The banking industry has undergone widespread changes within the operating environment and this involves globalization of markets and technological improvements. These two factors have influenced and encouraged innovative practices within the banking industry that has served to enhance its operational efficiency. The introduction of ATMs and e-banking facilities are some of the major milestones in the banking industry that have revolutionized business operations.
The global markets have intensified the competitive environment of the banking industry that has created the need for increased efficiency in operations and increasing customer satisfaction. Customers are the lifeblood of any organization and the banking business too depends on the acquisition and retention of consumers for its profitability. Customer relationship management forms a vital aspect of business strategy driving the company’s market shares and market leadership position.
Customer relationship management (CRM) has been defined as a business strategy that “is a fusion of a series of functions, skills, processes, and technologies which together allow companies to more profitably manage (acquire and retain) customers as tangible assets” (Shanmugasundaram, 2008:98). It is viewed as an interactive process that creates a balance between corporate objectives and customer satisfaction to increase the profitability of the business.
Acquisition and retention of customers is one of the vital requirements of business and the effectiveness of strategies driven towards this goal determines the success of business enterprises. The past few years have witnessed growing application of CRM in retail banking and investment banking sectors. The key objective behind such initiatives is to ensure the delivery of superior customer service and to fulfil the needs of consumers.
Such practices are effective in enabling organizations to meet the needs of the consumers and provide improved services in comparison to other players in the industry. Competitive advantage and business gains are driven by a proactive approach that focuses on consumer needs and expectations, provision of consistently high quality service, looking into consumer convenience and an effective follow up service to ensure consumer loyalty. A vital aspect of investment banking and any other financial services is the changing consumer mindsets.
Owing to the abundance of information easily accessible over the Internet the consumers today are more knowledgeable of the wide range of choices and alternatives available to them. The consumers are equipped with more knowledge related to the banking options available and hence their banking decisions are guided by their well-researched study. This fact holds true for all economic sectors and business operations but forms a critical aspect of banking industries since it caters to a diverse segment of consumers. In nearly all business to business markets in which clients are as large as, or as in this case, often much larger than their suppliers, the latter must respond quickly to pressures from their clients to improve client management processes and systems” (Foss & Stone, 2002: 211).
CRM in Investment banking sector The short term objective of the marketing department is to acquire customers while the long term objective translates to retaining the old customers through effective customer relationship management (CRM) strategies. Reaching and acquiring a new customer is one thing, keeping the relationship healthy and strong over a long period of time is the mark of the true marketing professional concerned with long term health of the organization” (Dolak, 2009). The increasing competitive market makes it difficult to retain customers over a longer period of time owing to the constant influx of new and substitute alternatives invading the shelf spaces at the local retail shop. This makes the task of CRM increasingly challenging and organizations adopt various strategies to attract old customers back.
Retention strategies often employ measures such as consumer behaviour research and product surveys that enable the organizations to assess the needs and expectations of the consumer and enable them to serve better. Customers always appreciate the personal touch that results in building strong relationships. The net today provides numerous effective communication channels that are being used to keep the customer happy. Web based customer relationship management has effectively integrated all modes of communication – web, email, chat, video, voice to serve and support the customers to enhance the total customer experience.
Investment banking differs from other forms of banking in the role a few major clients play on the bank’s performance and productivity (Foss & Stone, 2002). This form of banking targets a fixed client segment that drives the sales of investment products and services. The efficiency of the banking sector is determined by the types of products and services sold to customers in response to their investment needs and expectations. Customization of products and services are the key to deriving client satisfaction.
Identification of the client segment is a vital factor in targeting and reaching out to the desired client population and this process is driven by market research. The changing demographics and intense competitive pressures from global industry players have however made a significant impact on the business strategies of investment banks worldwide. The challenges faced by investment bankers lie in reaching out to target consumers and providing them with increased ease of banking services that serve to retain clients over a longer period of time.
Moreover, the increasing demands of consumers and growing expectations have driven the banking sector to adopt technology based innovative applications for meeting consumer needs and expectations. Online banking services and mobile banking applications are some of the innovative means that are being used by investment bankers to reach out to their target consumers. Such applications have served to improve banking services and efficiencies in resolving customer queries and needs promptly through the click of the mouse button.
The anytime and anywhere access to banking services have defined new trends in serving consumers. “Online customization is one useful customer relationship management strategy adopted by e-business to add value and improve sales of their products and services using the Internet” (Khosla et al. , 2003). Investment banking in Bahrain The banking sector in Bahrain is one of the key sectors influencing economic growth and development in the region. The contribution of the financial services and banking sector is second only to the oil and natural gas industry in the country.
The country has experienced an economic boom and an upward trend in economic growth and development over the past few decades on account of globalisation influences and opening of trade channels. The banking sector has also opened to multinational corporations establishing their operations in the country to tap the growing number of high net worth individuals in the country. Despite the globalisation of banking operations and increased de-regulation of the financial services sector in the area the country continues to have a significant control and supervision over the regulatory environment.
The Central Bank of Bahrain continues to be monitor and control the banking environment in the country. The modernisation of banking services and strategic approaches made by investment bankers in other parts of the globe have not produced much impact in this region owing to the constraints applied by the existing cultural influence. The retail banking scenario in Bahrain is to a considerable extent driven by the culture of the country. The cultural impacts are realised in the conservative approach of consumers towards banking and investment.
Various research studies have concluded that while the region is an emerging market for technology applications and innovative practices, user attitudes have limited the scope of technology based business models in the banking sector. The conservative market environment and user attitudes towards the CRM strategies adopted by investment bankers in Bahrain forms the focal point of the research study. The research study will analyse the various perspectives involved in CRM approach by investment bankers through the study of Unicorn Investment Bank in Bahrain. The bank was founded in the year 2004 and has its headquarters in Bahrain.
It is an Islamic financial services group that has an international presence in various locations such as Malaysia, Turkey, Saudi Arabia and United States. The bank currently has six distinctive business service categories that include asset management and real estate, capital markets, corporate finance, private equity, strategic mergers and acquisitions and treasury. Among the various services offered by the bank the key approach is to deliver the customers with a comprehensive range of investment solutions that are customised to meet client needs and expectations.
Unicorn’s integrated product offering and financial engineering skills are closely intertwined with a strong capacity to distribute the Bank’s products and services to a broad client base across the GCC region, the wider Middle East region, Southeast Asia, the USA and the Europe” (Unicorn, 2010). The target customers of the bank include high net worth individuals, business enterprises, financial institutions, corporations, and government agencies and departments. The products offered by the bank are Shari’ah compliant and conforms to the international financial practices (Unicorn, 2010).
Issues and challenges “All major banks have invested heavily in technology and infrastructure over the last 5 and 10 years in this area, but hardly any of them have been successful in actually getting it effective” (Infosys, 2009). The failure of CRM initiatives within the investment banking sector have provided a new ground for research into increasing the effectiveness of CRM applications. There are many strategic implications related to the application of CRM within investment banking sector.
This involves the adaptation of normal banking processes and systems to integrate with innovative use of technology based applications and automated query processing systems that require efficient management and handling of issues. Such issues pertain to the efficient use of CRM systems to meet operational goals and integrating the different banking functions to provide a structured application that can be used easily by consumers. Ease of use and convenience are some of the key parameters involved in the development of CRM based banking system.
A key challenge facing these areas involves the security and privacy issues that form a major source of concern for consumers using the technology based applications. Technology based business models and CRM strategies enable investment bankers to provide the customers with efficiency in delivery of services, access to relevant information, product details and ease of transactions. Mobile banking and e-banking facilitates the customers of investment banking to a host of facilities that range from product enquiry; access updated rates of interest and market values of the investment products chosen and conducts investment transactions online.
Investment portfolios can also be accessed and manipulated according to user convenience from the comforts of their home or office. However, widespread usage of such systems has been restricted on account of user reservations related to security issues and privacy of vital user data and information. Mobile banking and online transactions raise security and privacy concerns among most of the consumers (Barati & Mohammadi, 2009). The transfer of sensitive financial and personal information across mobile networks is found to be the prime reason behind the psychological barriers created among potential mobile banking customers (Laukkanen, 2007).