challenges of customer dealing in commercial banks of pakistan
TRANSCRIPT
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CHALLENGES OF CUSTOMER DEALING IN
COMMERCIAL BANKS OF PAKISTAN
JAVED AHMED CHANDIO, ASSISTANT PROFESSOR,
UNIVERSITY OF SINDH, JAMSHORO
RAFIA MALLAH, ASSISTANT PROFESSOR
M. AKRAM SHARIF, RESEARCH SCHOLAR, UNIVERSITY OF KARACHI
Abstract
The commercial banks of Pakistan dwell in a significant position in nation‟s economy. The
commercial banks have got key importance in developing a country‟s economic stability.
Customers are one of the main assets of the banks and many customers interact with the banks
every day and avail a variety of services. Dealing with the customers influences, the banking
sector when these institutions were getting more and more spirited. It also helped banks to
recognize the customers‟ current needs, their past experience and their future plans to get the
customer‟s desire, (Xu, et al., 2002). At present, a majority of the developing nations have
realized the importance of customer dealing but the preliminary research revealed that several
customer dealing outcomes do not generate desired results and in some cases ways of customer
dealing has damaged customer relationships so this research has focused on prominence the
challenges in commercial banks of Pakistan using customer dealing.
Keywords: Customer dealing, Commercial banks of Pakistan
1. Introduction
Despite exemplary progress and advancement in technology, banking institutions are confronted
with several challenges. In the present world of competitive advantage, there are tough contest in
terms of deposits, loans, furthering the demands of customers, squeezing margins in profits and
at the same time the exigency to keeping pace with the latest technological techniques and
equipments (SAP AG, 2002). Banking institutions and other organizations providing services
are well conscious about the value of customer dealing as they understand that they not only ned
to keep their customers continue their trust in these banks, but these banks also need more new
customers so as to enhance their banking business and profitability, and for the sake of
maintaining a long-lasting reputation (Onut et al., 2006).
When atmosphere of competition among the banking institutions broadened, increased
importance started to be assigned to customer dealing. By paying more attention on their
customers, the banks could attain useful feedback about what their customers needed from these
banks. Further, information and views collected from customers was found supportive to banks
in knowing about their present performance and their efficiency during the past, and the banks
could communicate to their customers banks‟ future plans and improvement strategies in order to
meet successfully the latter‟s targets in the banking business and customer services. (Xu, et al.,
2002). Crosby (2002) is of the view that information gathered by the banks about the needs of
their customers, when skillfully and cleverly put to use, is likely to develop firm relation between
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the banks and the customers, benefitting both of them. This aspect is especially beneficial to the
banks in the manner that customers dealing with these banks for longer periods of time require
less costs to serve. These relations overtime time turn smooth, strong and create trust between
the two. Generally, the function of customer dealing serves two purposes for a banking
institution or a business organization: first to bring new customers to the organization and
second, to motivate the existing customers to buy more services of the bank. It is often justified
by the phrase, “Make the right offer at the right time to the right customer”.
In a web article, Bhaduri (2005) takes up a discussion on exploiting the function of customer
dealing to the favor of banking sector in developing countries. According to the author‟s view, it
is a misconception about the customer dealing to be considered a skillful method to sale
expensive software programs or take it as an ornamented way to increase sales or to collected
new data for an organization. The author argues that customer dealing is a simple conception in
which a business organization in its activities and processes, assigns key value to its customers,
and makes all possible efforts to provide services that prove satisfactory to customers. As a
result, the organization experiences its profits maximizing. Bhaduri (2005) further argues that it
is the function of customer dealing that has made the bankers comprehend that their business
ought to aim at creating new customers on durable basis, and the entire processes of banking
activities should concentrate on searching and developing new customers and then to provide
them with satisfactory services.
Despite being a state possessing nuclear power, Pakistan still stands among the developing
nations. At present when large-scale businesses through internet are in practice in most of the
countries, the state of affairs in Pakistan needs significant improvements and innovations.
Services provided by banks in Pakistan to their customers, keeping in view the customer needs,
still require much to do for bringing excellence in comparison to the quality of services afforded
to the customers in developed nations as well as in several developing nations. Customers
generally keep exploring if they could get better services package from another bank. This refers
to less reliability and credibility on part of the banks which, instead of looking for new
customers, may have to concentrate more on keeping their existing customers list intact. Even
though most of the banks in Pakistan have realized of what import customer dealing is, and they
have taken practical steps to make customer realize this approach, the initial investigations
during the current research reveal that a significant number of customer dealing objectives still
remain unachieved. In some cases users are constrained to complain that customer relationship
has been negatively affected by unsatisfactory customer dealing. This also refers to significant
extent that human resources of the banks need suitable and adequate professional development
by way of skill development and training. Training and development of employees is part of
responsibilities of human resource management (De Cenzo & Robbins, 1998). Customer dealing
demands positive and friendly behavior on part of bank employees towards their customers.
Desimone, Werner & Harris (2003) relate that this behavior is influenced by different factors
categorized as internal factors and external factors. It would be quite relevant to emphasize upon
motivation, professional training and skill development of bank employees in pursuit of a sound
customer dealing.
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2. Background In this section we define customers and customer dealing in respect of customer relationship
management and confer past researches especially in the banking sector, types of customers and
major commercial banks in Pakistan.
2.1 What is Customer?
Customer can be defined as: "An individual or a company who is concerned with the
acquirement of the company‟s goods and services, and who is also of interest to the
organization" Imhoff et al., (2001). In the current research, we mean customer as a “Bank
Customer”.
2.2 What is Customer Dealing?
The relationship between customer and client can be managed through providing excellent
services however and whenever customers contact their client and, in the current scenario, it can
be defined as a business technique that is composed of multiple processes which strengthen
systems helpful for a business strategy in pursuit of developing durable and cost-effective
relations with explicit customers. The main idea behind customer dealing is to raise customer
value with the help of an improved understanding of individual needs and preference (Ling and
Yen, 2001).
2.3 Approaches of Customer Dealing
Customers can interact in many ways with the organization. In 2002, Dyche produced a customer
relationship model which indicated the ways through which a customer can communicate or deal
with the organization. In this model, it shows the operational relationship of customer through
call centers, web access, email and usage or direct interaction. These all ways are very important
to provide effective and efficient means or services to customers. By improving these all means
an organization can increase their customers. The following figure shows the Dyche model of
customer relationship.
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2.4 Customers dealing in Banking Sector
Almost all the banks are extremely focusing on the dealing with their customer and are projected
to enhance over a period of time (Foss, 2002). Many banks implement customer relationship
application in order to enhance their efficiency related with the customers. Dyche‟ (2002)
suggested that any customer relationship computer application would be feasible until or unless
banks would know the absolute information of its customers data. They should know about the
responses and behaviors of their customers, and on the basis of their customers‟ behavior, they
should be in a good position in order to implement their strategy in relation to customer‟s needs.
Conversely Foss (2002) argued that many banks are using different type of customer dealing
techniques to obtain different results. They designed their customer dealing applications
according to needs of their certain goals, for example, developing about a culture and
organization where consumer is the focus of attention, maintaining firm relations with customers,
ensuring possible maximum profitability for customers and strengthening especially the resource
which is provided by the most valuable customer group.
In 2006, Onut, Erdem, Hosver described that by using customer dealing application
organizations can improve their dealing service and enhance their performance. They also
focused on the advantages of customer relationship which are as follows:
Increase customer revenues.
Improve customer service
Efficient and result oriented call centers
Effective selling of their products;
Assistance sales staff for forecasting and planning;
Simplify sales and marketing processes;
Find out fresh customers
2.5 Types of Customers in Banks
Banks can categorize their customers in different groups related to the number of products and
services utilized by the customers. The customers who have healthy balance in their account are
very importance for their banks.
Day (2000) described that Banks are mainly connected with two different types of customers.
The customers who have high value of balance in their accounts and they are using most of the
product and services of the banks, came into the “value-adding” or “collaborative” association
with the banks.
In contrast, the customers who have low balances in their accounts and have poor involvement in
bank‟s products and services, their relationship with the bank is known as “transactional
exchange relationship”. The main focus of the bank for these types of customers is only
facilitating them with low cost solution. An account turns value-adding, from the viewpoint of a
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bank, for the reason that the number of products and services, which the customer avails of, goes
up thereby resulting an increase in the fees and charges earned by the bank.
The author goes on to say that when customers are convinced by the bank staff to purchase more
products like investment or raised savings accounts with the possibility of automated funds
transfers, the relation between bank and the customers for transactional exchange improves
which ultimately raises interest in favor of the bank. Overall, majority of banks around the world
are dealing with these two types of customers. These customers come into contact with a bank
mostly via its branch or through a call-centre which is also referred as “customer contact centre”.
To manage such relationship with customers, a branch and a call centre staff are responsible and
having awareness of both bank product information and customer information.
2.6 Banks in Pakistan
Pakistan‟s banking industry comprises of both domestic as well as foreign banks. The State Bank
of Pakistan (SBP) is the central bank of Pakistan which is located in Karachi (the financial
capital of Pakistan), and its second headquarter is in the capital, Islamabad. According to the
definition from Wikipedia (2009c), the State bank of Pakistan looks into a lot of different ranges
of banking to deal with the changes in economic climate and different purchasing and buying
powers. Some of the banking areas of domestic banks in Pakistan are:
2.6.1 Nationalized scheduled banks
National Bank of Pakistan
Bank of Khyber
Bank of Punjab
Sindh Bank
First Women Bank Limited
2.6.2 Specialized banks
Industrial Development Bank
Zarai Taraqiati Bank Limited
2.6.3 Card Issuers
Allied Bank Limited
Askari Bank
Bank AL Habib
Bank Alfalah Limited
Bank of Sindh
Barclays Bank Pakistan
Burj Bank (Formerly Dawood Islamic Bank)
Citibank Pakistan
Dawood Islamic Bank
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Dubai Islamic Bank
Faysal Bank Limited (Formerly Royal Bank of Scotland Pakistan)
Habib Bank Limited
JS Bank
Khushhali Bank of Pakistan
MCB Bank Limited
Meezan Bank Limited
NIB Bank Pakistan
Soneri Bank
Standard Chartered Bank Pakistan
Summit Bank (formerly known as Arif Habib Bank)
Tameer MicroFinance Bank Limited
United Bank Limited
2.6.4 Commercial banks
Askari Bank
Bank Alfalah
Bank AL Habib
Barclays Bank Pakistan
First Women Bank
Habib Bank Limited
Habib Metropolitan Bank
Habib Bank AG Zurich
JS Bank
KASB Bank Ltd
MCB Bank Limited
Silk Bank Limited (formerly Saudi Pak Commercial Bank Limited)
Soneri Bank
United Bank Limited
Samba Bank Limited
Allied Bank Limited
2.6.5 Islamic banks
Bank Albaraka
Bank Islami Pakistan Limited
Burj Bank
Dubai Islamic Bank Pakistan Limited
Meezan Bank Limited
UBL Islamic Banking
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3. Research Methodology
3.1 Sample and data collection
This survey was conducted in the context of banking services. The data were collected in face-to-
face interviews of customers coming to banks in relation with the bank employees and their
responses. The study provides a representative sample of different branches of commercials
banks in Karachi.
3.2 Research design
The research design is relating to the collection and analysis of data. There is Qualitative and
Quantitative Research design applied on this research paper.
3.2.1 Interview questions from Customers
During the interviews from different bank customers in Pakistan, the main focus was to identify
the problems customers are facing using the facilities from their bank. The interview questions
asked from the customers are used from the following broad category.
Products and services used by customers,
Call centers,
Response time of query,
Speed of processing transactions,
Security issues with internet banking, online shopping etc.,
Convenience,
Trust.
3.2.2 Interview questions from bank employees
In most of the Pakistani banks, customer dealing is operated by their I.T department through
customer relationship management application which records and handles customer information.
These banks have installed the latest customer dealing application packages and have the most
up-to date computers. The interview questions asked from different employees and bank
managers are based on the following broad category.
The use of customer dealing (Its packages used by banks),
Products and services offered by banks to its customers,
Services in terms of business customers vs individual customers,
Dealing with customer queries,
Interacting with customers,
Data warehousing,
Knowledge management,
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ATM machines (availability and its security issues),
Customer service/ Call centers.
3.3 Data collection
Depth Interviews, Focus groups and Projective techniques have been used. In quantitative
research design the data have been collected from primary source through observations,
experimentation and questionnaires. The samples have been selected on random basis. A sample
of 100 respondents was be used in the research.
3.4 Data Analysis
Statement showing that different level of challenges from Customer’s Point of view S. No Challenge of customer dealing from customer
point of View
HS VS S D VD Not Using
Total
1 Products and services used by customers 12% 19% 40% 17% 12% 0% 100%
2 Call centers 9% 22% 50% 10% 4% 5% 100%
3 Response time of query 5% 16% 28% 43% 8% 0% 100%
4 Speed of processing transactions 3% 11% 39% 24% 23% 0% 100%
5 Security issues with internet banking 19% 4% 12% 20% 16% 39% 100%
6 Security issues with online shopping 2% 0% 9% 5% 0% 84% 100%
7 Convenience 39% 22% 12% 6% 21% 0% 100%
8 Trust 55% 15% 12% 14% 4% 0% 100%
HS: Highly Satisfied, VS: Very Satisfied, S: Satisfies, D: Dissatisfied, VD: Very Dissatisfied,
Not Using: Not using these services
- 71 % of customers are fully or partially satisfied with the product and services offered by the
bank while 29 % are unhappy.
- 81 % of customers use call centers of Bank and are much satisfied with the performance of call
centers while 14 % are not happy and 5% are not using this service.
- Almost half of the customers are happy with the response time of their query from the bank
while remaining half are dejected.
- There is an immense need to improve the speed of the processing of transactions, so 14 % are
highly satisfied or very satisfied, 39 % are only satisfied while remaining 47 % are not happy.
The rapid increase of online banking reduce the processing time but internal errors, server down
and lots of related problems are emerging with this online processing.
- The internet banking and online shopping are not familiar activity for very customers; most of
the customers avoid these services due to security issues. So we see 36% are not satisfied with
the internet banking while 39 % are not using this service. On the other hand, 84 % of the
customers are not availing online shopping due to security risk.
- The relationship between customers and banks are judge through trust level, 82 % are trusted
customers with different satisfaction level while 18 % are untrusting customers.
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Statement showing that different level of challenges from Bank Employees Point of view
S. No Challenge of customer dealing from bank employees point of View
HS VS S D VD Not Using
Total
1 The use of customer dealing (Its packages
used by banks) 78% 2% 0% 12% 8% 0% 100%
2 Products and services offered by banks to its
customers 68% 15% 4% 3% 10% 0% 100%
3 Services in terms of business customers vs
individual customers 55% 23% 8% 4% 10% 0% 100%
4 Dealing with customer queries 80% 7% 0% 10% 3% 0% 100%
5 Interacting with customers 67% 19% 4% 0% 10% 39% 100%
6 Data warehousing 46% 12% 0% 7% 0% 35% 100%
7 Knowledge management 54% 12% 21% 4% 9% 0% 100%
8 ATM machines (availability and its security
issues) 87% 5% 0% 8% 0% 0% 100%
9 Customer service/ Call centers 47% 33% 15% 5% 0% 0% 100%
HS: Highly Satisfied, VS: Very Satisfied, S: Satisfies, D: Dissatisfied, VD: Very Dissatisfied,
Not Using: Not using these services
- 80 % of employees are pleased by the application or package design for the customer support.
20 % employees are dissatisfied.
- 87 % of employees are satisfied by their performance delivered to their customers, they are
fully trained for the services offered by the bank to their customers. 13 % employees are
dissatisfied with their performance.
- 86 % of the employees are content with the business customers while few are with the
individuals.
- Regarding customer interacting, not all employees of the bank are associated with this activity,
while most of the employees are engaging in it. Not every employee are using data ware housing
of the bank.
- Knowledge accessibility for their employees in terms of knowledge management, almost 87 %
of the employee is satisfied with this activity.
- Employees have also concern with the ATM machines, their availability and security, because
employee is also customers for its banks. 92 % of employees are satisfied while 8 % are
dissatisfied.
- 95 % of the employees are happy with the customer‟s service provided or availing from banks
and 5 % are frustrated.
4. Findings from the Interviews
In 2009, Kundi, and Shah explained that Pakistan banks are still in the growing stage in terms of
adopting new technologies related to customer dealing application. Although many banks in
Pakistan have implemented latest customer dealing application and packages but these banks
especially in the rural areas of Pakistan are still dealing with a many problems. These problems
are gathered from the interviews with different bank employees and customers. For instance,
during the interview with a bank manager at a bank in rural area of Pakistan, the manager
explains that, “very few customers are aware of Automated Teller Machines (ATM) and internet
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banking, others have no knowledge about it”. Banks should realize that in order to keep their
customers and attract new ones, they have to provide all the information about their services.
Otherwise, it would be hard for them to survive in the competitive market. Other major problem
is that the I.T staff is not fully trained in terms of technology especially customer dealing.
To date, some of the other tentative findings from the interviews are concluded as:
Currently, each branch services its own customers with no centralized customer service
or telephone-based automated services. Therefore, customer data cannot be tracked and
the concept of customer relationship management is virtually impossible.
Customers have to restate their information whenever they interact with their bank, and
the members of staff are unaware of the previous transactions and have no quick access
to records.
The I.T personnel at some of the banks are not fully trained to handle customer‟s
information packages including customer dealing.
The websites are overloaded with graphic data but are not clear, concise and informative.
Most of the banks are not having up-to date website to inform their customers about their
latest products and services.
In case of any changes in customer‟s account such as interest rate etc., some of the banks
are not sending any letters or information packs via email or even „slow snail mail‟ to
update information for their customers.
Major bank services such as: internet banking and phone banking are not available in
more remote banks.
In most of the banks, only a cash card is offered through which customers can only
withdraw cash from selected cash machines. Without having credit or debit cards,
customers are having problems to shop online.
Call centers are less efficient and have limited opening hours.
5. Conclusions and recommendations
The research of this paper presents the use of customer dealing and improvement in the banking
sector of developing countries such as: Pakistan. In this paper, we have presented the background
knowledge of customer dealing and uncover some of the major problems and weaknesses while
using the customer dealing applications in the banking sector of Pakistan. we have conducted
several interviews from different bank customers and employees of some well known banks in
Pakistan. The findings of these interviews are presented in this paper. However, in order to
improve the current customer dealing strategy, we have to perform a comparative analysis
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between the banks in Pakistan and banks in any other developed country. Several issues are also
needed to be addressed before suggesting the ideal customer dealing strategy in the banking
sector of Pakistan. These are:
What are the cultural and political issues in terms of customer dealing implementation in
the banking sector of Pakistan?
What is the process for defining and implementing of a customer dealing system in a
developing country context?
How would customer dealing affect an overall banking business strategy in Pakistan?
How can different „customer touch points‟ be integrated in the banking sector?
What are the key elements of a successful customer dealing system in Pakistani banking
context?
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