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

According to a Time magazine article ominously entitled "Are Banks Obsolete?", by 1993 about 80% of commercial loans in the U.S. come from non-bank institutions like insurance companies, financing companies, and brokerage firms. Banks have lost not only the bulk of their loan business, but their deposit business as well to these aggressive competitors. The study estimated that about $500 billion have been moved during the last three years from low-yield bank accounts to higher yield investments like mutual funds. This mass exodus of funds from banks to non-banks is not just a Western phenomenon. In Asia, we see small and nimble financing companies targeting the small borrowers and professionals who could not stand traditional bank bureaucracy.

Banks can react to this life-threatening erosion of their business in three ways. They can panic and pack up. They can try to handle customer complaints faster and send better apologies and amends. Or, more positively, they can fight back by radically shifting their paradigms about customer service, and reengineering their service delivery systems. Enlightened banks aim to win back and retain customers by delighting them, anticipating their needs, and exceeding their expectations. These institutions go beyond reacting to complaints and competitor's threats. Traditional banks wrongly equate customer service with customer complaints handling. Service is not about correction or restitution, after the damage to the customer and the corporate image has been done. Excellence in banking service means to be more responsive and proactive to changes in customer needs and demands. While modern technology, specifically information technology, can help, service excellence is primarily made possible by modern, if not maverick, management philosophies.

Responsive banking

The objectives of responsive banking are to cut customer waiting time, reduce transaction time, and cut costs and wastes through reduction in idle time, wastes, and other inefficiencies in both the front-line and back rooms. Responsive banking prevents the loss of customers by eliminating the causes of slow and insensitive bureaucratic service. It addresses this concern with system changes that result in paperless and queue-less banking. Citibank's Global Branch concept eliminates queues by shifting customer service from the teller area (windows) to the sales and service section (desks), where customer relationships are "opened, serviced, deepened, and broadened." Global Branches look exactly the same - furniture, lights, service standards, facilities, ala McDonald's, with no surprises. Using the machines in these branches, customers can print up-to-the-minute statements with a push of a button. They can also enjoy the convenience of paperless, formless deposit and withdrawal transactions.

Another approach to responsive banking is no-contact banking. For instance, tele-banking and electronic banking (ATM) result in tellerless and bankerless banking. Customer convenience in the future will be redefined as accessibility to information than to physical sites. More and more customers just want to have bank information and process it themselves. With the increasing speed and sophistication of information technology and the increasing difficulty of travel (traffic and parking), many customers are finding physical contact with the bank's people and products unwelcome and unnecessary. In the Philippines, Far East Bank's tele-banking service, Speedcall, allows clients to do a host of over-the-counter banking transactions by phone like balance inquiry, last transactions inquiry, and transfer of funds among enrolled accounts. Hong Kong Bank's Hexagon system "puts the bank on the customer's desk". It enables customers to monitor daily accounts positions, including those held with other banks, check previous transactions up to the last 30 days, download data and software for review and analysis, make multi-currency payments and transfers, move idle funds from one type of account to another to maximize interest earnings. An emerging start-of-the-art-technology, natural language understanding (NLU) provides computers with superb voice recognition capability that enables it carry on a normal human conversation, say with a bank client. UK's Lloyds TSB Bank plans to launch a full scale NLU system that will ultimately serve its 6 million accounts in 1,100 branches through tele-banking. NLU systems can also dramatically cut costs. One estimate is that a 30-second reduction by NLU from 100,000 calls averaging 2.5 minutes can save $250,000 to $1 million in 800-line charges.

The risk in electronic banking is downtime due to equipment or network breakdown and line congestion during peak hours or days. Both problems should be addressed systematically for they can ironically destroy rather than enhance service quality and the bank's image. Banks with tele-banking facilities should find automatic call distribution (ACD) technology a boost to efficiency. ACD, primarily used by airline reservation offices, can regulate flow of incoming calls from clients, resulting in shorter waits and higher operator productivity.