Gulf banks losing revenues due to bad customer service

August 5th, 2008 - 4:36 pm ICT by IANS  

Dubai, Aug 5 (IANS) The banking sector in the Gulf is losing millions of dollars due to a lack of focus on customer service, according to a new study. Despite record profits this year, the Gulf Cooperation Council (GCC)’s banking sector is losing hundreds of millions of dollars in potential revenue due to bad customer service, the study by global strategic management firm A.T. Kearney said.

Whereas assets and profits of GCC-based banks are growing at double-digit rates, the gap between the quality of customer service and customer expectations leaves much to be desired, according to an A.T. Kearney statement.

“GCC banking executives would do well to remember that a happy customer increases a bank’s profits,” A.T. Kearney’s Middle East managing director Dirk Buchta said in the statement.

Challenges such as too few skilled resources, lack of product transparency, limited responsiveness and follow-up on customer requests, as well as poor multichannel offerings - especially online and phone banking - could force customers to move banks.

A recent survey in Dubai found that half of all residents in the United Arab Emirates (UAE) consider their customer service experience neutral or negative.

Among Western expatriates, the figure was 90 percent or higher.

In the US, only 24 percent of consumers are negative or neutral about customer service, and 76 percent are satisfied.

“Banks in America generate an additional $1 billion in deposits if they can make just 5 percent of their customers highly satisfied,” Buchta said.

“These clients make larger deposits and recommend the bank and its services to friends and family. A.T. Kearney has found that a 5 percent increase in customer retention increases product profitability by 20 percent to 80 percent,” he added.

However, Buchta said that with increasing retail competition across the GCC, most notably in Saudi Arabia where a number of banks such as Inma Bank, BankMuscat and the National Bank of Bahrain have or are being granted retail licences by the Saudi Arabian Monetary Agency, customer service would become an ever more important differentiator.

“Satisfaction in the branch, on the phone, and online can and does have a direct impact on revenues,” Alexander von Pock, manager of the financial institutions group at A.T. Kearney and co-author of the study, said.

“Put it this way, a mid-sized GCC bank with world-class customer service could increase profits anywhere from $50 million to $150 million a year,” he said.

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