Banks need to be patient and listen, working over the long-term as a real consultant and partner to business, and providing solutions rather than asking oft-repeated questions. Banks need to offer partnership rather than parenting says Satyajeet Roy, Head – Business Banking, Commercial Bank International PSC
‘It’s all about relationships; knowing your clients, keeping in touch with them and understanding their needs.’ Sound familiar? This is a common tagline used by banks in the region, demonstrating a focus on customer service. But service is a fluid concept, and it surprisingly falters in a market downtown, when companies need it most.
Take for example Mr. U’s company, Care Computers. Most banks and relationship managers loved the business model, which had performed very well for seven years by buying stock in bulk from China and serving growth in the GCC. The business had good margins and cash sale, and so the bank provided him with a great relationship manager, a dedicated service desk, internet banking and credit facilities, all at very competitive rates. The client regularly met and interacted with senior bank staff and was treated like a king.
The hypothesis ‘Customer is King’ seemed alive at parties. But suddenly the party came to an abrupt end. What had happened? How did the ‘service concept’ and ‘client centricity’ suddenly become non-existent? The answer is simple – the client was experiencing stress. And there could be no worse time to reduce the level of service than now.
As the low oil price drains regional liquidity and slows down the economy, there has been a lot of discussion about the stress felt by SMEs in the media as well as within banks themselves. The industry is now exploring ways to deal with SMEs that cannot pay back their loans.
Some are actively working out the facilities, while others may look at it as a mere transfer of the portfolio from one ‘cost code’ or ‘business segment’ to another. Others have argued that the business is now with the remedial department, and that they will manage it, within the best interest of the banks.
We are all forgetting a crucial point though. In this troubled time, it is the client who really suffers, and they require a lot more than the regular service delivery. In contrast, what they get is a reduced level of interaction with their relationship manager, more questions to be answered, more documentation, and, worst still, delayed action and a higher cost to their regular transactions. The word ‘service’ is forgotten and the relationship team makes sporadic visits at best. However these are far from service visits and are only meant to check inventory levels, something that would have been more helpful if done earlier.
However, if we were to follow a few simple measures during these situations, chances are that collectively the client and bank can work together to correct or avoid a negative situation.
To begin with, banks need to accept the reality rather than amplify the misery. If a client cannot pay back a loan, it may be due to mistakes they made or global market conditions. Perhaps the bank did not see it coming. In most cases, it is a combination of all three. The quicker the bank resolves the problem, rather than deferring to blame or defence, the quicker it can control the damage.
It is easy and natural to take the high ground when the person sitting across from you is weak. Many relationship managers will question a struggling SME: “So when will you clear this outstanding?” Like an irate father talking to their son. Often the client plays the ‘junior’ role, accepting mistakes and hoping that he gets a little more time.
However, situations like these actually require bank relationship managers to be patient and listen, working over the long-term as a real consultant and partner to the business, and providing solutions rather than asking obvious questions. Banks need to offer partnership rather than parenting.
Another important factor to consider when servicing SMEs in a challenging environment is reducing their turnaround time. The best time for bankers to ensure that the service they provide to SMEs is timely is when markets are slow and clients experience regular delays.
The quality and agility of a banker’s due diligence will determine whether a client goes under or survives. Usually one or two delays in payments, often caused by a genuine transaction being held up for ‘more scrutiny’, can start an avalanche. Don’t be in a hurry, but delaying a transaction for days for no material reason will have a negative effect.
SME lenders also need to train their teams correctly in order to provide a better service to customers. Bankers need to be educated about how to use credit reviews to make correct sales decision, but also understand that the business cycles do have darker sides and should know how to manage a client in stress.
What clients get is a reduced level of interaction with their relationship manager, more questions to be answered, more documentation, and, worst still, delayed action and a higher cost to their regular transactions.
Managers should question whether their sales teams have the bench strength to deal with clients in difficult head winds and take the extra effort and time to train them. This involves an understanding of classification of accounts, credit monitoring during volatile market situations, client and supplier communication and solutions analysis.
Last but not the least, it is important for bankers to maintain contact with their clients’ other banks. In challenging markets, the first reaction is often to squeeze as much from the client as quickly as possible. However, the sharing of information and collaboration with other banks will not only lead to a faster resolution, but more importantly, a complete one. Sharing the bad news is good news and combined efforts can help everyone.
It is a natural to be concerned about cutting costs when revenues slow down – it’s the prudent thing to do. But cutting corners on customer service is the wrong thing to do. On-boarding new clients may not be a priority, but new clients usually expect ‘better’ service during tough times. They are conscious of their problems and have made a very hard decision in approaching the bank. Service guarantees during this time become a requirement.