With growing competition and shrinking margins, banks, insurance companies, mutual fund houses and other financial institutions are coming up with innovative products to attract customers, and are putting in place various mechanism to address customers’ grievances promptly. Even the Reserve Bank of India (RBI) constituted a committee, headed by M Damodaran, former chairman of the Securities and Exchange Board of India, to review the existing system of customer service in banks.
The committee had recently submitted its recommendations and had underlined the fact that banks will have to examine the methods of leveraging technology for better customer service with proper safeguards including legal issues. Simultaneously, the Ombudsman Committee of the central bank had also suggested that banks should initiate the process of providing one view of all bank accounts of a customer with the help of available technology, such as core banking. It has suggested that banks complete the process of core banking within one year.
One of the main priorities set by the Damodaran Committee is that banks will have to augment their technology for speed and quality of service delivery. And with the profile of customers changing fast, banks will have to take a giant leap in technology. Globally, Six Sigma-based tools are used widely to define, measure, analyse, improve and control methodologies in the way of functioning of financial institutions. Banks and financial institutions across the world are using Six Sigma and Lean tools-enabled processes to save money and, in turn, give their customers value for money.
For efficient and speedy transactions, banks are putting in place automated and electronic channels like ATMs, telephone banking and online banking. But often, customers complain that ATM machines don?t work, with the message ?out of service? flashing on the machine. Moreover, as banks expand their networks, customers often complain about frequent transaction errors, new processes, training deficiencies and inadequate knowledge of the staff on the products that bank offers.
Amit Chatterjee, managing director, ASQ India, a global quality leader, says that by incorporating Six Sigma tools into the root of the software and hardware system, one can solve such recurring problems in banks. In fact, by applying the same tools, Bank of America reduced its overall defects across electronic customer channels by close to 90% some years ago.
He explains that even the best-performing companies in the financial services sector in the country are at the 2-3 Sigma level with systemic wastes accounting for about 30-40% of the total operating costs, thus making them uncompetitive.
?By adopting business management systems, such as the Malcolm Baldrige system and Lean Six Sigma, financial institutions in the country can enhance their competitiveness,? he says.
Apart from electronic transactions, the Six Sigma model can also be applied to make the process of loan disbursement faster. In the case of auto loans, it is often seen that, at the showroom, the dealer’s sales personnel are more focused on selling the car and don?t advise the customer on the documentation process required for the loan. As a result, many a time, the loan application takes a long time to get processed at the bank and there is a substantial delay in the loan disbursement. Analysts say such delays increase the cost of the loan for a customer at a time when interest rates are being hiked frequently.
By applying Six Sigma tools, credit verification can be done faster and the approval process can be streamlined. The tool can help setting up a low-cost mechanism to inform customers immediately when their loan applications are approved so that the customer can do the paper work and arrange his down payment to take delivery of the car.
For instance, to make the process of delivery faster, a text message on the cellphone of the buyer from the lender directly will save the hassles for the borrower to check the status of the loan application at the dealer level and it will also take the salesperson out of the notification loop.
By adopting global best practices like Six Sigma, financial institutions can reduce their operating costs and bring in the much-needed customer satisfaction to grow their business.