Meral Karageyim
Bogazici University
Senior Researcher
Meral Ahu Karageyim, senior researcher at Bogazici University Center for Applied Research in Finance (CARF), in collaboration with her co-author Dr. Serdar Durmuşoğlu, Instructor at Shanghai Normal University, conducted a research study within the Turkish retail banking sector. Their work culminated in the publication of a notable academic article titled ‘Relationship Marketing Challenges in the Turkish Banking Industry: An Exploratory Study’ in the International Journal of Bank Marketing. She tells Qorus’ Boris Plantier more about it.
Exploring the adoption challenges and strategies for robo-advisors
Can you tell me a bit about your research?
We know that banks currently must focus on nuanced customer segments, tap new engagement channels and build better connections to remain competitive. Furthermore, while the use of disruptive technologies such as AI in an emerging market context had been examined from consumer perspectives, a literature gap existed for studies investigating employee and manager perspectives on the role of new technologies in the banking industry, especially in developing countries.
In the light of these current developments, we designed a research with Professor Serdar Durmuşoğlu. A qualitative approach using grounded theory to investigate the current challenges in retail banking relationship marketing strategies was adopted, and the data collection lasted more than one year.
Our article focuses more on managers’ perspectives and identifies major relationship marketing challenges, strategies and priorities in the Turkish banking industry. Correspondingly, through in-depth interviews with bank employees, this exploratory research examines relationship marketing strategies and priorities of the banking industry in an emerging economy, namely Türkiye.
What are the current challenges that bank managers in emerging economies are anticipating?
Our research reveals four main challenges identified in retail banking relationship marketing.
The first one is the omni-channel approach powered by digital transformation. In our research, almost all participants emphasized the importance of digital transformation (DT) and DT-related investments. Hence, in line with other recent research, our analyses show that, over the last couple of years, the Covid-19 pandemic accelerated retail banks’ operating in a vast array of digital channels, which are enabled by DT.
The managers participating in the research noted that customers have been coming to physical branches less frequently after the pandemic and prefer to use mobile and internet banking. Hence, all digital channels and AI-enabled chatbots and robo-advisors should be integrated into a seamless customer journey, composed of a collection of smooth customer experiences. Most participants highlighted the need for effective customer experience due to changing customer expectations and technology.
Successfully addressing this challenge can be achieved on multiple fronts. First and foremost, banks need to fully actualize a multichannel approach by using digital channels and smart devices for customer acquisition and customer relationship development, and to understand changing customer preferences.
Almost all participants agreed that relationship marketing strategies should focus more on mobile banking, digital banking and digital onboarding (acquiring customers without going to a branch and allowing for online identity verification, opening investment accounts, credit application, etc.). In addition to the mobile banking channel and bank websites, participants also emphasized the use of social media.
The second challenge, as you may guess, is artificial intelligence (AI). AI emerges as a critical and necessary technological development in the banking industry, with a strong focus on chatbots. Participants were expecting an increase in AI-enabled services for better customer experience. Moreover, AI-driven new services and customer onboarding were identified as key development areas in the post-Covid-19 era.
Almost all participants accepted that banks must continue investing in AI. This is not surprising since AI has been extensively transforming marketing practices over the past few years, such as in generating insights and consequently prescribing solutions, as well as in other repetitive and cognitive tasks such as virtual assistants and chatbots. As a result, AI is described as one of the most promising technologies encompassing programs, algorithms, systems and machines that mimic intelligent human behavior.
The third challenge is the new customer experience, defined in detail by the majority of our participants, covering dimensions related to relationship marketing, such as service quality and trust. As explained in our article, ‘customer experience’ refers to the cognitive, affective, emotional, social and physical responses of a customer in searching, purchasing, consuming and after-sale phases. Not surprisingly, 79% of respondents argued that banks should provide an impressive customer experience through physical and digital channels to continue being competitive.
A new customer experience with different sub-dimensions was defined by participants, with the most underlined themes being transparency, trust and data security. 88% of our participants indicated mobile and digital channels should include transparency, data security, trust, comfort and convenience, and easy access, when describing the new customer experience. Service quality, which is one of the most important constructs in relationship marketing, emerged as a major sub-theme in this research. Participants stated that service quality is also affected by digitalization and changing customer preferences.
The last challenge that emerged from our findings is the expansion of the financial services ecosystem. Increasing competition and new legislation in the banking industry increase the possibility of new collaborations with large technology companies such as Google, Apple, Facebook and Amazon, digital platforms and marketplaces. Participants also evaluated ‘new collaborations’ as a sign of increasing competition. According to the research findings, the theme of ‘new collaborations’ is defined as the expansion of the financial ecosystem and collaboration with open banking, financial technology companies, large technology companies, marketplaces or platforms.
Almost half of the participants (49%) underlined the need for considering different digital platforms for digital onboarding or for other digital services. Participants stated that banking services will no longer be limited to banks, that there will be significant growth in financial services available through non-traditional channels, especially online marketplaces and digital platforms, and that it is necessary to cooperate with customers in different environments.
Moreover, the majority of our participants expressed concerns about the interest of the big technology firms such as Google, Apple, Facebook and Amazon (GAFA) in the banking industry. As GAFA and fintechs are described as the new actors in the banking industry, competition is expected to intensify. Furthermore, digital-only banks, which provide services without branches, only through mobile applications or online, are also considered to be important actors in the future.
Traditional banks should embrace the expanded financial services ecosystem and work collaboratively in order to serve their customers better.
How would you describe the basic relationship banking strategies in banking?
Besides the basic challenges in relationship marketing already described, we gained very important insights related to the market. First, we had the opportunity to analyze the financial ecosystem in Türkiye, which is defined by interconnected devices, less human interaction, and a fast-emerging country. By critically analyzing the changes within the banking industry in an emerging economy, our research provides important information, executive insights and predictions about the banking system.
The article presents the impact of technological developments on relationship marketing strategies and the potential problems that these developments create in banking. Our research highlights the importance of some critical concepts such as data security, transaction security and system security of financial institutions. Cyber attack prevention is defined as critical for customer experience and loyalty.
This research provides further important insights into the evolving challenges and strategies of relationship marketing for the retail banking industry in Türkiye, in light of economic uncertainty due to recent weakening of its currency and fast-changing customer expectations.
Our results show that the role of bank branches, one of the most important channels for customer access, should be questioned. The widespread adoption of internet and mobile banking, catalyzed by the recent pandemic, reduces the importance of branches. In addition to regional differences in the importance of branches, it is necessary to consider the effects of product and service management and to design long-term strategies according to this change in channels. These long-term strategies should also consider digital customer experience in banking based on transparency, trust, data security, speed, and service quality.
In addition, the results show an increasing demand for mobile banking, digital platforms and AI-based services. In addition to new and remote channels, investment in AI-supported products and services, especially chatbots and robo-advisors, is expected to become increasingly more important. Bank managers must consider providing customers with these services for efficiency and convenience.