Building profitable customer relationships with CRM & E- Governance in Banks

Author :
Deepak Agrawal
Assistant Professor

(Faculty of Management & Commerce)

Maharaja Ranjit Singh College of Professional Sciences, Indore (M.P.)

Qualification :

M.B.A., M.COM, PGDBM, PGDFM

Teaching Experience : 5 years

Residence:

1/1, Murai Mohallha Chhawani Indore (M.P.) Pin : 452 001 Ph: 0731- 706740

E-mail:

deepakcupid@rediffmail.com bunny_agr@indiatimes.com

Electronic copy available at: http://ssrn.com/abstract=1032316

Building profitable customer relationships with CRM & E- Governance in Banks

Deepak Agrawal
M.B.A., M.COM, PGDBM, PGDFM Assistant Professor Maharaja Ranjit Singh College of Professional Sciences, Indore (M.P.) Devi Ahilya University, Indore

deepakcupid@rediffmail.com

ABSTRACT
The techno-revolution governs the changes in economy. With high rate of change of technology, existing management practices and policies, marketing strategies need to be changed. IT is playing dominant role in todays business, in order to meet those opportunities, there is need of ensure, stable and conducive economy. Keeping this challenge in mind it is an attempt to rediscover the power of upcoming technologies of digital revolution in the field of banking sector the challenges and their impact on future economy. Simultaneously, Customers Relations Management (CRM) helps in maintaining customer database and providing better services. The present level of MIS covers, basically, information needed for control, performance monitoring, decision making etc. and encompasses activities in administrative offices like processing of statutory returns, monthly/quarterly performance reports from branches, credit information personnel inventory, profit and loss accounts, funds management, and branch maintenance etc. The purpose of research is to elucidate the familiarity of the Internet by Bank customers (E-Governance). To understand the use of CRM in the banks. To know about the various aspects of analytic CRM and shows how can be best use to manage the customer life cycle more cost effectively. Key Words : CRM (customer relationship management), ERP (enterprise resource planning), E (electronic), ATM (automated teller machine), M (money)

Electronic copy available at: http://ssrn.com/abstract=1032316

1. INTRODUCTION:
Humans are very good at transforming ages. From the beginning of the Stone age, development through Pre-Medieval periodmedieval period to the industrial age, then to the Aviation age, the Atomic age, the Space age... all of these so-called 'ages' are history. After 40 years of computing power, it's very clear that computers have become history. Today we live in the 'Information age'. The information age has accomplished great work during its span on historical stage: dissolving jobs, transforming industries, crazily building and destroying great fortunes. This information age has given us a plethora of new technologies to work with. The technologies like bio-informatics, wireless networks expert systems, human machine interaction, robotic vision among others, though not fully evolved have the potential to drive the future. To keep away from being the victim of obsolescence and to keep an eye on the future, its necessary to be aware of these technologies and exploit them to their excellence. The techno-revolution governs the changes in economy. With high rate of change of technology, existing management practices and policies, marketing strategies need to be changed. Existing businesses have to be prepared for future shock. Awareness of the cutting edge of knowledge in each field is of supreme importance. The global geographical boundaries have disappeared for business, with the use of cyber space. We have to learn faster how the integration of IT can be quickly understood and brought into each aspect of business. What we can see clearly is expanding opportunities. To meet these opportunities, we will have to ensure a stable and conducive economy. Keeping this challenge in mind it was an attempt to rediscover the power of upcoming technologies of digital revolution in the field of banking sector the challenges and their impact on future economy.

1.1 Research Question: Object is to establish healthy relationship with the banks with optimum utilization of IT i.e. e- banking and comparison of services between Public & Private sector banks. 1.2 Period of Study: - The study Period of the project was in the Month of May July 2002.

1.3 Key objectives can be summarized as:

a). To elucidate the familiarity of the Internet by Bank customers (E-Governance). b). To understand the use of CRM in the banks. c). To understand the various aspects of analytic CRM and shows how can be best use to manage the customer life cycle more cost effectively. 1.4 Technological Developments in Banking
Information technology and the communication networking systems have a crucial bearing on the efficiency of money, capital and foreign exchange

markets and have manifold implications for the conduct of monetary policy. In India, banks as well as other financial entities have entered the world of information technology and computer networking with INFINET. The Indian Financial Network (INFINET), a wide area satellite based network using VSAT technology, was jointly set up by the Reserve Bank and Institute for Development and Research in Banking Technology (IDRBT) at Hyderabad to facilitate connectivity within the financial sector. The network was inaugurated in June 1999. It was established to serve as the communication backbone of the proposed Integrated Payment and Settlement System (IPSS). The Reserve Bank constituted National Payments Council in 1999-2000 to focus on the policy parameters for developing an IPSS with a real time gross settlement (RTGS) system as the core. INFINET initially comprised only the public sector banks was opened up for participation by other categories of members. 26 public sector banks achieved the level of 70 per cent of business captured through computerisation by June 2001. The Information Technology Act, 2000 has given legal recognition to creation, trans-mission and retention of an electronic (or magnetic) data to be treated as valid proof in a court of law, except in those areas, which continue to be governed by the provisions of the Negotiable Instruments Act, 1881.

1.5 Present level of Computerisation:

Based on the norms worked out by Rangarajan Committee (II), 7827 branches of the Public Sector banks were identified for full branch computerisation up to March 2000. It was found with immense need of existing - computerised branches to be inter connected in order to provide better services to customers. Some of the Banks have started inter-connecting their computerised branches using leased telephone lines or Very Small Aperture Terminals (VSATS), creating bettercentralised control and more comprehensive service to customers. As of now, New Private Sector and Foreign Banks have an edge over Public Sector Banks as far as implementation of technological solutions is concerned. However, the latter are in the process of making huge investments in technology. Services and products like "Anywhere Banking" "Tele-Banking" "Internet banking" "Web Banking, e-banking, e-commerce, e-business etc. have become the buzzwords of the day and the Banks are trying to cope with the competition by offering innovative and attractively packaged technology-based services to their customers. Simultaneously, CRM helps in maintaining customer database and providing better services. The present level of MIS covers, basically, information needed for control, performance monitoring, decision making etc. and encompasses most activities in administrative offices like processing of statutory returns under Reserve Bank of India Act, monthly/quarterly performance reports from branches, credit information personnel inventory, provident fund accounting,

profit and loss accounts, cash and investment management, stationery stock accounting, and branch house keeping etc. LATEST STATUS
Total no. of branches in India No. of branches partially computerized No. of fully computerised branches No. of PCs/Nodes at banks Total ATMs installed at corporate customer sites installed Credit cards issued Debit cards issued Branches covered under RBI's EFT scheme Branches connected to SWIFT
(SOURCE: NASSCOM)

45,837 13,802 5,514 95,090 1,202 10,14,400 90,050 3,944 680

2. ENTERPRISE RESOURCE PLANNING (ERP) :

With the allure of the ERP a new mantra has taken in corporate world that is Customer Relationship Management (CRM) even banks are not left affected by it as are one of the core service sector industry engaged in the development of the nation. Until recently, most CRM software focused on simplifying the organization and management of customer information. Such software, called operational CRM, focuses on creating a customer database that presents a consistent picture of the customers relationship with the company and providing that information in specific applications.

Data mining can help to select the right prospects on whom to focus, offer the right additional products to your existing customers and identify good customers who may be about to leave. This results in improved revenue because of a greatly improved ability to respond to each individual contact in the best way and reduced costs due to properly allocated resources. CRM applications that use data mining are called analytic CRM. This paper describes the various aspects of analytic CRM and E-Banking that shows how it is used to manage the customer life cycle more cost effectively. The ERP applications helped to optimize and restructure their internal business support system. SCM is a component of ERP youve built your customer information and marketing data warehouse. CRM helps companies improve the profitability of their interactions with customers, while at the same time; makes the interactions appear friendlier through individualization. To succeed with, banking companies need to match services and campaigns to prospects and customers - in other words, to intelligently manage the customer life cycle.

Instead of looking at the internal processes the orientation come to look outside the business and even more towards customers. Until recently, most CRM software focused on simplifying the organization and management of customer information. Such software, called operational CRM, focuses on creating a customer database that presents a consistent picture of the customers relationship with the company and providing that information in specific applications. These include sales force automation and customer service applications, in which the company touches the customer. However, the sheer volume of customer information and increasingly complex interactions with customers has propelled data mining to the forefront of making customer relationships profitable. Data mining is a process that uses a variety of data analysis and modeling techniques to discover patterns and relationships in data that are used to understand what your customers want and predict what they will do.

As a common trend customers used to call a clerk as a Sir requesting for prompt service but now he calls us as a Sir by the bankers considered really as Customer is a king. Earlier a customer who is the guest of the bank had to stand in front of the clerk for his account operations but now the trend had changed the host and the guest are sitting opposite to the table and the guest is welcomed by a pleasing smile.

2.1 Components of CRM It is a bundle of sales, Marketing and Customer support applications. Integration of the applications through the web makes the CRM applications really attractive. Transactions are tracked through CRM and integrated with ERP and Data mining is used for the analysis of data. The old concept (Diag.1)

THE BACK OFFICE (General Manager, Manager Finance, HR,)

THE FRONT OFFICE (Cashier, Clerk)

THE CUSTOMER

The Current Concept

(Diag.2) THE BACK OFFICE

THE FRONT OFFICE

THE CUSTOMER

THE FRONT OFFICE

THE BACK OFFICE

(Diag.3) THE INTEGRATION OF CRE & ERP CHANNELS OF COMMUNICATION THE BACK OFFICE TELECOM MANAGER
CUSTOMER EDP SUPPORT MANAGER MANAGER (Public relations) (Maintenance) ERP

APPLICATIONS

THE FRONT OFFICE

The Channels of communication indicates the various possibilities of the customers contracting an organization for information and help vide through telecom, Internet or meeting through a person. The sales applications may typically contain functionally relating to sales force management, scheduling, account management, reporting. It the facilities are web enabled, facilities customers to log and access the site directly and gather information browsing through the information provided in the web as in private sector banks like ICICI Bank Ltd. UTI Bank Ltd. HDFC Bank Ltd. The marketing applications may contain information related to its activities of the organization like service details, pricing, distribution management etc. It should be closely related to sales applications and managed by sales force. The support applications contain information about service contracts, after sales services. This activity is to be considered more crucial as the success of the organization largely depend upon managing customer dissatisfaction. It is said a satisfied customer brings 5 more, but a dissatisfied customer takes away 10 potential customers. The ERP system plays the role of fulfillment of the orders, which flow from CRM applications to them. The circuit is completed thus providing effective solution for addressing business issues comprehensive way.

2.2 SOFTWARE SOLUTIONS FOR CRM Siebel systems had developed software for addressing CRM, Oracle, the worlds second largest software company, had developed a CRM solution using Internet technologies and only provider of ERP solutions to integrate them. 3. INTERNET BANKING:
Internet banking is a cost-effective delivery channel for financial institutions. Consumers are embracing the many benefits of Internet banking. Access to one's accounts at anytime and from any location via the World Wide Web is a most convenience effort.

3.1 INTERNET BANKING OFFERS SUCCESSFUL SOLUTION

24 hours Account access. Exceptional rates on Savings, CDs, and IRAs Checking with no monthly fee, free bill payment and rebates on Automated Teller Machine (ATM) surcharges Credit cards with low rates Dealing with Bills & discounting. Easy online applications for all accounts, including personal loans and mortgages Quality customer service with personal attention Now balance enquiry is also available on Mobile Phone by SMS.

3.2 The benefits of Internet banking can be as :-

dealt

Improves customer access. Facilitate the offering of more services. Increase customer loyalty towards the bank. Attract new customers Provide services offered by competitors Reduce customer attrition M-banking eliminates visits at ATMs except for withdrawal and deposits. SMS is the best option can wake anywhere in the world. Cost of transactions reduces drastically leads to the better profitability. Can promote saving habits even among in childrens.

4. Survey Methodology:
4.1 Sample Collection- Seventeen points questionnaire was designed covering points related to operating and classification of accounts, time consumption to withdraw and deposit the sum in banks, satisfaction about services. Sample inquiry was conducted with sample rate to 200 respondents. Survey also covered about knowledge about e-banking, its uses, security and need of CRM. Data collection was from both primary & secondary sources. Primary data was collected and interpreted by the questionnaire interviews with bank executives and secondary sources included Internet, bank sites, and print media. 4.2 Sample Analysis- Although various methodology are applicable for the survey but percentile method was found more suitable for concluding research, with that arithmetic mean was also used for the same. 5. RESULTS AND DISCUSSION: 5.1 Important findings concluded as: There are about two million registries Internet bank users in India.

A1 class residents in Metro at least once in a week and 40% of all find it most convents to bank online traffic. The survey conducted in Indore characterised as metro city with among 200 respondents consisting of: Sex ratio 60% were male & 40% female, out of it 48% belong to age group between 18-27, 26% between 28-37, 18% between 38-47 and 8% above 48 years. 68% were having degree in Post graduation, 16% were Graduate and 16% respondents were educated up to higher secondary or below. Occupational pattern distributed, as 22% are businessman, 46% in service, 22% student and others are 10%. Among all have access to banks with satisfaction ratio of 98% including Public sector, Private sector & Co-operative banks. Data source for cooperative banks was very limited hence it was excluded. 56% are having accounts with public sector banks, 22% in Private sector banks where as 22% operates in both sector banks Overall Customer Satisfaction was analyzed on the basis of account operating by them there was huge difference between public and private sector banks 66% respondents were satisfied and 34% were dissatisfied with public sector banks, where as 95% were strongly satisfied with the services of Private sector banks. Time required to withdrawn from banks: 44% agreed with less than 15 minutes, 50 % lies between 16-30 minutes, 4% required 30-60 minutes and even 2% required more than 1 hour. In case of large deposit 72% shown their loyalty towards public sector banks where as 28% towards private sector. 76% were having knowledge about e-banking services, but 34% were satisfied with e-security, 14% refused and 52% were unable to cast their view. On the question about the maximum satisfaction from the services provided by the banks out of it overall 62% are satisfied with private banks then 22% with public, 12% by both and 4% couldnt comment about it. 92% strongly agreed about immense need of CRM in public sector banks where as 2% refused & 6% were unable to talk about. In question about unemployment created due to computerisation 54% agreed, 28% refused & 18% were unable to give answer. M- banking quickly checks balance, get transmission list, stop cheque or even pay the bills on the standing instructions. Number of visits can be reduced only up to deposit and withdrawal of the funds. SMS (short message service) is nowadays better solution in comparison to M-banking and can work anywhere in the world. Its services can also be used for stop payment, transfers, balance enquiry, debt clearance (installment payment etc.) Popularity of e-banking is merely 1% in India, comprises to 10% in Korea, but city Indore literacy was around 60% of the respondent, but among illiterates e-governance was limited.

Almost all the banks survey have websites possesses valuable information to their customers. MNCs & Major Indian public sector banks like Canara bank, UBI provides e-banking facilities. Real e-banking & m-banking business is done by HDFC Bank Ltd, providing list of services and also provides online help about e-banking services so they were more eager to literate customers regarding it. ICICI is having highest level of networks found the same result at national level figures. It was followed by IDBI, Centurion Bank. Between Nationalized banks State Bank of India takes the lead having highest number of ATMs followed by State Bank of Indore. They still lacks behind interconnectivity. ICICI is providing online banking for children who can set up small savings, but in my survey didnt find anyone using this facility.

5.2 Some Hard Facts about Indian Banks : Throughout the country, the Internet Banking is still in the development phase. In general, these Internet sites offer only the most basic services. 55% are so called 'entry level' sites, offering little more than company information and basic marketing materials. Only 8% offer 'advanced transactions' such as online funds transfer, transactions & cash management services. Foreign & Private banks are much advanced in terms of the number of sites & their level of development. Account security is still the key issue with the increase in hacking. Increase in service time even when the system is running. Absolute chaos when the system is down temporarily when no service is offered even if the system is not needed to dispense the customer (mere acceptance of a cheque is also refused even when the entry is possible to be done later) Delay in receiving periodic statements. No answer for wrong balance being carried forward either at year-end or at the time of switchover to computers until expensive hue embarked upon. Mismatch of exceptional transactions between the manual books and the computer generated report.

5.3 Result: - The applications of CRM and E-Banking facilities are creating fast presence in the private sector banks, where as customers demand for better services from banks especially in Public sector.

5.4 Conclusion: a) Origin of the Problem :-

With high rate of change of technology, existing management practices and policies, marketing strategies need to be changed. Existing businesses have to be prepared for future shock. Awareness of the cutting edge of knowledge in each field is of supreme importance. Keeping this challenge in mind it was an attempt to rediscover the power of upcoming technologies of digital revolution in the field of banking sector the challenges and their impact on future economy.

b) Major results: i) There is an immense need of adequate training and motivation to the bankers to create fruitful and everlasting relations with their valuable customers. They should also come out with more efforts to make their customer literate in order to incorporate the best potential available in IT sector. ii) No doubt CRM is here to take on the business world and essential to compete effectively in todays market place. The more effectively you can use information about your customers to meet their needs, higher the satisfaction the more profitable we will be. Operational CRM needs analytical CRM with predictive data mining models at its core. The route to a successful business requires that you understand your customers and their requirements, and data mining is the essential guide. Extensive usage of Internet is going to be de facto standard and its the challenge for the corporate world to fulfill desire of the customers. It can now be followed as written in the shops Grahakha Param Devah that means Customer is God for us. Move fast or be beaten by the competition that might convince the customers that they are better than you as proved by the private sector banks.

c) Outcome: E-banking is not having top priority in India Public Sector Banks but then also it is emerging scenario in near future. There is need of CRM to be use more effectively in order to maintain profitable relationship with their customers. 6. Acknowledgements: Research is benefited from the discussion being made with the various respondents at the various stages of the work.
Venugopal Rao. N.K.Saxena A. Sharma M.Chhabra Dr. Namrata Sharma Dr. Meenu Varshnay Jalaj Katare

7. References:
Kotler Philip, Marketing research, Tata McGraw- Hills, New Delhi, (2000), Chapters-1 and 2 Kotler Philip, et al., Marketing Management, Prentice Hall, Singapore, vol.8, 1999, pp.42-46, 49,54 Murthy C.S.V., e-Commerce, Himalaya Publishing House, Mumbai, (2002) pp. 685,699 Indore Manager IMA Indore, November (2001), pp. 5-9, Business World, India, July 2002, p.40 How to built customers by Herb Edelstein, President Two Crows Corporation Economic Times, Mumbai edition Articles June-July2002. Reserve Bank of India, Annual report 2000-2001, 2001-2002 Shukla, S.M., Sahitya Bhawan Publication, Agra, 1999, pp.46-53 Nasscom Survey, 2000-2001 7.1 Web Resources: http//www.economictimes.com http//www.indiatimes.com http//www.rbi.org http//www.nasscom.org http//www.rediff.com 7.2 Search engines: http//www.google.com http//www.khoj.com