Reflections on bank–customer interactions in the new millennium

Having relatively recently embraced the concept of marketing, banks approach the new millennium operating in an increasingly competitive and fragmented marketplace with financially literate consumers. This competition combined with the prevailing low interest rate environment means that traditional banks with extensive branch networks are having their profitability margins squeezed. New technology presents opportunities for banks to become both more efficient (in terms of cost reduction) and more effective (in terms of customer profiling and informed targeted selling). As many groups of customers become more content with interacting with their bank through remote technological channels (eg phone, Internet) the implications for bank–customer relationships are important. Recent research shows that new ‘electronic banking’ channels, while being keenly embraced throughout the industry, are being pursued more for their cost-based advantages than for their business development or relationship management capabilities. Given that the key power of the Internet arguably rests in its interactive capabilities, and that relationships are predicated upon interactively, it seems appropriate to conclude with some key issues for future electronic banking strategy with particular emphasis on staff–customer relationships.     

Customer account relationships and e-retail banking usage<Superscript>1</Superscript>

Financial institutions are actively developing new electronic banking products for their retail customers. To date, the market leaders have drawn a disproportionably higher share of e-retail banking customers. In response, smaller institutions have become quite active in exploring ways to participate profitably in online banking. A major influence is from a customer relationship management (CRM) perspective, where institutions try to limit the outflow of current customers and direct high-value customers to potential products from a multi-product service offering array. These efforts can succeed only if retail bank marketers focus the promotion of the new products and services that can utilise this channel toward those customers who are most likely to find them attractive. The first aim of this study was to examine the role that online and electronic banking play in defining the customer's primary financial relationship. The analysis of 701 retail customers of a financial institution presented in this study suggests that banks and other institutions are highly vulnerable to loss of customers to rivals with extensive online services. A second aim was to examine to what extent information on banking relationships is able to extend CRM analysis beyond that offered by typical demographic and income data. Current customer account relationships are found to be highly predictive of use of electronic services use in general. And, interest in the use of specific online services is related to differing customer relationships in addition to ordinary demographic and balance information. These findings can be useful for retail banking in identifying potential high-value users from a customer relationship management perspective.     

Online banking in India: An approach to establish CRM

Technology is fast altering the business servicescape. Its role in improving customer service levels is being used strategically and increasingly by service organizations. The service attributes and quality can be enhanced by deployment of technology. The Internet has facilitated convenience in customer interactions and transactions with the banks. Online banking is currently emerging as a new approach in India for providing improved accessibility and expediency to customers. Most banks have their own websites for improving the customer interface and offering online services. The article studies the applicability of online banking in India and its role in fostering relationships with customers and giving them more value. The research was conducted on customers familiar with online banking in India, and their perceptions about online banking were studied. The findings reveal that customers are using the services but are skeptical about the financial transactions and service quality dimensions.     

E-banking comes to town: Exploring how traditional UK high street banks are meeting the challenge of technology and virtual relationships

UK high street banks are continuing to extend the choice of channel through which customers can manage their moneycolon; an obvious example is e-banking. They have been keen to exploit technological advances and changing customer attitudes to alternative channels. Additionally, competition from leaner new market entrants has provided an added incentive to adopt new approaches. In the light of such developments, it is worth reflecting on the changing nature of the bank–customer relationship. This paper suggests that banks are finding it difficult to manage relationships effectively due, in large measure, to the sheer volume of customer data generated by new interactive, technology-based channels. Paradoxically, it seems that the more data banks have about customers the less likely they are to know them on a personal level. It is further suggested that channels such as e-banking potentially reduce the level of personal contact between bank and customer to the extent that a ‘virtual’ relationship develops. This paper concludes that, given the tendency towards ‘virtualisation’, it is inconceivable that bank–customer relationships will become any more intimate in the future. Indeed, a greater degree of personalisation in customer communication may be the very best that banks are able to offer.     

Customers' perceived value for private and state-controlled Hellenic banks

Under conditions of increasing competition banks try to improve their customers' level of satisfaction in order to create strong preferences and hence increase their customers' loyalty. This paper is based on data drawn from 1,470 questionnaires completed by customers of both private and state-controlled banks in various areas of Attica. It looks at the bank customers' satisfaction but focuses mainly on their perceived value from the banking services received. A first analysis of the data collected shows that state-controlled bank customers are older, with lower education and lower income. Additionally, state-controlled banks show lower proportions of very pleased customers and high proportions of displeased customers. A principal component analysis performed on the data related to perceived value has defined three main factors: professional service, marketing efficiency and effective communication, which have then been used as the basis for comparing the customers' perceived value between the two types of bank. The main findings of this analysis show that state-controlled bank customers enjoy a higher perceived value in the case of marketing efficiency (mainly due to the wider network and the favourable pricing policy) whereas private bank customers enjoy a higher perceived value in the case of professional service and effective communication.     

How the Internet affects output and performance at community banks

Internet web sites have become an important alternative distribution channel for most banking institutions. However, we still know little about the impact of this delivery channel on bank performance. We observe 424 community banks among the first wave of US banks to adopt transactional banking web sites in the late-1990s, and compare the change in their 1999–2001 financial performance to that of 5175 branching-only community banks. Whereas today virtually all viable community banking franchises offer the Internet banking channel, studying this earlier time period allows us to make clean comparisons between subsamples of “brick-and-mortar” and “click-and-mortar” community banks. We find that Internet adoption improved community bank profitability, chiefly through increased revenues from deposit service charges. Internet adoption was also associated with movements of deposits from checking accounts to money market deposit accounts, increased use of brokered deposits, and higher average wage rates for bank employees. We find little evidence of changes in loan portfolio mix. Our findings suggest that these initial click-and-mortar banks (and their customers) used the Internet channel as a complement to, rather than a substitute for, physical branches.     

E-business opportunities in financial services

Over many years, technological developments have enabled financial services products to be sold and administered via remote distribution channels. E-business is the latest channel whose potential is being explored by both traditional financial services players and new entrants alike. But, in their haste to ‘go online’, are organisations, new and old, falling into the ‘technology trap’ and ignoring the fundamentals underpinning financial services retailing and, perhaps, undermining some of their ‘segment-of-one’ strategies? This paper concludes that the key to successful e-financial services retailing is to take the nuances, attributes, techniques and skills that have accompanied financial services products in the physical world and reinvent them in an e-environment. Only by following this approach will e-business avoid being labelled as a solution looking for a problem. UK high street banks are continuing to extend the choice of channel through which customers can manage their money, eg e-banking. But it is suggested that channels such as e-banking potentially reduce the level of personal contact between bank and customer to the extent that a ‘virtual’ relationship develops. This paper concludes that, given the tendency towards ‘virtualisation’, it is inconceivable that bank–customer relationships will become any more intimate in the future. Indeed, a greater degree of personalisation in customer communication may be the very best that banks are able to offer.     

Ethnic banking in the USA

This paper describes the development of the ethnic banking market in the USA. It portrays the main ethnic groups involved and how they manage their relationships with banks, whether as individuals, families or small businesses. It analyses how banks have responded to the ethnic marketing opportunity and then suggests which areas banks need to focus on in order to improve management of their ethnic customers.     

Relationship intention of South African banking and life insurance customers

The effect of increasing competition, globalization and tough economic conditions has led to changes in how banking and life insurance firms operate. This has resulted in banking and life insurance firms focusing on retaining and building long-term relationships with their existing customer base by implementing a relationship marketing strategy. However, not all customers are willing to invest in building long-term relationships. Therefore, firms need to identify and target those customers who intend to support long-term relationships with the firm, that is those with a high relationship intention. The objective of this research was to investigate South African banking and life insurance customers’ relationship intention by determining the constructs constituting relationship intention and to determine whether differences exist between high and low-relationship intention customers for the identified relationship intention constructs. A non-probability, convenience sample was used to gather data from 401 respondents, with 202 from banking and 199 from life insurance customers. The results identified five constructs constituting relationship intention for the sample of respondents and indicated that high- and low-relationship intention respondents see four of the five constructs differently.     

Online relationship marketing and affective customer commitment – The mediating role of trust

The pervasive use of information technology has implications for consumer relationship management among financial services organisations. There is a need for increased understanding of how digital channels might influence the development and maintenance of firm–customer relationships and in particular the role of the Internet upon commitment and trust outcomes. Thus, this research aims to determine the relationship between online relationship marketing practices and affective customer commitment, and how this relationship is mediated by online channel trust. Data were collected from 200 online retail bank customers and Structural Equation Modelling was used to test the impact of five key online relationship marketing practices on affective commitment, and how trust mediates these relationships. We found that advocacy and collaboration have a direct relationship with affective commitment, while trust mediates the influence of engagement and personalisation on affective commitment. The article highlights the significance of trust in technology when using online channels to build customer relationships.     

Relationship intention of South African banking and life insurance customers

The effect of increasing competition, globalization and tough economic conditions has led to changes in how banking and life insurance firms operate. This has resulted in banking and life insurance firms focusing on retaining and building long-term relationships with their existing customer base by implementing a relationship marketing strategy. However, not all customers are willing to invest in building long-term relationships. Therefore, firms need to identify and target those customers who intend to support long-term relationships with the firm, that is those with a high relationship intention. The objective of this research was to investigate South African banking and life insurance customers’ relationship intention by determining the constructs constituting relationship intention and to determine whether differences exist between high and low-relationship intention customers for the identified relationship intention constructs. A non-probability, convenience sample was used to gather data from 401 respondents, with 202 from banking and 199 from life insurance customers. The results identified five constructs constituting relationship intention for the sample of respondents and indicated that high- and low-relationship intention respondents see four of the five constructs differently.     

INTERNET INVESTMENT BANKING: THE IMPACT OF INFORMATION TECHNOLOGY ON RELATIONSHIP BANKING

The production "technology" of investment banking, particularly in the pricing and distribution of securities offerings, has long depended on the ability of bankers to build and maintain networks of relationships with institutional investors and client firms. Among other benefits, these relationships enabled banks to economize on communications with investors at a time when communicating with the investment community was quite costly. But recent advances in information technology are forcing banks to reevaluate this relationship-based technology. For example, Goldman Sachs recently purchased a stake in Wit Capital's efforts to build a retail distribution channel via the Internet. And William Hambrecht, founder of Hambrect & Quist, has gone so far as to propose that IPOs be put up for auction over the Internet.
This article offers both historical and economic perspective on these technological innovations in investment banking. In so doing, it provides a framework for thinking about how this segment of the industry is likely to evolve in the near future. It also discusses how advances in information technology coupled with the increasing codification of investment banking practices could reduce the central role of human capital and relationships elsewhere within investment banks, and how this might influence both the organization of individual banks and the industry in general.     

Do Declines in Bank Health Affect Borrowers’ Voluntary Disclosures? Evidence from International Propagation of Banking Shocks

I examine whether declines in banks’ financial health affect their borrowers’ disclosures. Prior studies indicate that, in relationship lending, banks and borrowers rely on private communication, rather than public disclosures, to resolve information asymmetries. When banking relationships are threatened, borrowers must turn to new funding sources, inducing them to reconsider their disclosure policies. This paper predicts that borrowers, whose banking relationships are threatened by declining bank health, change their public disclosures of forward‐looking information. Using the emerging‐market financial crises in the late 1990s as shocks to the health of certain U.S. banks, I find that affected banks’ U.S. borrowers increase both the quantity and informativeness of their management forecasts following these shocks compared to borrowers of unaffected banks. The results are similar using conference calls or the length of the Management's Discussion and Analysis section as alternative proxies for voluntary disclosure. Overall, these results provide new insights into the impact of availability of relationship lending on firms’ disclosure choices.     

Does ethnic focus change how banks should implement customer relationship management?

This paper describes the development of the ethnic banking market in the UK. It describes the main ethnic groups involved and how they manage their relationships with banks, whether as individuals, families or small businesses. It analyses the problems ethnic customers have in dealing with banks and the gaps that emerge between them and their banking providers. In addition the paper analyses what banks have done to bridge the gap, with a brief comparison with the situation in the United States. The paper then suggests which areas banks need to focus on in order to improve management of their ethnic customers, and concludes by suggesting that given the rapidly growing size and value of the ethnic segments, banks would do well to undertake an ethnic banking audit.     

The effect of heterogeneous risk on the early adoption of Internet banking technologies

Financial service providers have increasingly offered customers new remote access to such services, with Internet banking being the latest example. While Internet banking has been available for years, the early adoption by customers of this technology was disappointing to most. This paper examines the demand for remote access to banking accounts by consumers and finds that when the technology is new, the traditional risk return models including variables allowing for heterogeneous risk add power in modeling the adoption decision. Perceived risks in Internet banking are seen to be responsible for some of the hesitation to adopt. Ironically, older consumers are found to be less likely to adopt Internet banking regardless of their risk tolerances. However, younger consumers are found to be early adopters only when they have relatively high levels of risk tolerance.     

Marketing online banking services: The voice of the customer

US banks have invested heavily in developing online capabilities, with the expectation of migrating customers to the new cheaper delivery system. Results in the USA thus far have been mixed at best; market penetration is low and customer usage is sporadic, focusing mainly on simple tasks. This paper reports on the first of two studies conducted to investigate the reasons for the mediocre performance. A qualitative consumer study revealed significant differences in attitudes and opinions between early users and those that banks hope will adopt next. Most importantly, future prospects could be characterised as indifferent about online banking; many were not convinced about its benefits and the value it provides. While the potential to expand the market for online banking services exists, banks need to re-examine their marketing approach.     

声誉模型视角的商业银行关系营销策略研究

根据菲利普·科特勒关于关系营销的建议,商业银行对客户实施关系营销有效的深度是不同的。商业银行与客户的关系是一种既竞争又合作的关系,声誉模型可以为商业银行有效实施关系营销策略提供支持。研究发现：商业银行应该选择“合作策略”彰显良好声誉,选择具有良好声誉的客户合作,并着力发展优质的忠诚客户。     

Internal marketing and employee commitment: Evidence from the Ghanaian banking industry

Attracting the right mix of employees and getting them committed to the goals and objectives of the organization is a major issue facing service organizations. Scholars have recommended that internal marketing is positively associated with employee commitment but little empirical research exists that has examined the relationship between internal marketing and employee commitment especially in the financial services sector. The current study investigated four internal marketing practices – empowerment, rewards, training and development, and communication and their impact on employee commitment in the retail banking industry. Using data from 410 employees of banks in Ghana, the empirical results indicated that, with the exception of communication, the factors are positively associated with employee commitment. The study concludes that in order to influence employee behaviour in the banking industry in Ghana, bank management must implement measures that provide direct benefits to employees. The strategic implications of the findings are discussed in the article.     

The political economy of relationship banking

In the aftermath of the global financial crisis, banks need to reevaluate their position in light of profound changes in the economic, social, and political landscape. On the one hand, we emphasize the benefits of relationship banking, which establishes close contact with bank customers. Through a long-term orientation, relationship banking aligns incentives and supports the long-term needs of bank customers, leading to reduced inequality and greater firm innovation. On the other hand, the interaction between politics and relationship banking can have dark sides. First, with new borders arising and competition in banking affected, relationship banking might be particularly prone to political interference. Second, a shock to the relationship bank can be transmitted to its borrowers. We analyze how relationship banking can overcome its drawbacks.     

Adoption of digital banking channels in an emerging economy: exploring the role of in-branch efforts

The aim of this qualitative study is to analyse the role of in-branch efforts of banks on migrating customers from branch banking to digital banking in India. In-depth semi-structured interviews were conducted with bank executives representing senior management from public and private sector banks in India. Qualitative content analysis technique was used to analyse the data. Varieties of responses received during interviews were clubbed into four main themes based on data reduction, display, and conclusion-drawing processes. In-branch communication with customers, digital transformation of the branch, customer-centric initiatives, and redefined role of branch staff hold the potential to bridge the customers’ migration to digital banking. The paper suggests that the key identified factor in improving digital banking acceptance in India is the requirement of integrated cultural and organisational changes at the bank’s level to gain the customers’ confidence and trust in digital banking.