Pegasus Business and Market Advisory - Customer Satisfaction in Retail Banking, Malaysia

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23 June, 2006

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Business and Market Snapshots - Malaysia

Retail Customer Satisfaction on Malaysian Banks Handling Enquiries, June 2006

Domestic banks in Malaysia generally measure their accomplishments in terms of financial performance rather than customer related criteria such as customer service and satisfaction. Malaysia's central bank, Bank Negara, implemented measures to consolidate and strengthen domestic banks as Malaysia liberalised and opened the local banking industry to foreign competition in 2005 under the WTO Trade Agreement. Foreign banks are more innovative in their financial products and place greater emphasis on customer service compared to the domestic banks.

Consumers choose a bank mainly because of the convenience and trust they have in the bank but customer retention is a result of good customer service. Unsatisfactory bad services such as long queues, inconsistent information provided by the bank, errors in transaction and politeness of the bank’s staff are one of the major reasons for customers leaving their banks. A survey showed that nearly a tenth of a bank's customers would leave for other banks with better offerings and customer service.

Malaysia's central bank (Bank Negara) introduced a 10-year programme known as ‘BankingInfo’ in 2003 to educate consumers on their rights as users of financial services and products. Bank Negara also required banks to establish an internal unit to handle their customers' complaints. Furthermore Bank Negara introduced the Banking Mediation Bureau for consumers to channel complaints about their banks to the central bank.

A customer opinion research conducted gauged retail customer satisfaction towards bank's handling of enquiries.

Nearly 74% of the customers mentioned they had no problems with their banks and had never made an enquiry in the last one year.

The remaining 26% mentioned they had accounted problems with their banks or had made an enquiry in the last year.

Among the customers surveyed mentioning they had not accounted any problems or made enquiries with their banks, 54% indicated they could not assure they would maintain their accounts with their current banks. Possibilities of changing to another bank were better customer service, better facilities, convenience of location, courteous staff, employee professionalism and better financial products offered by other banks. Another 46% mentioned they were satisfied with their current bank and had no intention to switch to another bank.

Among the customers mentioning they encountered problems or had made enquiries with their banks, major issues were related to debit and credit, making payments, changing addresses and charges for overdrawn facilities.

Only 13% were satisfied with their banks' response or assistance of which 62% mentioned they would continue using their banks' services.

The majority at 53% were only appeased of which 24% mentioned they would continue using their banks.

The remaining 34% mentioned dissatisfaction of which only 9% mentioned they would continue with their banks.

The customer opinion research indicated that consumers are able to shape and drive how a bank is to grow and develop if it wants to retain its customers while attracting new customers. Thus local banks have a critical choice of either courting their customers closely or lose out to their competitors.

Pegasus Business and Market Advisory (PBMA) provides business and marketing research and advisory services focussing on Southeast Asia namely Malaysia, Singapore, Thailand, Indonesia, Philippines, Vietnam and Brunei. Contact corporate@pegasus-asia.com for further information.