Customer Service in Islamic Financial Institutions - Assignment Example

?How do you create a truly centric Islamic financial service in Islamic financial s The Islamic banks are seen to enter into a head on competition with their peers, who are the conventional banks. A study conducted in 2013, by the Islamic Banking, Cardiff University and Finance Centre United Kingdom (UK) has found a strong demand for Islamic banking, financial services and products among the British Muslims (Smith, 2013). However, the banks have failed to understand that the head-on strategy has different implications as compared to the strategy that looks at exploiting the Islamic niche bank. While competing with the conventional banks, the Islamic banks are at a disadvantageous position, as they are smaller in size. More particularly, in case of retail banking range of bank networks, size is an important factor, in which they are seen to suffer heavily (Presley, 2013). Figure 1 Source: (Garbois et al., 2012) Therefore, the Islamic banks should focus on these two areas; firstly on other channels like phone banking and online banking in order to increase market share. Secondly, the Islamic banks should also look for establishing alternative branch model depending on the needs of the customers. The alternative branch model also offers other advantages like reduction in operating cost, set-up time and capital investment. When the Islamic banks are competing with the conventional banks, it signifies that they are attracting the customers, who give less significance to the Sharia compliance while conducting their financial deals and more importance is given to the efficient services and products that are offered by the banking market in large (Anon, 2010). The three key elements that are most important while targeting the right customers segment are; firstly, is the identification of the customers segment that is least open to the Islamic banks for their financial purposes. This step leads to identification of the exclusion. Secondly, the customer segments whose requirements are not satisfied by Sharia compliance should be identified. This requires that the shortfall of the bank must be identified. Finally, the segment of the customers, who are more interested in ethical banking business like the non-Muslim and the Muslim customers both should be identified (McDonald, 2012; Burkard, 2011; Dibb and Simkin, 2013). Designing strategies to attract these customers can make the Islamic banks much more competent to face the competition from the conventional banks. In order to achieve this objective, the banks need to identify broader set of customer’s requirement and remain at par with the conventional banks in regards to pricing and ease of use. In this context, product innovation should be given paramount importance. There are some products that can be offered in the new Islamic banking structure that are not in compliance with the Sharia law like the hedge fund, which are for the high net worth individuals and derivatives, that are for the corporate clients. Some Islamic banks are now seen to offer derivative products by going against the compliance law (Bock, 2010). Top tips for creating and maintaining a customer-centric organisation In order to create a customer centric image, the organization needs to emphasize on the environmental and social efforts and apart from these, ethical values should also be given importance. In order to incorporate those in the Islamic banks, the employees should be educated about the Islamic bank structure and products. Customers play a very important role in generating revenue and sales for the organization, whether it is financial or any non-financial institution. Studies have shown that customer focus is very low in Islamic banks. Therefore, in order to increase the revenue, customer satisfaction should be the top priority. Following should be done in order to focus on the customers: Whenever dealing with any product, the salesperson needs to be very well aware of the product and services they are offering. This awareness is seen to be lacking in the Islamic banks, where the customers need more explanation regarding the products that are designed to comply with the Sharia law. Information about the products before the customer purchases should be offered to them. None of the cost should be hidden from them. Like for instance, when extra charges after sales is discovered, the customers get annoyed, which causes damage to brand loyalty. There are often limited web services or call centre services for the customers. The banks should ensure that the multi-channel services are offered to the customers in an optimum manner (Robson, 2012; Al-Shammari, 2011; Leland and Bailey, 2011; Galbraith, 2011; Macaulay, 2012). A brand can offer customer centric products and services in a framework in which the organization aligns the services, it provides regarding every aspect of the firm, like infrastructure, processes, performance metrics, culture and people. As the intensity of the competition increases, it becomes more difficult for the Islamic banks to adapt to a customer-centric, sophisticated sales approach. In order to reorganize the business from product focus to customer focus, the bank should emphasize on improvement of skills and sales techniques, implementation of improved multi-channel offering and organizational integration that would help in reducing the cost and promote customer satisfaction. At the same time the bank should also ensure that all the customers are given equal importance across all the channels. Products and services be tailored to facilitate Muslim lifestyles and life stages If the banks aim to exploit the Islamic banking niche, it ensures targeting the customer segment that gives importance to the Sharia compliance. Thus, the banks should not only satisfy the general financing needs, but also the Muslim specific customer needs. The banking products start from basic products such as credit cards and auto finance to sophisticated products, such as wealth and asset management. All these products need to be tailored to the Muslim specific needs, which create a platform of differentiation. In retail banking business, the customer segment can include employees from the ministry dealing in Islamic affairs, awqaf employees, muftis and other religious conservatives (Ghosh, 2012; Corporation Essvale, 2011). One of the best examples of the retail banking product that can be aligned to Muslim specific requirement is financing the pilgrimage going to Mecca. This type of product is highly attractive to the customers, who are not concerned with the Sharia compliance. Some of the banks are already having this service, like Tabung Haji Banking in Brunei and Malaysia. In private banking business customers who are employed in the halal industry are also included. Providing specialised services to the high net-worth individuals like designing an awqaf set-up can signify highly differentiated and specialised service for this customer segment. On the other hand, corporate banking includes target segments from the halal industry and Islamic charities (Mbizi, 2012; Claessens, 2012; Abeka, 2012. A service to this segment means providing asset management for awqaf or expertise in providing Islamic financing for the companies in the Western countries, which are acquired by equity firm running under Sharia compliance. Pricing consideration is also important while exploiting the Islamic banking niche. If the target customers are less interested in accepting the products offered by conventional banks, then the Islamic banks can charge higher price for their products. Apart from this, the advertising campaign, product name, corporate slogan, brands name and other marketing portfolio should be in accordance to the Muslim heritage and values. The banks should also maintain personal relationship with the customers through bank branches, where the employees can directly interact with the customers. Islamic banks have also entered into less traditional ways, like phone banking to communicate with the customers. Corporate social responsibilities are also given importance, like creating Islamic charities and supporting the local Muslim communities are highly favoured and supported by the Islamic banking customers. There is a large market gap between the Islamic bank and the conventional bank. However, by satisfying the Muslim-specific client, needs and banking products aligned to the Islamic core values will help them in position them better (Garbois et al., 2012) Integration of multiple delivery channels Multi-channel approach is a defensive measure taken by the banks. This leads to reduction of the pressure at the bank branch and introduces the accounts manager to the system. The Islamic banks are using the multi-channel distribution like Internet, ATM, phone banking and branch banking. Internet has now become an important technological platform for financial transaction. Internet banking has the advantages of availability, convenience and low cost. It enable the banks to provide services with the qualities like personal service, customer focus, fast delivery, convenience, availability and 24 hours round the clock service. The 128-bit encryption when used commercially, paves the pathway for secured online financial transactions. A pure internet banking does not requires any brick and mortar branch, which signifies low operating cost and entry barrier for the newcomers. However, newcomers see internet as an opportunity that provides offer of product at an attractive price, lower service charges and higher interest rates of the savings deposits. Thus, it can be seen that multi channel delivery system of the bank does not only reduce the cost and work load of the branches, but also places the bank at the door steps of the customers. Through ATMs the customers can easily access the services of the bank. Similarly, phone banking apart from providing various services to the customers, also makes them aware of the better services that are newly launched by the banks (Khatib, 2011; Wimmer et al., 2010; Flower, Fawcett and Harle, 2012; Jones, 2010). Importance of technology With the advancement of technology, technology customisation has taken an important place in the Islamic banking business (Cornish et al., 2013). The technological developments that the Islamic bank requires are developed in-house by the banks. The assistant general manager of Ithmaar Bank, Yousif Alkhan stated that the products offered by the conventional banks are more standardised than the Islamic one (BankingTech.com, 2012). As a result of which technology customisation is given higher importance in the implementation effort. This will help the Islamic banks in reducing the fundamental difference that exists between them and the conventional banks. In Islamic banks, the service standard offered to the customers is well below the conventional banks, which is caused by the lower amount of investment in the core banking technologies including lack of back-up. But now the scenario has changed and the Islamic banks have understood that investment towards technology is an important parameter in all banks like retail, investment and commercial banks. Mohamed Gamil, the chief operating officer of Islamic Bank of Britain (IBB) has emphasized that the banks should move faster and adopts to cloud computing. IBB has entered into deal with the cloud computing company Salesforce.com, which is well known for its products to customer relationship management. Cloud computing has opened doors for sales management and also moving the savings and current accounts into the cloud (O'Loughlin, 2010; Batiz-Lazo, Maixe-Altes and Thomes, 2010; World Bank, 2011; Ahmad, 2010; Ahmed, Karim and Archer, 2013; Guantai, 2013; Holley, 2013). Attracting and training customer-focused staff Poor employee training is one of the chief reasons for poor service to the customers. Providing excellent services to the customers does not cost more to the company than providing poor services to the customers. Hiring positive minded employees and giving them training related to customer-focused mission is the important element that prevents poor customer services. In order to prepare the employees to deliver exceptional customer service they should be made well aware of customer requirements. Work based learning schemes and high quality staff training is the key Islamic principles on which the banks are focusing (Smith, 2013). Apart, from training in order to attract the employees, they should be provided with incentives and other benefits from time to time, so that they remain highly motivated and give optimum production. In this context, the performance of the employees should be strictly monitored; the achievers should be identified and should be rewarded in order to make them perform better. Rewards can be of any type. It can be in form of career progression, financial compensation or in form of acknowledgments like “employee of the month” awards. The incentive system of the bank should be structured properly, since it is crucial in providing recognition to the employees. Particularly, in case of Islamic banks, it should be structured well, as it works as a powerful tool in retaining the employees especially when the Islamic banks suffer from the shortage of skilled resources (Armstrong, 2012). Reference List Abeka, S.O., 2012. An investigation of factors influencing corporate customers acceptance of Internet banking: A case study of East African Trade Finance customers. Munich: GRIN Verlag. Ahmad, A.U.F., 2010. Developments in Islamic Banking Practice: The experience of Bangladesh. 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