by Rene T. Domingo (email comments to rtd@aim.edu)

How does one determine if a bank or any other organization is customer-centric or customer-driven? Customer orientation is the most important prerequisite in providing competitive world class service. Unless the customer takes priority in company decisions and policies, then he is not recognized as truly the “king”. To understand what it means to be customer centric in banking, let us analyze the types of banks which are not.

A cost driven bank

A credit card company realized that the cost of servicing an account has gone up. This was due to the higher cost of labor and the cost of new technology. It decided to pass on this cost to all its credit card customers by doubling the annual membership fee. Large regular customers were incensed by this increase in charges, believing that bank had earned more than enough profits from their huge card transaction to cover its cost of operations. As a policy, bank charges were levied across the board and did not discriminate between frequent and infrequent card users. As a result, many of the big members dropped the card and switched to the competitor. The bank did recover the cost of servicing, but in so doing, lost more in terms of profits and loyal customers.

Another cost driven bank

Assume the average queuing time of a bank customer in the lobby is 10 minutes with 3 tellers deployed. If the tellers are reduced to two, the average queuing time jumps to 30 minutes. Pressured to cut cost by top management, the bank may opt for a hefty one third reduction in labor costs in spite of a 200% increase in customer inconvenience. The rationale: the resulting customer inconvenience, irritation or its effects will not appear in this quarter’s profit and loss statement.

The capacity driven bank

The capacity driven bank will behave very similarly to the one described above. Let us say that during peak hours, with three tellers, customers had to wait for an hour to get their business done. To reduce queuing time to a more tolerable 10-15 minutes, two more tellers have to be added. Customers are angry as the bank manager explains that their maximum capacity or number of booths is for three tellers only. Moreover, head office has fixed the budget per branch and no new hiring is allowed.

The collateral driven bank

A borrower has requested for a short term loan of at least $300,000. It will be used for working capital to increase capacity, market share and enhance profitability. The bank is convinced by the proponent’s feasibility study and marketing plan but decides to release only $200,000 because his remaining collateral could only secure this amount. The loan proceeds, while not small, were not enough to enable the proponent to benefit from volume discounts and other economies of scale advantages that were expected to be generated by the original $300,000 amount. Ironically, after receiving $200,000 and implementing its expansion program, the proponent experienced losses and cash flow problems. The bank blames him for mismanagement and threatens to call the loans.

The technology driven bank

A bank has installed new ATM’s to decongest its lobby of customers, but more importantly to showcase this acquisition as the latest and fastest technology in the industry. To its disappointment, most of its customers shun the machines and continue to deal with live tellers and maintain their personal relationships with these human front liners. The bank fights back by levying service charges for all teller transactions to increase ATM patronage. It has to justify its multi-million investment in technology and show to its competitors that it is working remarkably. The customers fight back by closing their accounts and moving them to the next door bank.

Another technology driven bank

A client with his passbook came to withdraw from his savings account from a teller. At that point in time, the computer went off line and was disconnected from head office central computers. It took some time to manually process the withdrawal. The client got his cash, but not his passbook. The teller said that the passbook cannot be updated unless the computer went on line again. The customer was asked to come back the next day for his updated passbook.

The employee convenience driven bank

Your bank’s ATM is down for servicing and cash replenishment, just when you needed money in the morning before going to work. This loading happens so regularly and it occurs also frequently during office hours when you want some cash during lunch. You are irritated and wonder. Why can’t the bank do this routine task during the wee hours of the morning or off hours when there are few or no customers to be inconvenienced? The answer is simple: it is convenient for your bank and its employees to do these activities during office hours. Why should it care about your or its other customers’ convenience? It is the customer’s fault or unlucky day if he comes to withdraw money when the ATM is being serviced.

The sales driven bank

A bank has been receiving complaints from its customers about slow service, delayed statements, discourteous tellers, and misposting of transaction. The usual response was no response or “we have sanctioned the erring employee and we assure you it will not happen again.” Of course the mistakes and delays happen again and the bank hopes the customers will get tired of complaining and learn to live with them. Meanwhile, the bank marketing program calls for the launch of new bank products and services to match the competition’s offerings. Tellers are trained and enjoined by management to cross sell these new products to current clients who come to do regular transactions. The customers greet this initiative with mixed feelings and some with disdain. Most silently ask themselves: “How can this bank have the temerity to offer new products when it could not even efficiently service its present ones?”

The company policy driven bank

A customer has been in the queue for 15 minutes. He was about to make two transactions – one check deposit to his savings account and one check encashment worth $2,300. When it was his turn, the teller promptly accepted his deposit. But when she realized the amount to be encashed, she requested the customer to get first the approval and signature of the branch manager who was seated inside the office. The teller explained that as matter of policy, tellers cannot encash checks above $2,000 without approval from their superiors, and customers themselves must personally get this approval. The client in this case had to line up again for another 10 minutes in front of the branch manager.

In contrast to the banks described above which are internally oriented, the customer driven bank is externally oriented or market oriented. It does not set policies and standards based on its capacity, costs, or competence, but on the actual needs expectations, and convenience of its clients – depositors and borrowers alike. After it recognizes and accepts its clients needs, it invests in, improves, or designs products and processes that will fill these needs as closely as possible. Then it hires, trains, motivates, and equip the right people who will run these processes and sell these products

The aim of the customer-centric bank is not just to sell products and services, but to create delighted, loyal customers who will always come back and favorably endorse the bank to their friends and acquaintances. In the end, the customer driven bank will have more repeat customers and repeat business than its competitors. It puts its customers ahead of everybody else and everything else – in its mission statement, in this policies, in its systems, and in its decisions. It sales and profits will rapidly increase as its reputation for customer care and concern spreads.