Like many institutions, financial institutions are also trying to maximize the satisfaction of their customers by improving their service. However, these improvements should be cost saver or direct income generator. Therefore, in this study we will be analyzing Interactive Voice Response (IVR) system (supposed to be implemented in ABC Company) which is being used by different companies from different sectors. Since our focus will be on the financial sector, our analyses will be done on a consumer loans company called ABC.
As we already know, the financial institutions develop channels in order to receive customer calls or orders. One of the most important channels is the call center and phone banking. However, due to the rapid growth in the population which have risen as per the following scheme and the business volumes of the financial institutions, the call center unit should be enlarged in terms of number of agents according to the market size. The population has risen from 40 million to 75 million in almost 30 years in Turkey. This shows that the people who will start banking will also increase in
Despite this growth in the population; our company, ABC still uses the phone banking by answering each call of the customer, but this is ineffective and a very costly method of receiving customer requests. The reason for this is, when you call + 90 212 444 0 XYZ, a male voice is greeting the customer and says in Turkish that “Welcome to ABC, I am transferring your call to the customer representative”. This means that all calls are directly transferred to the call center agents. This makes a lot of load on call center people and this type of system requires high number of agents. Moreover, when a foreigner calls this number, she or he will not be able to understand what is being told to her or him since the voice is in Turkish and there is no other option. The overall process of the manual system is depicted in the following figure. The welcoming voice which is in Turkish is a part of the transformation process.
Overall Process of the Phone Banking in ABC Company
But, many financial institutions including almost all deposit banks (the bank works on interest basis) and all participation banks (the bank works on non-interest basis) found a very attractive and effective way in order to receive and answer customer orders or complaints. This is Interactive Voice Response (IVR) system. It is a phone technology that allows a computer to detect voice and touch tones using a normal phone call. The IVR system can respond with pre-recorded or dynamically generated audio to further direct callers on how to proceed. IVR systems can be used to control almost any function where the interface can be broken down into a series of simple menu choices. Once constructed, IVR systems generally scale well to handle large call volumes.
Therefore, we have selected the welcoming and processing part of phone banking which is under the transformation phase of the overall process to be improved. When the recent welcoming part of phone banking receives calls from the customers (input) it directly transfers calls to the call center agent and the agent processes the request (transformation). Afterwards, the agent finalizes the request of the customer (output).
As it is seen from above, it creates lots of work load on these people as they are receiving 150 calls per hour on average in the peak hours and 35 calls on average in the other hours. We know that there are 8 hours/day as peak hours and this makes;
150 x 8 = 1200 calls / peak hours
35 x 16 = 560 calls / other hours
Total = 1200 + 560 = 1760 calls / day
Since one employee should work for 8 hours maximum due to the regulations and payment structure in ABC, and s/he can handle only 6 calls per hour, they need 25 people in the peak hours and 6 people for the other hours (35 calls / 6 calls = 5.83, rounding up this figure we find 6 people for first 8 hours of the non-peak times. This makes 12 people for 16 hours.). Moreover they have added 3 people for managing these three shifts. Therefore in total the size of the call center is 40 people. But, as the number of calls increase there must be an increase in the number of employees.
ABC is forced to employ many people than its rivals due to the lackness of this IVR system. Furthermore, many customer calls are about the recent interest rates, installment due dates, whether the customers have overdue or not, early settlement balance, how many installments are remaining etc. All of them can be learned by pressing at most 3 buttons by the customer through IVR systems.
Lets compare the recent system and the proposed one in order to understand the need for this improvement.
Transfers call to agent
Tries to understand the request
Customer wants to speak in English
It fails, if the call is transferred to an agent who doesn’t know English, there will be miscommunication
English IVR operates
Customer wants to be informed about new campaigns.
IVR or agent does (%60 of the calls are handled by the agents, since the customers wants to ask specific questions about the campaigns)
Customer wants to know recent interest rates for a new loan
Customer wants to check his account
Customer wants to check whether he has overdue or not
Customer wants to check his next installment
Customer wants to know his early settlement balance
Customer wants to pay his installment
Customer wants to have account statement sent to his fax or e-mail
Customer wants to talk to agent
After stating the main differences, we also need to measure the quality. In order to measure the quality, we need to list the factors affecting quality. These are listed as follows:
- Customer satisfaction: The customer satisfaction will increase since the customers will conclude their issues through IVR system in a short period of time.
- Average waiting time for customers in the queue for talking to agent: This will be very much for the old system where it will not be so long for the new system. The existing system can handle 150 calls / hour in the peak times. However, sometimes the call number exceeds this number very far. This number reaches to 300 calls / hour in the campaign periods. This means that at least 150 calls can not be handled by the agents. This will decrease the customer satisfaction. The average waiting time will be doubled. Since the system will handle all calls which are not related with the agents the new system will be able to handle 300 calls / hour in the campaign times. Since 60% of the customers will want to talk to the agents in the campaign times, 300 x 60% = 180 calls /hour will be received by the agents so, in comparison with 150 calls, the average waiting time will not be doubled but increase by 180 / 150 = 20% which can be negligible.
- Cost incurring: Old system is not based on any infrastructure so it will be pure human work. The salaries and related expenses will be very high. For the new system there will not be more human work and due to this no high amounts of salary to be paid to the personnel. However, the system will be costly to the company as it will be shown in the following chapter.
If we add all them up, we can see that this task will be improved in order to increase the satisfaction of the customers and to cut unnecessary costs (as it will be discussed later). This show us that the corporate strategic level of ABC wants to reach the standards of the rivals by investing into a new infrastructure development.
As we have discussed in the previous section, we need to develop IVR system in order to handle customer calls and request. However, we need to decide on how we will develop this infrastructure. There are three options:
- Option-A: In-house development
- Option-B: Buying from a company
- Option-C: Outsourcing one IVR system which gives service to different organizations.
The analyses of these options by means of different factors are discusses in the following paragraphs:
- Cost: As we know Option-A has the lowest cost since it is developed by the recruited staff working in IT (Information Technology). If we think that we will allocate 5 staff (one is earning USD 5,000 gross per month) for 2 months only for developing this infrastructure, it means that they will be paid for only this project. Mathematically,
Total Cost of Option-A (advertisement expenses are neglected from all options)
Staff Cost = 5 staff x 2 months x USD 5,000 = USD 50,000
Hardware Cost = USD 40,000
Total cost = USD 90,000
If ABC buys it from a company, the company will come and install the system. They will also train the staff and put one consultant for 1 year who will be paid by the seller company. The total cost will be as follows:
Total Cost of Option-B
Software, Installation and Training Cost = USD 300,000
Hardware Cost = USD 40,000
Total cost = USD 340,000
The last option is outsourcing one IVR system and paying rent for that. If ABC rents it from a company for 5 years, the company will come and set the connections between ABC database and their IVR system. When the customer dials ABC call center number, the IVR will work as if it is 100% handled by ABC. The total cost will be as follows:
Total Cost of Option-C
Connection cost = USD 15,000
Monthly rent = USD 5,000
Cost for the 1st year = USD 75,000
Cost for the other years = USD 60,000
If we look at the lowest cost, the first option seems to be better.
- Quality: After cost analyses we need to focus on another factor called quality. Although all options will give higher quality service than the old system to the customers, they have differences between them by means of quality levels. In the first option, as it will be developed by the IT staff, the staff’s low experiences and low level of know-how may create undesired results at the end of the project. The project may be completed but it may be completed in a longer period of time, or it will be completed with some missing / wrong working activities. For example, if the customer presses one button it may not go to the desired option but goes to another option and the customer will be dissatisfied.
For the second and the third options, we don’t expect any undesired result to occur since ABC will be depending on qualified and experienced companies.
- Speed: If we consider speed, the third option will be most beneficiary since there will not be any development by the IT department and also by the outsourcing company. They will just connect the systems and it will start to operate on behalf of ABC. The first option will take the longest time since the staff of IT is not as capable as the other companies’ staff.
- Flexibility: In the first option, since ABC staff will be developing the system, they will build whatever they want and they are told. Their restrictions will be given by their managers and they will come up with a system which is originated by the participation of several departments. This increases the flexibility and the system will be unique for ABC. This will add an element to the core competence of the company since it can not be stolen by any other company. However, both second and the third systems are already prepared and ABC should adapt its infrastructure to both of them. They may make slight changes in the second option but for third option there will not be any change.
- Dependability: In the first option, as we have discussed above it will not be reliable as the other two options. However, since it is developed by ABC staff they can make changes at any time at which error or bug occurs. But the other two will be more reliable than this one. On the other side, in the first option the financial institution is almost totally independent. But, in the other options it gives the authority and responsibility to other companies to develop systems for ABC.
Regardless of the above factors, there are other factors which are qualitative but very important before taking a decision. These are the resistance coming from the organization and the political or legal constraints that should be factored during the adaptation or development of IVR system.
For the first factor, resistance; we always expect resistance when a change occurs. Resistance to change is the action taken by individuals and groups when they perceive that a change that is occurring is a threat to them. However, the threat need not be real or large for resistance to occur. In all options, ABC will face this resistance mainly coming from call center department, legal advisory department, audit department and IT department. This resistance is based on two main factors;
· They think that they have the most developed system and there is no need to change it or,
· They think that they will lose their jobs.
For the first one, in all cases, the staff is not right. But for the second one, they may be right because these developments are done in order to cut the costs. If we express it mathematically with taking the most expensive option (Option-B):
Total cost of the project is USD 340,000. According to our estimations, at least 50% of the people are calling the call center for the transactions that can be handled by IVR system. It means that 50% of the work force of the call center will be redundant. If the total size of call center is 40 people, then 20 people can be dismissed. Therefore;
20 persons x USD 2,000 /month = USD 40,000 saving / month. It means that, not later than 1 year the cost of the most expensive option will be amortized. On the other side, we can also think it in a different way in order to relax these people. If ABC wants to enlarge the capacity of call center, they will not dismiss anyone but instead of employing 20 people more, they will prefer to implement IVR system.
After explaining resistance, we can deal with the legal and political constraints. For the legal constraints we need to factor the following questions. Whatever the decision will be:
- Is it in line with consumer law?
- Does it breach any article in banking law?
- Does it breach any article in any banking regulation, policy, etc?
- Does it breach any article in trade law?
Other than legal constraints, ABC should be careful about its values and strategies. For example, the third option may be totally neglected since ABC will open its database to an outsourcing company which may transfer all information and customer database to another institution. Although there must be a confidentiality agreement, this may not save the institution in all circumstances.
If we think about all options related to resistance and legal or political constraints, we can say that the first option will be better than the rest. The second option may not be seen as threat by many people but the third option will be totally a threat since they will transfer all call center activities to another organization. This means that at least call center staff will be jobless. When we summarize all factors together, the following table will be drawn.
No breach expected
No breach expected
No breach expected
No breach expected
No breach expected
Database may be transferred to other organizations
When we compare all of them, we can use the Option-A due to its low cost, very high flexibility, low resistance and no breaching of any regulation or policy. When this is compared with the existing system, the 4V analysis is done as per the following scheme.
As it is seen from the above scheme, the chosen implementation (Option-A), is far better than the existing system by means of volume, variety, visibility and slightly better by means of variation.