ABSTRACT
In a world where consumer needs are ever-changing, there is a need to critically examine how modern technologies are affecting the customer relationships within banks. Commercial banks have acknowledged that Information Technology are crucial to fostering the performance of commercial banks. However, the benefits of adopting the various systems have not been extensively established. The current study investigated the effect of Information Technology on customer relationship management within Nigerian banks. The research specifically investigated the influence of service automation, data analytics, and digital channels on customer relationship management. The study was anchored on the Resource-Based View, and the identity, differentiate, interact, and customize theory. A descriptive research design was adopted and the unit of analysis was the 41 commercial banks in Nigeria. The study sampled the chief technology officer, human resource managers, and operation managers from each of the commercial banks. The sample was determined using the Yamane formula. 94 respondents were sampled using questionnaires which were the main data collection tool. A pre-test of the research instrument was carried out on 10% of the respondents to support reliability testing. The study adopted a mix of drop and pick, as well as Google forms to collect data. The collected research data were analyzed quantitatively using both descriptive and inferential statistics with findings being presented using bar graphs, charts, and tables as deemed appropriate. The study achieved a 90% response rate from the sample participants. The study found there is a statistically significant relationship between Information Technology and customer relationship management in commercial banks. The study identified that service automation and digital channels have a significant positive influence on customer relationship management. The research found an insignificant effect of data analytics on customer relationship management. The study concludes that improving service automation and utilization of digital channels can result in better customer satisfaction, loyalty, retention, and customer handling experiences. The study recommends that commercial banks should improve their utilization of data analytics and business process engineering to achieve better customer relationship management. The research recommends that banks should foster their reliance on social networking and automation processes to drive customer relationship management. The study was limited only to three Information Technology; hence there is a need for a further study taking into consideration more proxies of digital transformation.
CHAPTER ONE
Introduction
1.1 Background of the Problem
Modern customers are well informed of what they want in an organization. Any organization that does not respond to their changing needs risks losing these customers to competitors (Gray & Byun, 2010). Therefore, in order for organizations to reap optimal benefits from customers, it is important that they implement strategies geared towards strengthening their relationship with customers (Vasiliu, 2012). This requires them to develop their skills in customer identification to clearly understand their needs and develop products and services specifically tailored to these needs.
Muro, Magutu and Getembe (2013) notes that, managing customer relationships has been acknowledged as one of the key issues in organizations following increased competition. New firms entering the market destabilize the ones previously operating in such market thus calling for proper management of customer relationships (Parvatiyar and Sheth, 2002 cited by Njoki, 2015). More and more companies are realizing the need for in-depth and integrated customer knowledge in order to build close cooperative and partnering relationships with their customers.
McDonald (2002) notes that Customer Relationship Management (CRM) is a business strategy to identify, cultivate, and maintain long-term profitable relationships. It requires developing a method to select the most profitable customer relationships or those with the most potential and working to provide those customers with quality service that exceeds their expectations. CRM looks at ways to treat clients as individuals with specific needs so as to attain a position where the organization can influence clients‟ choices positively toward their product and service offerings (Robert-Phelps, 2004). The emergence of new channels and technologies is significantly altering how companies/banks interface with their customers, a development bringing about a greater degree of integration between marketing, sales, and customer service functions in organizations.
The study is founded on two theories: the resource based view theory which defines resource as anything which could be thought of as strength of weakness of a given firm (Wernerfelt, 1984). Barney (1991) argues that the resources include all assets, capabilities, organizational processes, firm attributes, information and knowledge among other variables meant to provide a firm with competitive advantage. The resources form the basis of a firm‟s competitiveness. The study will also be based on the open systems theory which dictates that in order to sustain its operations, a firm needs to take good care of its key stakeholders including suppliers, customers and shareholders. Customers comprise an important stakeholder of a firm as they provide an avenue through which the output of the firm is consumed to ensure continued production.
Therefore, financial services offered by commercial banks are more less the same except for the manner in which they are packaged according to the targeted market segment; that is practically made of customers. According to Ryals and Payne (2001) cited by Njoki (2015) customer relations management and information technology is one favorable strategy that should be adopted by banks and other organisations to differentiate their services from others.
Anani (2013) highlighted on customer relations management in IT and notes that, customer relationship management in information technology environment seeks to establish long term relationships with current customers of the firm besides safeguarding more profits through customer retention. According to him, Information technology adoption has enabled organizations to improve their efficiency and effectiveness in service delivery hence greater customer satisfaction. Implementation of customer relationship management allows organizations offer services in a more organized and professional manner thus enable quality services delivery.
According to Mozaheb, Alamolhodaei and Ardakani (2015), the whole process of customer relationship management in IT environment has greatly evolved over the last 3 decades. Globally, China is well known for integrating IT in its banking and customer‟s management. ATM use, wireless communication with customers, records management through technology and many more used by the Bank of China, the farmers‟ banks of China and banks that serve the middle level customers has had a great impact on the banks‟ performance for over 25 years now. Remarkably is the customers‟ management. This is evident in two ways whereby the customers are able to manage their accounts through e-banking, and the banks could easily reach and attract more customers through electronic data management, e-communication, emarketing and many more. This for example saw the rise of customers in the basic 8 commercial banks of china between 2006 to 2013 rise by 24.53%; unlike the local farmers‟ banks that integrated technology least in their customers‟ management.
In Africa, IT in banking is easily felt in Nigeria today. According to Oluwagbemi et al (2014), the evolution of e-banking dates back to 1986 when the banking sector in Nigeria was deregulated. The result of this deregulation brought far-reaching transformation through computerization and improved bank service delivery. Competition with new products became keen within the system while customer sophistication posed a challenge for them, hence the reengineering of processing techniques of business activities encourage the automation of financial services especially among new generation of commercial and merchant banks. Here, new banks discovered that the evolving technology at the global level could be applied to greater advantage in the Nigerian financial landscape (Belás, 2014).
That indeed paid off for some of them, as customers, who ordinarily would have found it almost impossible to leave the banks they were already familiar with for a new one that was yet to find its feet, quickly noticed the difference in the available products and service delivery systems of the two categories of banks (old and new generation). The customers without hesitation opted to pay for the extra values that would satisfy the extra-personalized product services and the attendant personalized marketing. They therefore demonstrated their preparedness to switch from one bank to the other, the old ties notwithstanding; as they identified gaps in the service delivery of their original banks. This continues to draw benefits in the banking industry in Nigeria today since the customers are ever adopting cheap and accessible services at efficient and convenient qualities (Oluwagbemi et al, 2014).
In Tanzania, Chacha (2015) notes that, one way through which commercial banks have made strides is by investing in modern technology. This has increased customers‟ confidence in the banks and from time to time customers have doubled their investments. For example, E-banking makes use of certain identification features before access/permission is granted by the bank to its users. A widely used identification feature today is the use of personal identification number (PIN). These are usually a series of codes which is only known to the customers who owns the account or anyone else the person(s) wished to have access to his account. Permission to perform financial transactions is immediately granted by the banks once this PIN is quoted. These integrations for example have built the confidence of the customers and their investments have doubled and their identities with various banks built.
In Nigeria, the evolution of technology has totally changed with the operations of the banks and the profits accrued from the technology have doubled day to day. For example,, the adoption of e-banking, mobile money transfer as championed by Safaricom and e-data management has put financial institutions at advantages of minimizing expenses each day and increasing the customers‟‟ bases, customers‟ touch and customers‟ reach (Njoki, 2015).Otundo (2014) notes that Nigeria is one of the countries adopting and consuming technology for both economic development and social well-being. In the Nigeria commercial banks cases, IT is being applied starting from customers‟ financial statements managements, mobile money transfer, money management through ATMs and the agency banking. His has not only led to customers‟ satisfaction but has also led to increased customers‟ confidence, increased customers, increased touch between the customers and the bank agencies and many more (Wainaina, Kibera, K'Obonyo and Thuo, 2011).
1.1.2 The Concept of Customer Relationship Management
Robert-Phelps (2004) defines CRM as a methodology of creating and evolving an organization in the marketplace while at the same time influencing positively the perception of the organization in individual customers. It looks at ways to treat clients as individuals with specific needs so as to attain a position where the organization can influence clients‟ choices positively toward their product and service offerings.
Yaprakand Karademir (2010) in their study, Internationalization of emerging market business groups: an integrated literature review, argue that, technology in customer relations management in today‟s business is such a strategy that has been adopted by organisations and their effects have included personalized information identification for the clients and solutions to personal concerns addressed good-humoredly.
McDonald (2002) notes that CRM is a business strategy to identify, cultivate, and maintain long-term profitable relationships. It requires developing a method to select the most profitable customer relationships or those with the most potential and working to provide those customers with quality service that exceeds their expectations. This way, technology has from time to time surprised customers‟ expectation in the banking industry in Nigeria, due to the fact that banks are continuously coming up with new technology run banking. For example, customers are easily notified for any deposits to their banks through mobile banking technology, customers can avoid large queens in the banking halls by depositing or withdrawing from ATM, customers get investment advisory through customized short messages and many more. This indeed has evolved over a long time and customers are gaining confidence and more relevance to the banks due to technology.
Stone, Woodcock and Machtynger (2002) observe that the mastery of CRM can very well mean the difference between success and failure in organizations. The get more particular by pointing out the role of technology in CRM by arguing that, customer relationship management (CRM) is a combination of organizational strategy, information systems, and technology that is focused on providing better customer service (Chen and Popovich, 2003). The main objectives of CRM are to acquire new customers, retain the current customers, and nurture a favorable relationship with the existing customers. This can be well understood by embracing the modern technology as it has been witnessed in China, Australia and Canada. It should be considered as a corporate strategy because it is a fundamental approach to doing successful business as it helps managers understand, anticipate and respond to the needs of an enterprise, current and potential customers in order to grow their relationship value.
In summary, the goal of CRM is to be customer-focused and customer-driven, running all aspects of the business to satisfy the customers by addressing their requirements for products and by providing high-quality, responsive customer service. Cross-functional integration of CRM should be encouraged in the whole organization to take responsibility for customer satisfaction and allow better predictive models to improve cross-selling and improved products and delivery options. CRM can consist of virtually any front office or customer facing process designed to improve the company's relationship with customers (Kotler & Keller, 2006). Rangarirai & Donie (2013) in their study „Customer Relationship Management (CRM) practices in Financial sector‟ sum the whole idea that, technology is the central deliverable that must be embraced for better customers management and improved profits in any organisation.
1.1.2 The Concept of Information Technology in Banking Today
IT in banking sector can easily be understood by focusing on IT in banking in the New Era. According to Otundo (2014), the 21st century will bring about an all embracing convergence of computing, communications, information and knowledge. This will radically change the way we live, work, and think. The growth of high speed networks, coupled with the falling cost of computing power, is making possible applications undreamed of in the past. Voice, data, images, and video may now be transferred around the world in micro-seconds. This explosion of technology is changing the banking industry from paper and branch banks to' digitized and networked banking services (Mbizi, 2012).
According to Mbizi (2012), it has already changed the internal accounting and management systems of banks. It is now fundamentally changing the delivery systems banks use to interact with their customers. All over the world, banks are still struggling to find a technological solution to meet the challenges of a rapidly changing environment. It is clear that this new technology is changing the banking industry forever. Banks with the ability to invest and integrate information technology will become dominate in the highly competitive global market. Bankers are convinced that investing in IT is critical. Its potential and consequences on the banking industry future is enormous (Chavan & Ahmad, 2013).
Fraering & Minor (2013) note that computers are getting more sophisticated each day and their relevance in banking is greatly changing. They have given banks a potential they could only dream about and have given bank customers high expectations. The changes that new technologies have brought to banking are enormous in their impact on officers, employees, and customers of banks. Advances in technology are allowing for delivery of banking products and services more conveniently and effectively than ever before - thus creating new bases of competition.
According to Zafar (2012) rapid access to critical information and the ability to act quickly and effectively will distinguish the successful banks of the future. The bank gains a vital competitive advantage by having a direct marketing and accountable customer service environment and new, streamlined business processes. Consistent management and decision support systems provide the bank that competitive edge to forge ahead in the banking marketplace. He continues to note that, the advantages accruing from computerization are three-directional - to the customer, to the bank and to the employee.
According to his study, for the customer, Banks are aware of customer's need for new services and plan to make them available. IT has increased the level of competition and forced them to integrate the new technologies in order to satisfy their customers. They have already developed and implemented a certain number of solutions among them: Self-inquiry facility: Facility for logging into specified self-inquiry terminals at the branch to inquire and view the transactions in the account., Remote banking: Remote terminals at the customer site connected to the respective branch through a modem, enabling the customer to make inquiries regarding his accounts, on-line, without having to move from his office., Anytime banking- Anywhere banking: Installation of ATMs which offer non-stop cash withdrawal, remittances and inquiry facilities. Networking of computerized branches inter-city and intra-city, will permit customers of these branches, when interconnected, to transact from any of these branches, Telebanking: A 24-hour service through which inquiries regarding balances and transactions in the account can be made over the phone, and, Electronic Banking: This enables the bank to provide corporate or high value customers with a Graphical User Interface (GUI) software on a PC, to inquire about their financial transactions and accounts, cash transfers, cheque book issue and inquiry on rates without visiting the bank. Moreover, LC text and details on bills can be sent by the customer, and the bank can download the same. The technology used to provide this service is called electronic data interchange (EDI). It is used to transmit business transactions in computer-readble form between organizations and individuals in a standard format.
1.1.3 Technological Innovations in Nigeria Banking Sector
In the Nigerian‟s banking industry due to competition, IT investments and adoption has become a very important component in achieving organizational. In recent past therefore, electronic and communications technologies have been used extensively in banking for many years to advance agenda of banks. The earliest forms of electronic and communications technologies used by the banks were mainly office automation devices. Telephones, telex and facsimile were employed to speed up and make more efficient, the process of servicing clients (Ngumi, 2013).
However, with coming of new partners in banking industry, competition intensified and the personal computer (PC) got proletarian, Nigeria banks begun to use them in back-office operations and later tellers used them to service clients. The advancements in computer technology have led to application and adoption new IT investments that have changed the banking landscape in the country (CBN, 2013).
Arguably, the most revolutionary electronic innovation in this country has been the ATM. In Uganda, banks with ATM offerings have them networked and this has increased their utility to customers. The ATM has been the most successful delivery medium for consumer banking in this county. Others technological innovations in banking sector include internet banking, telephone banking, Electronic funds transfer, among others (CBN, 2014).
1.2 Statement of the Problem
The fast-changing competitive environment, globalization, economic changes, regulation, privatization and the like demands that banks are run efficiently and effectively by continuously engaging in technological innovations. Emergence of new technologies, products, markets and competitors places demand on any organization to apply any skills necessary to remain competitive and achieve competitive advantage (Faith, 2014).
Every well managed bank needs to undertake technological innovations which will enable it to have a competitive edge over the others (Mugambi, 2006). These innovations are intended to facilitate a firm‟s sustainability in the face of growing competition and external threats. The information and communication technologies are revolutionizing the banking sector over the years. The rapid development and commercialization of Information and Communication Technologies (ICTs) banking industry has prompted banks to increasingly adopt these technologies. This is based on the expectation that the new ICT based technologies and processes would lead to an improvement in their operating efficiencies and customer service levels.
When customers evaluate the quality of the service they receive from a banking institution they use different criteria which are likely to differ in their importance, usually some being more important than others. While several criteria are important only a few are most important. These determinant attributes are the ones that will define service quality and hence customer satisfaction from the consumer‟s perspective (Parasuraman, A.et al., 1988).
The banking industry has already been depicted (Parasuman et al., 2001) as exhibiting little market orientation and fulfilling services with little regard to customer needs as well as including branches dissimilar in efficiency. Long lines, limited time for customer servicing, transaction errors, excessive bureaucracy, and security and network failures have been said to be the most frequent problems using banking services (Smith, 1999). This highly lower customer‟s perception on the quality of service offered and hence reduces customer satisfaction and the bank‟s profitability and credibility.
One question relates to whether automated, telephone and Internet banking represent positive change and are satisfactorily serving the customers. Whilst technology can save time and money and eliminate errors, thereby addressing certain issues associated with changing cultural and social trends, it can also minimize direct customer interaction and any associated service value to be gained (Bitner,2001). According to Joseph et al. (2003), reliable and accurate banking services; customer services; personalized services; and accurate records are some of the factors which are considered by the customers in their choice of a given type of service delivery channel.
Since the year 2000, technology has increasingly been innovated in the delivery of services in the Nigeria banking industry. The adoption of technology into service industries, more so in banking is becoming a strong trend as service providers are now being urged by industry bodies to invest in technology. This has led to a number of studies being carried out on the effects of this technology and the customers‟ perception of banking in Nigeria. For example, Wainaina et al (2011) did a study on Customer Relationship Management and Competitiveness of Commercial Banks in Nigeria and found out that the customers that integrated modern IT attracted more customers besides allowing them access services conveniently. Ngumi (2013) did a study on the Effect of Bank Innovations on Financial Performance of Commercial Banks in Nigeria and found out that with modern IT, the customer base of the banks increased by almost 10 to 12%. Faith (2014) did a study on the Impact of Technological Innovation in Commercial Banks in Nigeria: An Evaluation of
Customer Satisfaction and found out that IT is directly linked to customers‟ satisfaction in the banking industry.
From the long list of findings above, it is therefore evident that technology has a direct link with the performance of banks in the country. However, from the literature, it can be noted that there are no studies that have been done linking the influence of IT and customers‟ satisfaction among this banks; a basis on which this research is based on. Therefore, this research intends at, examining the influence of technology on customer relationship management among commercial banks in Nigeria; a case of First Bank Nigeria.
1.3 Objectives of the Study
The main objective of the research was to establish the effect of Information Technology on customer relationship management within commercial banks in Nigeria
1.3.1 Specific Objectives
i. To establish the effect of service automation on customer relationship management within commercial banks in Nigeria
ii. To determine the effect of data analytics on customer relationship management within commercial banks in Nigeria
iii. To establish the effect of digital channels on customer relationship management within commercial banks in Nigeria
1.4 Research Questions
i. What is the effect of service automation on customer relationship management within commercial banks in Nigeria? ii. What is the effect of data analytics on customer relationship management within commercial banks in Nigeria? iii. What is the effect of digital channels on customer relationship management within commercial banks in Nigeria?
1.5 Significance of the Study
This study is expected to benefit the management of commercial banks, the regulatory authority, the bankers’ association, and academicians in various measures. To the management of commercial banks, these results will provide insights on how the various Information Technology can be vital in supporting better customer experience within the banks.
The findings will also help to stimulate debate within the Nigeria Bankers Association (NBA) on how best to seek strategic alliances with telecommunication firms and other players in the financial sector in implementing emerging Information Technology such as Application Programming Interface - API revolution and other FinTech solutions.
To the CBN, the results can be integral in systematically designing regulations for the adoption of Information Technology as well as creating a conducive environment to support the enhanced adoption of emerging technologies. The study findings are also expected to benefit scholars by acting as a source of knowledge on the various Information Technology and CRM in Nigeria. Further, the results are expected to foster the available empirical evidence and act as future reference material for researchers examining CRM in Nigerian banks.
1.6 Scope of the Study
The research scope was geographically be focussed on First Bank PLC. The contextual scope of the research focused on the Information Technology and customer relationship management within the commercial banks. The theoretical scope of the study focused on the Resource-Based View and the Identify, Differentiate, Interact, and Customise Theory. The study adopted a quantitative methodology with the unit of analysis being personnel working within the commercial banks. The time scope of the study was constrained between the period of May 2020 to July 2020.
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