Offering high degree of flexibility to customers

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.