A Case Study on HSBC (Hongkong and Shanghai Banking Corporation)

Introduction

This research is mainly based on the continuously reducing customer's engagement in banking sector. Currently most of the financial institutions are facing this issue and it is affecting their operational efficiency as they feel that banks are not providing them appropriate rate of return on their accounts. Due to this they prefer to invest their money in other financial instruments such as shares, bonds, mutual funds, stocks etc. It is resulting in decreased revenues of banks because customers choose other sources rather then to get higher returns on their money. Another reason for this problem is that in fixed deposits or saving accounts clients get less returns in long time but in mutual funds or other instruments they may earn high amount in a small time period. Taxation also leaves an impact of customer's engagement in banks because if the interest cross the limit of 10000 Pound then a TDS will be deducted on 10%. When there is no information of PAN of client then banks double the rate. In other financial assets such type of taxes are not applied. If they keep instruments for at least three years then the incomes is treated as long term gain and tax is applied after indexation.

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Background

HSBC is a British Multinational banking institution which is world's 7^th largest bank. It is operating its business operations all around the world and its headquarter is in Canary Wharf, London, UK. The bank is facing financial issues due to lack of customer's engagement. Revenues of HSBC are continuously decreasing because of reduction in number of fixed deposits and saving accounts. This issue is creating different types of problems in banking sector such as declined job opportunities, diminishing profitability etc. Customers of HSBC switching to other financial instruments as they get higher returns from them.

Impact of declining customer's engagement topic is chosen because it is related to the interested field of the researcher and in present day most of the financial institutions such as HSBC are dealing with this issue. Another reason behind its selection is to assess the problems that are resulting in diminishing profitability and liquidity of banks. This report will be beneficial for all the readers as it may help them to analyse the issues that are taking place in banking sector due to lack of customer's engagement. It will guide them to easily understand the negative impacts of this problem. All the implications of this problematic issue are going to be discussed in this research which will help all the observers to get an insight in to the topic. Analysers may get detailed information of all the causes of reducing engagement of customers in banking sector. This report will help the readers to analyse the steps that should be taken by the financial institutions in order to deal with the problem.

Research Aim:

“To determine the impacts of decreasing customers engagement on banking sector”

Objectives

To understand the concept of customer's engagement in banking industry.
To assess the impacts of reducing customer's engagement on banks.
To identify the factors and reasons which have resulted in the problem of continuous decrement of client's engagement.
To analyse the benefits of customer's engagement for banking sector.
To evaluate the ways that may help banks to overcome the issue and enhance customer's engagement.

Research Questions

What is engagement of customer's in banking industry?
Do lack of client's engagement leave impact on banks?
Why decrement of customer's engagement is taking place in banking industry?
Is there any benefit of customer's engagement for banks?
What are the ways that may help banks to deal with the issue and increase involvement of customers?

Literature Review

According to Moliner, Monferrer and Estrada, (2018), customer's engagement can be defined as an emotional connection in an organisation and its clients. It can be enhanced by meeting their aspiration and increasing their satisfaction level. If a bank has highly engaged customers then it may result in large number of transactions, fixed deposits and saving accounts of them. When the companies in banking industry are not able to increase it then it is not possible to sustain in the market. To achieve higher level of sustainability and viability major requirement is to gain trust of customers and fulfil their needs.

According to Larsson, (2018), if an organisation which is operating business under banking industry is not able to maintain customer's engagement then it may leave different negative impacts on its efficiency, profitability, liquidity etc. It may reduce revenues as clients switch to other financial instruments such as bonds, shares, mutual funds, stocks etc. because the rate of return in all of them is very high as compare to fixed deposits and saving bank account. When revenues get decreased then it will result in losses and lack of monetary resources. In this situation enterprises will not be able to execute operational activities appropriately. It is very important for all the banks to analyse al issues of their clients so that their problems can be resolved and satisfactions level can be raised.

According to Åberg and Khati, (2018), customer's engagement is very important for all the companies related to banking industry. If they are not able to maintain it then it may affect their ability to perform executional activities. There are various factors that may result in lack of customer's engagement for banks. These are lower rate of return on saving account and fixed deposits, accessibility, tax deducted at source etc. For all the banks it is very important to figure out the factors so that appropriate strategies can be formulated in order to deal with them in an appropriate manner. If the bank is not able to determine the factors then it is not possible to analyse the cause of the issues which is affecting overall profits and revenues.

According to Chaimankong and et.al., (2018), customer's engagement is very beneficial for banks and other organisations operating business under finance sector as it may help to maintain higher level of profitability and liquidity. It can be enhanced by satisfying all the clients, establishing good relations with them and meeting their aspirations. When the clients are highly engaged with banks then it will increase their transactions that may result in enhanced revenues of the institution. For all the banking sector organisations it is vital to satisfy all the customers so that their trust can be gained and motivated to them in order to increase number of fixed deposits, saving accounts and other products or services that are sold by the enterprise.

According to Augusto and Torres, (2018), all the banking sector companies should find appropriate ways if there is lack of customer's engagement. It will help to overcome all the challenges that are taking place due to this issue. There are some ways that can be chosen by the banks in order to increase engagement of customers. These are survey regarding their problems, development of client focused strategies, offer real time transactional notifications, make appropriate policies that may provide higher returns etc. All of the options can be used by the banks in order to overcome the problematic situation of decreasing customer's engagement in banking sector.

According to Shah, Mohd and Khairudin, (2018), it is very important for all the banks to take appropriate steps so that their issues related to customer's engagement resolved. Currently most of the banking sector organisations are dealing with this problem due to higher competition in the market with other financial institutions which deals in share, mutual funds, stocks and bonds. If they are not able to take the right action against this issue then their operational efficiency, profitability and liquidity will be affected. While trying to deal with the challenge the banking industry is required to form new strategies that are formulated by focusing on customer's problems and concerns.

References

Åberg, E. and Khati, Y., 2018. Artificial Intelligence in Customer Service: A Study on Customers' Perceptions regarding IVR Services in the Banking Industry.
Augusto, M. and Torres, P., 2018. Effects of brand attitude and eWOM on consumers’ willingness to pay in the banking industry: Mediating role of consumer-brand identification and brand equity. Journal of Retailing and Consumer Services. 42. pp.1-10.
Chaimankong, B. and et.al., 2018. An integrative model of customer engagement process: the empirical evidence of large commercial banks in Thailand. Journal of Thonburi University. 12(27). pp.9-23.
Larsson, A., 2018. Responding to the FinTech challenge: a study of Swedish bank managers’ perceptions of FinTech’s effects on digitalization and customer e-loyalty. In The Rise and Development of FinTech (pp. 152-175). Routledge.
Moliner, M. Á., Monferrer, D. and Estrada, M., 2018. Consequences of customer engagement and customer self-brand connection. Journal of Services Marketing.
Shah, M. M., Mohd, I. H. and Khairudin, M. K., 2018. Factors Relating to Employee Engagement: A Case Study in a Selected Bank. In Proceedings of the 2nd Advances in Business Research International Conference (pp. 297-303). Springer, Singapore.

A Case Study on HSBC