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China's banks are quickly learning the ropes in today's global banking environment.
This learning process is necessary if China's banks are going to cope with the challenges from foreign banks, which will be allowed full access to China's market after next year.
Increased competition, product standardization and pressure to cut costs will be common agendas for the successful management of banks in China.
China's banks, with great determination, are making the transition from a State-planned economy to a market-driven economy.
The next stage will be to the transition from a market-driven entity to a customer-driven one.
In the post-2006 banking environment, customer service will be one of the single biggest differentiators for successful banks in China, regardless of whether they are domestic or foreign banks.
For the past decade, US-based banks in particular have been honing their skills in providing superior customer services.
They have successfully met the challenge of being able to consistently exceed customer expectations.
Are China's banks prepared to meet this challenge when US banks and other foreign banks arrive on China's shores?
Our customer service survey regarding banks in China was completed, last November and December, by 300 students at a university in Guangzhou.
The students were aged 20 to 25. They represented the next generation of China's corporate professionals and entrepreneurs.
They also typified China's future middle- and upper-class citizens, who will enjoy a higher standard of living, with increased earning power and disposable savings.
These young people will drive demand for outstanding customer service as an integral part of any product to be purchased.
Therefore, their attitudes and perceptions about customer service should not to be taken lightly. The respondents indicated they used one of China's State-owned banks as their primary bank. Eighty-one percent said the Bank of China was their main bank.
That was not surprising, considering the size of the Bank of China, and the convenience of its many branches.
More than 50 per cent of the respondents said they have been banking for at least four years, and 32 per cent said they have been banking for six years or more.
The respondents said they were familiar with the ways their banks served their customers -- from personal experiences and their observations.
Survey says
The respondents were asked to rank the features of "good customer service" that they felt were most important.
The results were: no long waits in lines; a friendly attitude of bank employees; quick answers to questions; fast attention to customers; new suggestions from the bank to serve customers; and being called by name.
One common definition of good customer service practised by US-based banks is "any encounter that results in a positive perception by a customer."
A good service paradigm for banks is to create a swift and enjoyable experience for customers.
Our survey responses reflected little difference, if any, in quality service expectations between bank customers in China and in the United States, with the exception that US residents usually like to be acknowledged by name as a sign of personalized service.
The respondents were asked to select those features of good customer service they had personally experienced at their banks.
The feedback reflected less-than-positive results.
Only 12 per cent said they had experienced the most important feature of "no long waits in lines." Only 24 per cent said they had experienced the second-most important feature, "a friendly attitude of bank employees."
The feature of highest satisfaction was "quick answers to questions." However, only 25 per cent of the respondents experienced that.
Twenty per cent of respondents stated they had never experienced any of the features of good customer service.
The respondents were also asked to rank their banks on customer service, with "1" for "excellent," "2" for "above average," "3" for "average," "4" for "below average," and "5" for "poor."
The feedback indicated banks in China have a long way to go to improve their levels of customer service satisfaction.
Only 1 per cent of the respondents indicated a "1" rating, and only 12 per cent selected a "2" rating.
Thirty-five per cent of the respondents selected a "3" rating, and 33 per cent selected a "4" rating. Nineteen per cent selected a "5" rating.
From these findings, we may conclude 52 per cent of the respondents felt customer service satisfaction at their banks was either poor or below average.
Our survey also sought to determine whether below-standard customer services could be rationalized and tolerated if transaction costs and fees were lower.
Seventy-seven per cent of respondents said good customer service was more desirable than the transaction costs.
That suggested people were willing to pay higher fees provided they received good customer services.
Eighty-five per cent of the respondents said they would switch their business to a bank that provided better customer service.
That suggested there is no brand loyalty to banks in China, and that if alternatives exist for improved service quality, people will move their banking relationships.
In response to the question about switching their business to a US-based bank with better quality customer services, 71 per cent of the respondents answered positively, while 29 per cent responded negatively.
That suggested although US-based banks may provide better services, they will still have to earn the trust and credibility of China's consumer market.
US-based banks unashamedly tout the high priority and value they place on providing outstanding customer services.
The best managed banks in the United States exemplify customer services through practices, skills and attitudes.
These may take the forms of guaranteeing no customer waits in line for more than five minutes; providing a guest relations officer who greets customers and directs them to the appropriate service departments; or re-engineering both the front and back offices to eliminate duplications and to provide greater efficiency for customers.
It is no secret US-based banks are gearing up for the huge consumer retail market in China -- and the tremendous funding base that can be provided by local deposit accounts.
They will bring their best practices in customer services to China.
In anticipation of the opening of China's banking industry to foreign bank competitors, the Chinese banking system has implemented numerous reforms.
These reforms have included improving capital ratios, shedding non-performing loans, developing corporate governance and establishing internal risk-management controls.
All of these measures have one thing in common: They aim to improve the operating performances of banks, as seen on their financial statements.
Improving financial performance is 50 per cent of the formula for successful banks.
The other half of the formula is satisfactorily serving customers -- by exceeding their expectations.
Satisfied customers are the key to bank stability and future growth.
Our survey results indicate it is time for a wake-up call within China's banking industry.
It is time for China's banks to wholeheartedly embrace the concepts, understanding and practices of superior customer services.
Bank customers in China, as in the United States, deserve nothing less.
[The author worked in the US financial services industry for 30 years, including at large banks in California, Hawaii and Asia. He has been president of City Bank (Hawaii) and chief executive officer of the Word of Life Federal Credit Union, which he founded. He is a banking consultant and a member of the international faculty of Guangdong University of Foreign Studies.
(Business Weekly January 17, 2005)
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