Electronic copy available at: http://ssrn.

com/abstract=1032316

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)










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 45,837
No. of branches partially computerized 13,802
No. of fully computerised branches 5,514
No. of PCs/Nodes at banks 95,090
Total ATMs installed at corporate customer sites
installed
1,202
Credit cards issued 10,14,400
Debit cards issued 90,050
Branches covered under RBI's EFT scheme 3,944
Branches connected to SWIFT 680
(SOURCE: NASSCOM)

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 APPLICATIONS
COMMUNICATION

THE BACK OFFICE

TELECOM CUSTOMER EDP SUPPORT ERP
MANAGER MANAGER MANAGER
(Public relations) (Maintenance)
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 dealt
as :-
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 co-
operative 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