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In difficult economic times, and a highly-competitive environment, investing in customer service is vital for both customer retention and profitability. But research suggests that many banks in the region still have a long way to go.
2009 is going to be a challenging year for Arabian banks. The Union of Arab Banks estimates that profitability will be down by as much as 40%, and Markaz - the Kuwait Financial Centre - claims deposits and loan levels will also drop.
As the number of new customers declines and profit margins become tighter, customer satisfaction is an issue banks should focus on in order to make sure they are in a strong position to compete and retain business.
"In the past there was a feeling that there was another customer around the corner as they were coming in their thousands," says Robert Keay, managing director of Ethos Consultancy, which compiles the ‘Annual Service Quality Bank Benchmarking Study'. "That is changing, therefore every business has to look after the customers they have as there might not be another one in the door tomorrow."
"The journey to excellence in delivering customer satisfaction and creating customer loyalty begins the very day a new prospective customer contacts your business and enquires about your services," says Philip Forrest, president of The International Customer Service Institute and author of ‘Sold on Service'.
Despite this, a study by consultants A.T. Kearney found that many bank customers in the Middle East are not happy with the level of customer service they receive and that this has a direct impact on banks' potential profitability.
Authors of the report found that customer retention was a major problem in the Gulf, due to a shortage of skilled staff; a lack of product transparency; limited responsiveness and follow-up on customer requests; and poor online and phone banking services.
The report found that half of all UAE nationals and 90% of non-nationals believed they receive neutral or negative customer service from their bank. By comparison, in the US market, % of customers believe they receive neutral or negative service, while 76% classed themselves as "satisfied".
Bank managers who look at the bottom dollar may want to start improving their customer service as A.T. Kearney estimates that a 5% increase in customer retention increases product profitability by 20%.
It also reports that banks in the US could generate an additional US$1billion in deposits if they can make 5% of their customers highly satisfied.
"A customer who is satisfied is less likely to leave, and obviously customer retention would spread customer acquisition costs over a longer time frame and thus make the relationship more profitable for the bank," says Alexander von Pock, manager of financial services at A.T Kearney Middle East, and co-author of the report.
So how are regional banks currently performing in relation to customer service? The best indicator currently available is the Annual Service Quality Bank Benchmarking Study.
An independent report, it analyses customer service in 28 of the region's leading banks by visiting branches, making enquiries through banks' websites and phoning their call centres for help.
For the 2008 study, 725 branches were visited, 435 telephone calls were made and bank websites were visited 300 times. The top five performers were National Bank of Ras Al Khaimah (RAKBank), First Gulf Bank, Emirates Islamic Bank, Abu Dhabi Commercial Bank and Dubai Islamic Bank.
RAKBank topped the list for the fourth year running, while Lloyds TSB was the best international bank and Al Hilal Bank was the best performing new bank. Abu Dhabi Commercial Bank was highlighted for the most improved, while a notable decline in service was noted for National Bank of Abu Dhabi, Union National Bank and Royal Bank of Scotland.
The findings found that, in general, 40% of enquiries placed through banks' websites were answered, compared to 22% in 2007. Forty three percent of telephone calls to call centres were answered within 15 seconds, a decrease from 52% in 2007.
