challenges of customer dealing in commercial banks of pakistan

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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS

COPY RIGHT © 2012 Institute of Interdisciplinary Business Research 102

OCTOBER 2012

VOL 4, NO 6

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

http://en.wikipedia.org/wiki/National_Bank_of_Pakistan

http://en.wikipedia.org/wiki/Bank_of_Khyber

http://en.wikipedia.org/wiki/Bank_of_Punjab

http://en.wikipedia.org/wiki/Sindh_Bank

http://en.wikipedia.org/wiki/Industrial_Development_Bank

http://en.wikipedia.org/wiki/Zarai_Taraqiati_Bank_Limited

http://en.wikipedia.org/wiki/Allied_Bank_Limited

http://en.wikipedia.org/wiki/Askari_Bank

http://en.wikipedia.org/wiki/Bank_AL_Habib

http://en.wikipedia.org/wiki/Bank_Alfalah_Limited

http://en.wikipedia.org/wiki/Burj_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

http://www.hbl.com/

http://en.wikipedia.org/wiki/JS_Group

http://en.wikipedia.org/wiki/MCB_Bank_Limited

http://en.wikipedia.org/wiki/Meezan_Bank_Limited

http://en.wikipedia.org/wiki/NIB_Bank

http://en.wikipedia.org/wiki/Soneri_Bank

http://en.wikipedia.org/wiki/Standard_Chartered_Bank_(Pakistan)

http://en.wikipedia.org/wiki/Summit_Bank

http://en.wikipedia.org/wiki/United_Bank_Limited_Pakistan

http://en.wikipedia.org/wiki/Askari_Bank

http://en.wikipedia.org/wiki/Bank_Alfalah

http://en.wikipedia.org/wiki/Bank_AL_Habib

http://en.wikipedia.org/wiki/Barclays

http://en.wikipedia.org/wiki/First_Women_Bank

http://en.wikipedia.org/wiki/Habib_Bank_Limited

http://en.wikipedia.org/wiki/Habib_Metropolitan_Bank

http://en.wikipedia.org/wiki/Habib_Bank_AG_Zurich

http://en.wikipedia.org/wiki/JS_Group

http://en.wikipedia.org/wiki/KASB_Bank

http://en.wikipedia.org/wiki/MCB_Bank_Limited

http://en.wikipedia.org/w/index.php?title=Silk_Bank_Limited&action=edit&redlink=1

http://en.wikipedia.org/wiki/Soneri_Bank

http://en.wikipedia.org/wiki/United_Bank_Limited

http://en.wikipedia.org/w/index.php?title=Samba_Bank_Limited&action=edit&redlink=1

http://en.wikipedia.org/wiki/Allied_Bank_Limited

http://en.wikipedia.org/wiki/Burj_Bank

http://en.wikipedia.org/wiki/Dubai_Islamic_Bank_Pakistan_Limited

http://en.wikipedia.org/wiki/Meezan_Bank

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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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References

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Financial Daily from The Hindu group of publications.

Crosby, L.A., (2002) “Exploding Some Myths about Customer Relationship Management”,

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De Cenzo, D.A., Robbins, S.P. (1998), „Personnel/Human Resource Management‟, Third

Edition, Prentice hall of India Private Ltd; new Delhi, India, p.16.

Desimone, R.L., Werner, J.M. & Harris, D.m. (2003), Human Resource Development, 3rd

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Ling, R., and Yen, D.C., (2001) Customer Relationship Management: An Analysis Framework

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challenges of customer dealing in commercial banks of pakistan

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