Business Management Articles
/ Banking Service Management


by Rene T. Domingo (email comments to

A bank desiring to be world class competitive can benchmark with other banks to continuously improve its services and operations. This process known as competitive benchmarking has however its limitations. Companies which achieved breakthrough results and performance in some bank operations may not belong to the banking industry. To reengineer and reinvent itself, a bank may have to do "functional benchmarking" or finding and adapting the best practices of any company in any industry.

One of the earliest application of functional benchmarking was done by John Reed of Citibank. He likened the bank to a factory that converts inputs or raw materials into useful outputs or finished products through a series of value-adding processes. Instead of raw materials being converted to finished goods, he envisioned the bank as a paper or information factory that converts documents or data into useful information, like bills, certificates, passbooks, checks, etc. With this analogy, the bank can benefit from the techniques production managers use to improve and optimize over-all efficiencies like capacity planning, line balancing, efficient layouts, inventory control, quality control, and job sequencing. The ISO 9000 certification which started in the manufacturing industry to document and improve the quality management systems of factories is now generating interest among many banks worldwide. They banks see their operations similar to factory processes that have to be managed in terms of quality, cost, and delivery performance. An example is Standard Chartered Bank which got an ISO 9002 certification for its trade finance and private banking service. Another world class manufacturing practice that banks can emulate is the JIT (just-in-time) system pioneered by Toyota of Japan. The JIT principle is to minimize wastes and inventory by producing, processing, or purchasing only can be consumed and used by the next process which can be an internal or external customer. Banks can use JIT to eliminate tons of unnecessary files, forms, supplies, and filing cabinets.

A critical process banks can functionally benchmark with other industries is the "customer contact" or the "moments of truths" during which the bank and its employees directly meet or interface with its customers and clients. Non-manufacturing companies and service companies like hotels, credit card companies, casinos, convenience stores, and fast food restaurants, airlines, and supermarkets offer a lot of lessons and practices banks can learn and adapt to enhance frontline customer services.

To manage customer queues, banks can learn from McDonald's. Queues in this busy fast food chain may be long but they move fast. In some banks, even short queues can be irritatingly slow to most customers. In front-line employee training and customer service, banks can adapt the SAS "moment of truth" policy of celebrating every contact with passengers. Every employee is required to make each of the millions of "moments of truth" that occur daily a memorable and delightful experience to the airline passengers by showing the right attitudes, greetings, courtesy, and deportment. It is rare to see and experience this excitement in banks where customer contacts are treated as mere transactions accompanied by the tellers' rude stares and indifference.

Banks suffering from late, incorrect, and lost statements of accounts can benchmark with American Express world renowned for its timely and accurate billings. It is surprising that many banks do not give much importance to this very vital "moment of truth". Late statements give the impression the bank does not care for its clients.

There is now a move to reduce red tape and bureaucracy in banks to streamline processes. Elimination of unnecessary documents is being done to achieve almost paperless transactions. But progress is slow because of the bank's concern for control, audit trails, and paper trails. The ultimate benchmark for paperless transactions is of course the casino, symbolized by Las Vegas, where millions of dollars in cold cash are exchanged daily without incident and without documents. Casinos have managed to achieve maximum control with the minimum inconvenience to its customers. Surely, banks can adapt some practices of the gaming industry.

Another industry that have achieve control without sacrificing service is the convenience stores, led by 7-11 with its 24-hr 7-day a week full customer service. The 24-hr ATM banking facility is limited in the range of services bank customers can avail of. AMFB of Malaysia have started "Sunday banking" by operating from 10 am to 12:20 pm every Sunday in its 27 branches. Banks can learn from 7-11 how its can operate profitably and securely up to the wee hours of the morning - truly a convenience store. We have yet to see the arrival of a fully-manned 24-hour "convenience bank".

There are precautions to take when doing functional benchmarking. Banks should study and adapt best practices, not blindly copy them. For instance, big banks have copied the big lobbies and luxurious sofas of 5-star hotels in an attempt to impress and provide comfort to incoming clients. However, sofas and chairs may send the message that service time is too long and these are just measures to reduce suffering and irritation due to long waits. Actually what banks should adapt is the hotel practice of "standing-up" check-in of guests. Guests can finish registration while standing up in just a few short minutes. Compare this with most banks in which one has to sit down to open an account in the new accounts section. Can we not open accounts quickly while standing up?

Another wrong benchmark is the express lane of supermarkets. This concept of "6 pieces or less" lane makes sense for groceries since each item take more or less the same time to process. In banks, a client with 2 transactions can take much more time to serve than one with 12 transactions, because the nature of bank transactions widely vary in scope and requirements. I have not seen any successful "2 transaction or less" express lane in banks. In fact, since most clients have 2 or less transactions, they all queue in the "express" lane for a long time, while the regular lanes are empty.

Benchmarking should be done with care. If done properly and continuously, it could bring dramatic results to the banking industry.


home | about | feedback | buy a book |

Copyright 2003. All Rights Reserved.