Consequently, interest rates in the banking sector were also raised. The central bank raised the statutory liquidity ratio (SLR) and cash reserve ratio (CRR) of the banks. Moreover, against the apprehension of more inflationary pressure, the central bank insisted on strict compliance of the credit-deposit ratio of 85:15. Under such a situation, all the banks came under heavy pressure on their prime functions and had to mobilise more deposits or reduce the amount of loans to escape the mismatch of credit-deposit ratio. But it was obvious that reduction of loan amount was not easy as the valued clients were under a contract to continue their businesses with the banks' funds for a certain period of time. Thus, the only option left with the banks was to mobilise additional deposits. All the banks launched marketing campaigns on their various services and financial products to attract more deposits. The banks also deployed almost their entire human resources to mobilise more deposits so that their credit-deposit ratio might be complied with within June 2011. We saw a panic situation prevailing particularly among the officials of the private commercial banks who were facing a tough time to mobilise deposits for maintaining their liquidity in line with the statutory requirements. Under the circumstances, providing good quality customer service is vital in retaining the existing customers and attracting new ones. Minimising customer dissatisfaction is thus highly focused. Moreover, attracting and retaining new customers are expensive. Marketing data indicates that it costs five times as much to get a new customer than retaining the existing one. The growth of a business is based on retaining existing customers and then to drive for new customers. So, retention of customer depends on their satisfaction based on tools like standard quality, pricing, on-time delivery, minimum lead time, customisation of products and services where needed, variety of products and services, and good customer care service, among others. Of them, quality products and services and timely delivery matter most, which in turm can create loyal customers. According to a survey, a person who was awarded an unpleasant experience with a product or service will tell nine or ten other people negatively. About 93 per cent customers base their purchasing decisions on the advice of people they know. An unhappy customer can drive away prospective customers of a business. On the other hand, a satisfied customer talks highly of a product or service to other people and that helps raise the market share automatically. In the banking sector, the branch is the service contact point of a bank. But it becomes a fallacy that while the bankers are ferrying their products for deposits from door to door, their service point at the branch level are not ready to satisfy the needs of the customers in an efficient manner. The customers want solutions not just the products, stitched to a set of features and benefits. So, there should be a marketing policy based on customer service orientation along with drive for changing the attitudes of the officials. Any 'generic' approach in this aspect would definitely fail and the expenditures of any amount will just be wasted. Without the customer service being put rightly in place with a strong will to serve the valued customers or with a strong implementation agency at work for its enforcement, huge expenditures on advertisement will hardly be of any consequence. Banks only provide financial products and services. And service products need a human touch which determines their market share. Hence, banks need to focus more on the customers and their needs. The bank officials need to be trained not just to sell products and services but more importantly, to serve the customers' need. The writer is Executive Vice President of Islami Bank Bangladesh. He can be reached at email: jabbarcrd@yahoo.com