What Banks can do || to building customers confidence

Most banks in Azerbaijan are focusing their strategy on how to retain customers.  It goes without saying that today,there is a stability as a result of robust policy developments in the banking and finance sector. However, we cannot take away the reality of the chain effect from the February 2015 manat devaluation. As in every country, whenever the currency is devalued, as was experienced in the U.S. and Europe, there is a sense of uncertainty in the mind of customers, which apparently would reflect on the way, they would do business with banks.

Expert in the industry says the timing for the devaluation in Azerbaijan even though inevitable, has occurred at a time when banks were beginning to see a new shift in the perception from the general public towards using the services provided by banks and financial institutions. Nevertheless, with the new situation, banks are now faced with the huge challenge on how to again build clients engagement and trust towards the financial sector.

It is true that due to the drastic change in currency value, banks that had borrowing from abroad made huge losses, probably because they have not properly hedged. However, what banks probably would be struggling at the moment is how to mitigate the effect on loyalty. Customer retention is something that cannot be devised only through well thought out financial strategies; it also has a lot to do with incorporating various other components that involves more to providing regular services.


Due to these  process in the country growth and development towards stability, for many years, Azerbaijan banks, among other challenges have struggled with customer loyalty and retention. It was not easy to encourage people to patronize banks, use the services such as deposits and credit lines as well as take advantage of the online services. Building customer confidence was tough, especially the older generation who have passed through a severe time of loss because of the sudden change in government system and structures in the 1990s. So many people would not deposit with banks, and those who did, were always careful with the amount of liquid assets put into banks. But currently, this has not been the case for nearly a decade because the banking sector introduced drastic measures for good to encourage more active users and visitors to the banks.

An observable trend in the financial and economic sector of the country, the strategy for some businesses, investors and developers was to place capital investments into structures and other forms of non-liquid assets. This was despite the perceived robust capital in the economy. At a time in Azerbaijan development, it was necessary that most of the structural investment happened, but as is always the case, there will be an imbalance because there will be less funds for banks to support other sector of the economy such as loans and credits for SMEs, mortgaging, etc.

To be able to function and operate in business, banks need to grow, and to grow, it needs customers. Loyalty to bank is still very important. Building own brands and creating unique customer services is a key. In Azerbaijan, most banks were early adaptors and were easily leading in these areas. The key is that these steps actually worked and would still work if banks can again concentrate on accumulating customers in parallel to recapitalization rather than focusing on one aspect alone.

Banks should remain aggressive in pursuing customers. Since most of the banks in the industry has established a niche, and are considered big players in the industry. For sure, these banks are strong enough to absorb any dwindling loyalty. For this reason, these banks will not struggle or do not need too much effort to make this strategic move. To have more or less created their own space and are playing comfortable, this would have come through many years of engagement, and more importantly because there is a high level of trust with customers. The top players such as International Bank of Azerbaijan Republic,  Kapital Bank, Bank of Baku, Unibank, no matter what would always have customers who will rely on these big banks.But if they aspire to grow to become top global banks, then it will need old customers to expand its activities with the banks, and it will also need to draw in new customers. They will need to device convincing plans for those who would prefer to stack up cash in structural projects on why they should trust the bank to manage their finances in financial transactions.

Recapitalization and customer loyalty should go together because banks need to be strong enough for any cushion in case of extreme negative circumstance, which no one is predicting at this moment, but again, as the mind of customers are still fresh with global financial crisis and then the devaluation, adding to the Central Bank of Azerbaijan projection of growth in inflation, customers are looking for that extra assurance from banks. Which banks and financial institutions are looking for ways to come up with good plans to make sure customers understand the whole change in the financial sector and the extent it will affect them. Banks are again look towards creating incentives for existing customers to assure them that their deposits are secured no matter whatever currencies it is deposited and also creating effective mitigating policies for its big corporate customers to support them in planning their financial risks.

To make sure the needs of corporate and big clients are met, retail banks should look at how to penetrate the retails and other small and medium industries in the country. Expert observation has shown that most of the merchants and traders in Azerbaijan are not adequately using the banks as they would have. There are lots of liquid cash that are not transacted in the financial markets. Consider the positive impact on banks and the economy when this sector is influenced to use the banks, and their visit is transformed into loyalty.Actually, customers pull customers.As a matter of fact, customers of same likeness attract each other, which are a sure way to build confidence. This means with increase in customer loyalty every other banking business will evidently experience growth. Loyalty and customer confidence is then a key driver to establishing long-term sustainable banking.



To read all about this article, check the print copy of Banking Baku Magazine.