Offering high degree of flexibility to customers

Mahendra Gautama, Contributor, Jakarta

Today, the banking industry more than ever needs to meet its customers' demands and provide various channels through which they can satisfy their needs in the most economical and effective ways.

It is not surprising, therefore, that the industry is striving consistently to accommodate the customer's need for convenient methods of banking through the current multichannel services.

Compared to the previous option of physical channels, such as tellers in the banks or Automated Teller Machines (ATMs), today virtual channels have been made available, like the Internet and cell phones. Banking by using a cell phone is popularly referred to as m-banking.

A report issued by the International Data Corporation (IDC) in 2003 indicates that in the not-too-distant future the number of cell phones will reach the staggering figure of one billion. In Indonesia, the number has exceeded over 12 million, which is far higher than the number of fixed telephones in this country.

With this kind of rapid increase, there are good reasons for banks to serve their customers using cell phone technology. For example, since 1997, Barclays Bank in England, in cooperation with BT Cellnet, has attracted some 500,000 new customers through its m-banking services.

Indeed, as most of the commercials on m-banking claim, m- banking provides a high degree of flexibility and convenience as customers can conduct transactions, check account balances and transfer money whenever or wherever they are.

M-banking is based on the text message services that are provided by almost every telecommunications provider. Using Wireless Application Protocol (WAP), texting is a more recently developed system providing access to the web, though in a less elaborate form than most Personal Computers (PCs).

Today, needless to say, it is an integral part of the services provided for customer convenience by almost every global bank, while the local scene consists of the major players, such as BCA, Bank Niaga, Bank BNI and Bank Mandiri.

Of course, apart from its major advantages -- technology-wise, that is -- m-banking has its shortcomings, just like any other delivery channel that relies on technology. One of its shortcomings is a lack of personal interaction.

Another weakness of m-banking is its security aspect. The results of surveys conducted by Mckinsey's 2000 -- titled "Selling Internet Banking to Asians" -- clearly indicate that the majority of Asian customers, including those in Indonesia, are reticent about embracing online banking for security reasons.

However, the report also found that about 38 percent of respondents would be willing to open online accounts in the future, while 20 percent said that they would do so if such accounts were free of extra charges for transactions.

The remaining 42 percent did not show much interest in this type of virtual banking service.

Changing customers' perceptions about the security aspects of m-banking will not be possible only through advertising and promotion. Banks have to pay more attention to trust management.

Frederick F. Reichheld and Phil Schefter wrote in the Harvard Business Review 2000 that customer loyalty is strongly related to trust, which is undoubtedly extendable to their trust in virtual banking.

It is a must for banks to study customer attitudes and the level of intimacy in their relationship with their current or chosen bank. Once trust is built and embedded in their minds, then it is much easier to gain their loyalty. Finally, these loyal and trusting customers will act as "walking advertisements" for their banks.

Apart from trust management, banks also have to take care of three factors.

First is the capability of the bank to design and deliver value propositions in m-banking products that feature unique conveniences and benefits.

Second, the value propositions must have two-pronged benefits for customers: both direct and indirect benefits. By direct, we mean further enhancement of current and new benefits and at the same time reducing costs, while indirect benefits mean an increase in sales or the number of the bank's customers should be reflected in cheaper services being provided to customers, thereby reducing customer turnover.

Indeed, the bank must have and consistently update the database and information on customers and their preferences so that it can identify its target market more sharply and deliver enhanced services.

Finally, for every new technology or innovation, including m- banking, it is necessary for all banks to go through a "testing and learning" process. This will truly be a useful and rewarding period as there will be numerous experiences to learn from, because even ATM banking -- today an essential part of banking services -- was not overly welcomed about a decade ago in Indonesia when it replaced the more personal service provided by tellers and staff. But soon it became one of the prerequisites by which a customer evaluated or selected his or her bank.

Similarly, with patience and deep commitment from the banks, and by reducing to the minimum or entirely removing the technology's shortcomings, m-banking is likely to become an integral and essential part of banking services that no customer will be able to do without in the very near future.