E-mail marketing campaign on HSBC

Chapter 1: Introduction

1.1 Background

In today’s dynamic world, every human activity is getting influenced by technological advancements. The highest impact of technology can be observed in the area of business. Doing business has become really complicated, with a wide array of tasks to be fulfilled. The core business activities did not, however, change. A firm still needs to produce goods and or services, and it also has to market the goods and or services. These activities had their boundaries and limitations, previously. But today, the possibilities seem infinite. Today’s effective business strategy may get obsolete tomorrow. This phenomenon is most obviously detected in the area of marketing.

Marketing in the year 2003 is very much different from what it was even ten years ago. Marketing activities of a firm mainly consists of the decisions regarding its four P’s—Product, Price, Place and Promotion. If we take a closer look, we can see that products have changed a lot, aligned with the changing demographic profiles of us human-beings, as well as due to different emergent and modified human needs. Previously we needed television sets for entertainment. But nowadays DVD player, surround sound system, etc. accessories are also being demanded alongside. Thus we see millions of product offerings from the manufacturers, each having its own target market. Whenever the topic of targeting comes forward, customization also comes into attention. Mass marketing is losing its appeal and effectiveness in a really fast pace.

Targeting, segmentation, customization and Niche Marketing are today’s marketing jargons. Thus firms are customizing their product offering according to the specific needs of the niche’s. Similarly, the other three marketing activities are also being aligned with this Niche concept.

The Hong Kong and Shanghai Banking Corporation, Bangladesh (HSBC) is also trying to practice such a niche marketing policy. Recently they have launched an e-mail marketing campaign. The market segment consists of the existing 35,000 clients of HSBC. However, all 35,000 customers are not being targeted for this campaign. Understandably, the customers who have access to e-mail are targeted. The overall campaign has been divided into a number of steps. Successful completion of all the steps will mean the beginning of a new era of marketing in our country. This campaign and all of its details are being managed by a software solution, named Amacis Visibility.

1.2 Objectives of the Research:

The objectives of this research are:

v  To implement a new mean of marketing

v  To update the customer database of HSBC Bangladesh

v  To judge the effectiveness of an e-mail marketing campaign

v  To inform existing customers about new product offerings, in a cost effective manner

1.3 Significance of the Study

This study is very important for the marketing department of HSBC Bangladesh. Our country is still lagging behind most other Asian nations in terms of adaptation of information technology. Though many professionals of our country are provided with e-mail addresses from their organizations, many do not use them. This is a challenging venture for HSBC. The campaign cost is quite high. If the first campaign fails to raise the desired rate of response, HSBC Bangladesh will think twice before launching such campaigns. If the customers get comfortable with e-mail correspondence, they can be directly informed about all changes in policies and products. Currently, if there is a change in policy, each and every customer needs to be informed via postal services. This becomes very costly, because HSBC uses privatized courier services for such purposes. If every customer used an e-mail address, they could be informed through incurring almost zero cost.

1.4 Expected Findings (Hypotheses):

It is expected that the following things will be found from the research:

v  About fifty percent customers of HSBC has an e-mail address

v  About fifty percent of these customers regularly check their e-mail accounts

v  Fifty percent customers of HSBC are comfortable with electronic correspondence

v  Ten  percent customers of HSBC respond to promotional offers sent via e-mail

v  Impact in sales and customer satisfaction levels due to the introduction of e-mail marketing

v  What percentage of customers click on the hyperlinks included with the e-mail messages

The marketing department of HSBC believes that at least 50% of the customers will have their own e-mail addresses. They also believe that around 60 to 70 percent of the customers will accept e-mail correspondence as a viable option. They are also expecting a 30 to 40 percent response rate.

1.5 Methodology

In this research, two types of data had been used. The primary data was collected from the customers through telephone interviews. As a rule of thumb, the following sequence of approach was used:

1. Cell Phone (if any)

2. Office Phone (if any)

3. Home Phone (if any)

If a person could not reached after making three phone calls, his e-mail address field had to be marked as “N/A” or “Not Available”.  However, there were some exceptional cases. Some customers could be reached at the third phone call, and they would request the researcher to call back at a later time or date. These customers were called back. This way some customer’s were called even four to five times. On average, the research team approached one thousand customers in a week. Any customer belonging to one week’s thousand list was not called after the week ended. This rule decreased the consistency of the study, but it was required, because after 1,000 entries were collected, the researcher had to close their fields by inputting data into the database.

The data collection was affected by a number of variables, e.g. number of phones used in interviewing, time used per phone call, number of persons making phone calls, etc. The population was 35,000 customers of HSBC. Secondary data here was the previously compiled database, which had e-mail addresses of some customers, as well as their phone numbers, occupation, address etc. This data aided the researchers in tracing the customers and getting the e-mail addresses from them.

1.6 Limitations of the Study

The limitations of the study are:

v  Time: It is quite impossible to contact 35,000 customers within a time frame as short as three months. Thus the researcher could not reach all customers within the allotted time, which questions the validity of the research findings.

v  Chittagong Branch:  HSBC has one branch in Chittagong branch, which has a lot of customers itself. These customers could not be reached by the researcher, who was working in Dhaka.

v  Lack of facilities: Some essential facilities like land phone lines, updated secondary data, etc. were not readily available; during the data collection phase. Many HSBC customers have changed their phones, occupation and home address. These changes have not been reflected on the existing database, which was used in data collection.

v  Unwillingness of the Customers: Some customers were not willing to disclose personal information over telephone. No alternative means of collection could be used, which forced the percentage of e-mail addresses to be lesser than it actually is. Some customers also declined to be contacted via e-mail address.

v  Phone Problems: A percentage of customers could not be reached due to certain factors like continually engaged phone lines, unavailability in all the phone numbers provided, etc. Some people kept their cell phones off, and others asked the researcher to call back later. Mobile phone network problems also hampered the study. The researcher was provided with Citycell mobile phone; which has a serious connectivity problem with Grameen Phone cells. This factor also hampered the data collection.

1.7 Budget for the Study

(a) Financial Budget:

HSBC recruited three interns for this research. Each received Taka 4,500 as salary per month, for three months. The other cost components were telephone bills, printing costs, PC usage costs, etc. The approximate budget was:

Total Cost                                                                                                                                81,000

(b) Time Budget:

The whole project took three months to complete. After the successful collection of 10,000 e-mail addresses, the first series of e-mails were forwarded to the customers. After that, the outcomes of the campaign were closely analyzed. However, data collection continued up to the end of the three month period.

Chapter 2:  A Brief Overview of the Banking and Finance Sector of Bangladesh

 2.1 Bangladesh Bank: The Regulatory Body

The Bangladesh Bank is the country’s central bank and is responsible for issuing and maintaining the value of the currency. It oversees the banking system and implements the government’s financial and monetary policies. With the exception of foreign banks, Bangladesh’s banking system was government-owned until 1982. The government is increasingly allowing more private commercial and investment banks to increase competition. Of the 52 licensed banks in June 2001, four were nationalized commercial banks, five were specialized banks, 30 were private commercial banks, and 13 were foreign banks. Other financial institutions, such as the Industrial Promotion and Development Company of Bangladesh, take an active part in financing industrial projects. The functions and responsibilities of the Bangladesh Bank are not clearly defined, and it lacks autonomy in such core areas as the licensing of new banks, monetary and exchange rate policies, and supervision of the nationalized commercial banks, which together account for over 50% of both total deposits and lending. Although major policy reforms have been undertaken during the past few years, including deregulation of interest rates, strengthening of standards of loan classification and provisioning, and elimination of the Bangladesh Bank’s control over most financial transactions, the financial sector continues to be underdeveloped and inefficient.

There are two bourses in Bangladesh: the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE). The Securities and Exchange Commission (SEC) is the market watchdog but has been criticized for weak governance. Allegations of insider trading continue to affect investor confidence. There are less than 250 listed companies and turnover and liquidity are low. A stock market bubble was created by manipulation of the stock markets in July-November 1996 and the DSE all-share index peaked at 3,600 in November 1996. The index has been trading in a range of 540-670 in the last few years. The ratio of market capitalization to GDP is now less than

3% and is small compared to other countries in the region. Automated online real-time screen-based trading was launched in 1998. The DSE-20 price index, which lists the largest companies, was launched in January 2001.

2.2 Industry Analysis

According to Hill, “An Industry can be defined as a group of companies offering products or services that are close substitutes for each other.” Close substitutes here refers to products or services that satisfy the same basic consumer needs. In order to understand an entity’s business, one needs to take a closer look at the industry where the entity is operating. Here, the banking industry of Bangladesh will be analyzed through the usage of two models, namely Porter’s Five Forces Model and the Industry Life Cycle Model.

2.3 The Industry Life Cycle Model

The industry life cycle model is a useful tool for analyzing the effects of an industry’s evolution on competitive forces. Using this model, we can identify five industry environments, each linked to a distinct stage of an industry’s evolution. The stages are:

1. Embryonic Industry Environment
2. Growth Industry Environment
3. Shakeout Industry Environment
4. Mature Industry Environment
5. Declining Industry Environmen

It is very important for a business entity to have a clear idea regarding the industry life cycle. Each stage of the life cycle requires unique and differentiated strategy formulation. If we analyze all the characteristics of the life cycle model, we can see that the banking industry of Bangladesh is in its growth stage. However, the shakeout stage does not seem too far a reality. Some of the characteristics of the shakeout stage are already evident.

In the growth stage, the demand for the industry’s product begins to take off. It is quite evident that the demand for banking services in Bangladesh has increased gradually, throughout the years. The increasing number of banks and their differentiated offerings bolsters this fact.  Rivalry among the competing banks is getting intense, day by day. However, the rivalry among competitors in a typical growth industry is low. High rivalry begins at the shakeout stage. However, many authors do not distinguish between these two stages. The justification of low rivalry among companies is that all of them keep themselves indulged in market share building. As demand is ample and supply is comparatively low, anyone can enter the market and get their share of the profit. Banks in our country passed through that stage, and now the market is shrinking day by day. The growth rate has fallen, and slowly the demand is approaching the saturation point.  Most banks have prepared themselves for the intense competition which is the core characteristic of the shakeout stage. It is expected that interest rates and service charges for the different banking services will sharply decline in the coming years.

2.4 Porter’s Five Forces Model

The model focuses on five forces that shape competition within an industry:

Figure 2.2: Five Forces Model

1. The Risk of New Entry by Potential Competitors
2. The Degree of Rivalry Among Established Companies Within an Industry
3. The Bargaining Power of Buyers
4. The Bargaining Power of Suppliers
5. The Threat of Substitute Products

Porter argues that the stronger each of these forces is, the more limited is the ability of established companies to raise prices and earn greater profits. Thus, a strong competitive force can be regarded as a threat since it depresses profit. Similarly, a weak competitive force can be viewed as an opportunity, for it allows a company to earn greater profits.

2.4.1 Potential Competitors

Potential competitors are companies that are not currently competing in an industry but have the capability to do so if they choose. The banking industry in our country is still in its growth stage. So the threat of potential entrants is quite high. Usually the existing companies try to deter potential competitors by setting certain entry barriers. Barriers to entry are factors that make it costly for companies to enter an industry. The common barriers to entry are Brand Loyalty, Absolute Cost Advantage, Economies of Scale and Government Regulations. In Bangladesh, the question of Brand Loyalty is somewhat evident in the banking industry. A person who is a loyal customer of a local or government owned bank usually does not opt for an account in a multinational bank, whatever lucrative the benefits seem. This creates barriers for new entrants. No bank enjoys an absolute cost advantage, due to the fragmented nature of the industry. “Fragmented” industry and its attributes will be discussed in the following section. Most of the government banks and some local banks enjoy scale of economy; due to the fact that they have been doing business for quite a long time, and they have branches all over the country. The multinational banks are also on the process of achieving scale of economy. The increasing number of branches supports this statement. Government regulation is quite supportive towards the formation and operation of new banks. So this factor is not a significant entry barrier in this sector.

 2.4.2 Rivalry Among Established Companies

The second of Porter’s five competitive forces is the extent of rivalry among established companies within an industry. If this rivalry is weak, companies have an opportunity to raise prices and earn greater profits. If rivalry is weak, companies have an opportunity to raise prices and earn greater profits. The extent of rivalry among established companies within an industry is largely a function of three factors:

a) The industry’s competitive structure

b) Demand conditions

c) The height of exit barriers in the industry

a) The Competitive Structure

Competitive structure refers to the number and size distribution of companies in an industry. Structures vary from fragmented to consolidated and have different implications for rivalry. A fragmented industry contains a large number of small or medium-sized companies, none of which is in a position to dominate the industry. A consolidated industry may be dominated by a small number of large companies (oligopoly) or in extreme cases, by just one company (a monopoly). In many countries, banking is a consolidated industry, with a few major players in the market. But in our country, the industry is very much consolidated, as a whole.

The prime characteristics of a fragmented industry are low entry barriers and identical product offering from the firms. Such is the case in our banking industry. Banks operate with pre-fixed and unanimously agreed interest rates, and their offerings are somewhat identical. The only way to differentiate product offerings from those of the competitors is to lower prices. Such phenomenon occurs as new entrants flood into a booming fragmented industry. This also creates excess capacity. A vicious price war is usually followed by the situation of excess capacity. It can be expected that our banking industry will experience severe price cuts in the following years. As a whole, a fragmented industry increases competition, and it also depresses overall industrial profitability.

 b) Demand Conditions:

An industry’s demand conditions are another determinant of the intensity of rivalry among established companies. Growing demand from either new customers or additional purchases by existing customers tends to moderate competition by providing greater room for expansion. Growing demand tends to reduce the rivalry because all companies can sell more without taking market share away from other companies. In the case of banking, the demand has been growing at a satisfactory rate, throughout the last decade. However, it is not certain whether the trend will sustain or not.

c) Exit Barriers 

Exit barriers are economic, strategic and emotional factors that keep companies in an industry even when returns are low. If exit barriers are high, companies can become locked into an unprofitable industry in which overall demand is static or declining. The common exit barriers are:

i. Investment in plant and equipment that have no alternative uses and cannot be sold off.

ii. High fixed costs of exit

iii. Emotional attachments to an industry

iv. Economic dependence on the industry

In order to keep up-to-date with today’s complicated banking practices, a bank needs to invest on computers, software, secured vaults, security systems and different other controlling and monitoring measures. Most of these assets are customized, and therefore serves the purposes of the intended organization, only. This customization nullifies the resell value of these assets.

 High fixed costs of exit can appear in the form of employee severance payments, and also in the form of government penalties, etc

Many local banks of our country have become part of our everyday lives. They had been their since our ancestors were born. Thus many people, both within the government and the mass have emotional attachments with these banks. This acts as a serious exit barrier for these banks. So, in spite of being highly inefficient and loss bearing, some banks are still operating.

Some banks are so big that shutting any of them will give a serious blow to our foreign and domestic trade. Such an occurrence can impact the whole economy.

2.4.3 Buyer and Supplier Defined

In a typical industry, the buyers are the customers that avail the offerings from the incumbent firms. On the other hand, suppliers are the firms that provide raw materials for the producers. Using their raw materials, the firms produce goods and sell it to the customers. This is a typical buyer-seller scenario. However, the banking industry is a bit different from a typical industry. The two major functions of a bank are providing money depositing facilities and loan facilities. When a person takes a loan from a bank, he is a buyer. However, when he deposits his money to the same bank, he becomes the supplier. Thus the same individual can become the buyer and seller, simultaneously.  The directors of a bank are also suppliers for that particular bank.

2.4.4 The Bargaining Power of Buyers

Bargaining power of the buyer can be viewed as a competitive threat when they are in a position to demand lower prices from the company or when they are in a position to demand better service that can increase operating costs. On the other hand, when buyers are weak, a company can raise its prices and earn greater profits. For the banking industry buyer means customers who take loan from the banks. The bargaining power of the buyers depends on the following factors:

a) Number of Loan Applicants:

There are more than 50 banks in our banking sector including multinational and nationalized banks. There are not enough original business loan applicants in our country. Investment opportunities are not growing as well; for lots of other factors. So, banks are setting with their idle money for giving loans; mostly in the form of personal credits. As a result, competition for doing business is increasing day by day among established companies.

b) Switching Cost:

Switching cost is very low in banking industry. Every bank is giving the similar types of loan at similar interest rate. So, an individual who wants to take loan from banks can switch easily to other banks if he or she doesn’t like the terms and conditions. Customers of HSBC bank are switching to other banks because of low interest rate and lots of other reasons. Lower switching cost makes the industry more competitive.

c) Threat of Backward Integration:

In banking industry, there is always a chance for threat of backward integrations. Big multinational companies or corporations can give threats to the commercial banks that they will arrange their funds by forming another bank where the cost of fund is low compared to other banks. For this reason, giant customers of this industry always possess more power than their banks. However, the individual non-corporate clients do not possess this type of bargaining power.

2.4.5 The Bargaining Power of Suppliers

Bargaining power of suppliers can be viewed as a threat when the suppliers are capable of forcing up the price that a company must pay for its inputs or reduce the quality of the inputs they supply, thereby depressing the company’s profitability. On the other hand, if suppliers are weak, this gives the company the opportunity to force down prices and demand higher input quality. For the bank the main supplier of fund is the depositor. Bank also gets its funds from the directors. So, the strength of the suppliers depends on the following factors:

a) Number of Supplier:

Bargaining power of the fund suppliers is low in banking industry because there are lots of individual savings in the economy but banks don’t have too many opportunities for investment.

b) Threat of Forward Integration:

Sometimes suppliers of funds can give threat to the bank as well. Corporations or big multinational companies can give threat to the private bank that they will form another bank for depositing their money. They will not supply any fund to other banks. We all know that bank makes money by investing other’s money. So, this can lead to a higher competition in procurement of fund.

2.4.6 The Threat of Substitute Products

The final force in Porter’s model is the threat of substitute products. Substitute products are those of industries that serve consumer needs in a way that is similar to those being served by the industry being analyzed. Loans, the major banking product, have some substitutes. All informal sources and channels of financing are treated as viable substitutes. Some wealthy individuals, whom are often usurers as well, lend out money at a very high interest rates. These loans do not often require securities, and also do not require any special conditions, e.g. age, certain service time, set monthly income, etc. which makes them a very lucrative option. However, most of these activities are illegal, and therefore bears high risk. For this reason, most people tend to avoid these channels. Thus it appears that the threat of substitute products is not that much prevalent in the banking sector of Bangladesh, till date.

2.5 Role of Macroeconomic Environment

The banking industry is not a self-contained entity. It is embedded in a wider macro environment—the broader economic, technological, social, demographic and political environment.  Changes in the macroenvironment can have a direct impact on the banking sector, improving or deteriorating the profitability of the sector, permanently or temporarily.

2.5.1 The Macroeconomic Environment

The state of the macroeconomic environment determines the general health and well-being of the economy. This in turn affects a company’s ability to earn an adequate rate of return. The four most important factors in the macroeconomy are:

a) The growth rate of the economy

b) Interest rates

c) Currency exchange rates

d) Inflation rates

If the growth rate of the economy is high, consumer expenditure increases, which helps most businesses. However, the growth rate of our economy is moderate, which provides moderate opportunities for the banks to expand their operations and earn higher profits.

Interest rate is very significant for the banking industry. At the moment, interest rate is quite high in our country, compared to neighboring countries. Most personal loans bear an interest rate of at least 12 to 14% and above. This high interest rate is increasing the short term profitability of the industry, but in the long run, it is also acting as a hindrance towards building a better customer base.

Movement in currency exchange rates has a direct impact on the competitiveness of a company’s product, especially in the global market place. Providing “Trade Services”, e.g. processing export-import documents, maintaining export and import formalities, etc. is a major business of the country’s banks. Thus the exchange rates of the major currencies, e.g. dollar; euro, pound sterling, etc. have a direct impact on the banking industry.

Inflation can destabilize the economy, producing slower economic growth, higher interest rates, and volatile currency movements. Throughout the last decade, the inflation rate has come under control in our country, making its detrimental effects less significant. Thus the banking industry is not experiencing that much of difficulties due to inflation.

2.5.2 The Technological Environment:

Technological changes can act as a barrier to entry in an industry. Previously, the usage of computers and electronic databases were unknown to most people of our country. But the scenario has changed a lot in the last 8 to 10 years. After the elimination of duties on computers and accessories, the price of personal computers fell sharply. This created a boom in the computer industry. Most households in Dhaka now have at least one personal computer. Nowadays, people expect swift, hassle free service from the banks. Even the old and nationalized banks are realizing this fact. Installing all the modern banking equipments and computer systems can result in high fixed costs. Thus technological environment acts as a serious hindrance for entrepreneurs to setup their own banks, in our country.

2.5.3 The Social Environment

As with technological change, social change creates opportunities and threats. Due to changes in cultural values and education, people trust the banks more than ever. Previously, bank loans were perceived as a mean of getting bankrupt—through paying excessive interests. But today’s 4 years installment personal loans are gaining popularity. Borrowers are still paying interests, but they are not being compelled to live with the loan burden for 10 to 15 years—it’s all over within a brief time frame. All these factors are contributing positively towards the banking industry.

2.5.4 The Demographic Environment

Currently, individuals are getting established at a younger age. These individuals are the prime targets of many of the banking services like credit cards, personal loans, etc. Being younger in age, these individuals tend to spend more in luxury items, and they need to take loans in order to fulfill their desires. Realizing this opportunity, the banks cleverly brought out different loan schemes. This change in demographic environment has proven to be a great opportunity for the banks operating in Bangladesh.

2.5.5 The Political and Legal Environment

The political and legal environment of Bangladesh has never been impressive. This volatile environment creates a lot of difficulties for banks. Due to lack of law enforcement, the percentage of defaulted business loans had been historically high in our country. American Express Bank was compelled to shut down their corporate banking due to high number of defaulted loans. They simply got fed up while dealing with such troublesome customers. It is easy to recover loan money from small customers than from big businessmen—who are generally favored by the corrupt law enforcement agents of our country. This has become a very frustrating scenario for both the banks and for those people who genuinely need money for doing business. Neither party can fully trust the other. Unwanted strikes, hartals and political unrest have harmed the business of the banks as well. If the political and legal environment does not improve significantly, the banking industry’s performance will definitely be below par, in future.

2.6 The Concept of Strategic Groups Within Industries

All firms within a certain industry do not act similarly, in most cases. They differ in terms of distribution channels, served market segments, product quality, technological leadership, customer service, pricing policy, advertising policy and promotions. As a result of these differences within most industries, it is possible to observe groups of companies in which each member follows the same basic strategy as other companies in the group but follows a different strategy than that of companies in other groups. These groups of companies are known as strategic groups.

2.6.1 Proprietary Group and Generic Group

There can be two types of strategic groups in a particular industry. One group spends a lot of resources in research and development. They bring out new products and services in order to attract customers. In the banking industry, the multinational banks like HSBC, Standard Chartered and also a few local banks like Eastern Bank, Dhaka Bank, etc. follow such a strategy.

This group is called the Proprietary Group. Banks that belong to this group pursue a high-risk/high-return strategy. The prices charged by these banks for their services are generally higher, which is apparent from the diagram shown above. They bear high risk, because their high R&D spending may bear no fruit. There is no guarantee that heavily researched and pre-tested products will do well in the market. What a bank believes to be a premium service might appeal the least to the customers.  However, when a product does become popular, it usually brings a lot of fortune for the firm, mainly due to the premium price attached with it. These banks also devote a lot of resources in adopting new technology. That is why we see banks like HSBC to be fully equipped with the latest banking software as well as with the finest and fastest PCs, teller machines, vaults and security systems.

On the other hand, there are a number of banks who adopt a strategy which is totally different from what is adopted by the banks of the proprietary group. These banks belong to the generic group. The name suggests that, these banks will be generic in nature. They believe in providing no frills, traditional banking services. They are reluctant in spending high amounts in research and development. They are often the followers of what other banks adopt after doing research. They almost never equip themselves with the latest technologies. They use five years old technology, which is cheaper, yet functional. Understandably, the price charged by these banks is quite lower than the same of the proprietary banks. Their target market is totally different. While the minimum average account balance in HSBC bank is 50,000 Taka, one can maintain a zero balance and still have his account active in a generic bank.

2.6.2 Implications of Strategic Groups

 Strategic groups help in defining the true competitive picture of an industry. Though belonging to the same industry, all banks do not compete against each other, directly. For this reason, HSBC does not have to position itself against the government banks.

 2.6.3 Mobility Barriers within Strategic Groups

There are mobility barriers within the strategic groups. That is, a bank belonging to the generic group cannot just move itself up to the proprietary group, overnight. There are high mobility barriers in the banking industry of Bangladesh. This means, banks within a given group are protected to a greater extent from the threat of entry by banks based in other strategic groups.

E-mail marketing campaign on HSBC

Chapter 3: The Hongkong and Shanghai Banking Corporation (HSBC)

 3.1 An Overview of HSBC Group

Headquartered in London, HSBC Holdings plc is one of the world’s largest banking and financial services organizations, with major consumer, commercial and investment banking and insurance businesses. The HSBC Group evolved from The Hongkong and Shanghai Banking Corporation Limited (Hongkong Bank), which was founded in Hong Kong with offices in Shanghai and London and an agency in San Francisco. The HSBC Group international network comprises more than 5,500 offices in 81 countries and territories, operating under well-established names in the Asia-Pacific region, Europe, the Americas, the Middle East and Africa. With primary listings on the London and Hong Kong stock exchanges, shares in HSBC Holdings plc are held by some 160,000 shareholders in more than 90 countries and territories. In the United States, investors are offered a sponsored American Depository Receipt program. Through a global network linked by advanced technology, the Group provides a comprehensive range of financial services: personal, corporate, investment and private banking; trade services; cash management; treasury and capital markets services; insurance; consumer and business insurance; pension and investment fund management; trustee services; and securities and custody services, The HSBC family is comprised of over 130,000 employees representing 81 countries and territories   Following are the principal members of the Group,

BamerindusHSBC Asset

ManagementForward TrustBritish BankHSBC Equator BankHSBC financial

InstitutionFirst DirectHSBC Investment

BankHSBC GibbsHang Seng BankHSBC Investment

Bank AsiaHSBC Global payment and Cash ManagementHongkong BankHSBC Private BankingHSBC InsuranceHongkong Bank of

AustraliaHSBC SecuritiesHSBC MarketsHongkong Bank of

CanadaTrinkaus &BurkhardtHSBC Trade ServicesHongkong Bank of

Malaysia  HSBC Bank of Roberts  Marine Midland Bank  Midland Bank  

However, many of the members have changed their name into HSBC, The Hongkong and Shanghai Banking Corporation Limited to introduce the whole group under one brand name.

3.2 Key Developments of HSBC Group

Founded in 1865 in Hong Kong, this Group expanded primarily through offices established in Hongkong Bank’s name until the mid-1950s when it began to create or acquire subsidiaries. This strategy culminated in 1992 with one of the largest bank acquisitions in history when HSBC Holdings acquired Midland Bank, which was founded in the UK in 1938. The following are some key developments in the Group’s growth since 1959.

1959: Hongkong Bank acquires The British Bank of Middle East (formally the Imperial Bank of Persia) and The Mercantile Bank (originally the Chartered Mercantile Bank of India, London and China), which is subsequently integrated into Hongkong Bank.

1960: Wayfoong Finance, a Hongkong Bank hire purchase and personal finance subsidiary, is established.

1965: Hongkong Bank acquires a majority shareholding in Heng Seng Bank, now the second largest bank incorporated in Hongkong

1967:Midland Bank purchases a one-third share in the parent of London merchant bank Samuel Montagu.

 1971: The Cyprus Popular Bank Limited (now Laiki Bank) becomes an associated company of the Group.1972: Hongkong Bank forms a merchant banking subsidiary, Wardley(now called HSBC Investment Bank Asia ), and an insurance subsidiary, Carlingford (now HSBC Insurance).Midland Bank acquires a share-holding in UBAF Bank (now known as Arab Commercial Bank).

1973: Samuel Montagu becomes a wholly owned subsidiary of Midland.

1978:The Saudi British Bank is established under local control to take over The British Bank of the Middle East’s branches in Saudi Arab.

1979:Hongkong Bank acquires 51% of New York State’s Marine Midland Bank Antony Gibbs becomes a wholly owned subsidiary. Midland acquires a controlling interest in leading German private bank Trinkaus & Borkhardt.

 1980:Hongkong Bank of Canada is established in Vancourver. The Group acquires a controlling interest in Equator Holdings.

 1981: Egyptian British Bank is formed, with the Group holding a 40% interest.

 1983: Marine Midland Bank acquires Carroll McEntee & McGinly (now HSBC securities (USA) Inc), a New York based primary dealer in US Government securities. The Cyprus Popular Bank becomes an associated company of the Group.

1986: Hongkong Bank established Hongkong Bank of Australia, and acquires James Capel, a leading London based international securities company.

1987:Hongkong Bank acquires the remaining shares of Marine Midland and a 14.9% Equity interest in Midland Bank.

1988: Strategy alliance is entered into between Hongkong Bank and California-based Wells Fargo Bank. Midland Bank launches First Direct, the UK’s first 24-hour organization’s telephone banking service.

 1989:A strategic alliance is entered into between The HongKong and Shanghai Banking Corporation and California – based wells Fargo Bank. Midland Bank launches First Direct, the UK’s first 24-hour organization’s telephone banking Service.

 1991: HSBC Holding is established; its shares are listed on the London and Hong Kong stock exchanges.

 1992: HSBC Holdings purchases the remaining equity in Midland Bank. HSBC Investment Banking is formed.

 1993:The HSBC Group’s Head Office moves to London. Forward Trust, a Midland subsidiary, acquires Swan National Leasing, established the UK’s third largest vehicle contract hire company.

 1994:Hongkong Bank is the first foreign bank to incorporate locally in Malaysia, forming Hongkong Bank Malaysia Berhad.

 1995:Wells Fargo & Co. and HSBC Holding establish Wells Fargo HSBC Trade Bank in California to provide customers of both companies with trade finance and international banking service.

 1997:Marine Midland Bank acquires First Federal Savings and Loan Association of Rochester in New York.

 1999: Shares in HSBC Holdings begin on a third stock exchange, New York. HSBC Holdings acquires Republic New York Corporation (now integrated with HSBC USA Inc.) and its sister company Safra Republic Holdings S.A. (now HSBC Republic Holdings (Luxembourg) S.A.).Midland Bank acquires a 70% interest in Mid-Med Bank p.l.c. (now called HSBC Bank Malta p.l.c.), Malta’s largest commercial bank.

 2000:HSBC and Merrill Lynch form a joint venture to launch the first international online banking and investment service company. HSBC reaches an agreement in principle to acquire 75% of the issued shares of Bangkok Metropolitan Bank, the eight largest banks in Thailand. HSBC acquires Credit Commercial de France (CCF) a major French banking group. Share as in HSBC holdings are listed on the organization’s stock exchange, in Paris.

2001:Agreement is reached for HSBC to acquire Barclay’s Bank’s branches and fund Management Company in Greece. CCF is chosen by the French Government to acquire Banque Hervet, a regional bank in France. HSBC Finance (Brunei) Berhad signs an agreement to acquire IRB Finance Berhad, a Finance company in Brunei.

2002:The Hongkong HSBC’s joint venture with Merrill Lynch to provide online investment and banking services to ‘mass affluent’ investors is integrated into the HSBC Group and continues to operate as Merrill Lynch HSBC. HSBC acquires the corporate banking and trade finance business of State Street Bank and Trust Company’s Global Trade Banking Australia business; Benkar Tuketici Finansmani ve Kart Hizmetleri A.S., a leading provider of consumer finance in Turkey; and Grupo Financiero Bital S.A. de C.V., one of Mexico’s largest financial services groups. HBSC purchases a 10% interest in Ping An Insurance Company of China Limited, the second largest life insurance operation in China; and agrees to acquire Household International, Inc., a leading US consumer finance company operating in 46 states.

2003: CCF agrees to increase its stake in French private bank Banque Eurofin SA to 71.21%, and to acquire a further two branches of Banque Worms in France, bringing the total number purchased to 13. HSBC acquires Keppel Insurance Pte Ltd, a provider of life insurance and Islamic insurance in Singapore; and increases its shareholding from 60% to 100% in Equator Holdings Limited.

3.3 Global Coverage of HSBC

HSBC is truly the World’s Local Bank, in a number of ways. The global presence of HSBC makes it really large banking institution. The following table clearly shows that the brand HSBC can be found in every nook and corner of the third planet of the solar system:

The following figure shows the percentage distribution of HSBC branches, around the globe.

USA, UK, Brazil. Mexico, France, Hong Kong, Canada, Argentina, Turkey and Cyprus jointly host 93% of the total number of HSBC branches. Bangladesh’s share is only a meager 0.051%.

3.4 Vision Statement of HSBC

“We Aim To Satisfy The Organization’s Customers With High Quality Service That Reflects The Organization’s Global Image As The Premier International Bank”

3.5 Objectives of HSBC

HSBC’s objectives are to provide innovative products supported by quality delivery of systems and excellence customer services, to train and motivate staffs and to exercise community responsibility. By combining regional strengths with group network HSBC’s aim is to be the bank of choice and one of the leading banks in its principle markets. HSBC’s goal is to achieve sustained earnings growth and to continue to enhance shareholders value.

Chapter 4: HSBC Bangladesh

4.1 HSBC in Bangladesh

HSBC Bangladesh started its operation on 17 December 1996 in Dhaka with a vision to satisfy its customers with high quality service that reflects its global image as the premier International Bank. In 1999 it has opened one Branch in Chittagong and two Booths in Gulshan and Motijheel. Recently, another Branch has started operating from 2 March 2003 in Dhanmondi. All of these offices were inaugurated by Mr. David G. Eldon Chairman HSBC Asia Pacific, during his visit in February 1999 and March 2003. HSBC Bangladesh also has an Offshore Banking Unit, which provides banking services for foreign companies based in the Export Processing Zones in Dhaka and Chittagong. HSBC Bangladesh also introduced the ATM and telephone banking facilities for personal Banking business.

4.2 Mission of HSBC Bangladesh

•   We aim to become one of the leading Banks in Bangladesh by our prudence  fair and quality of operations.

•   We intend to meet the needs of our clients and enhance our profitability by creating corporate culture.

• We aim to ensure our competitive advantages by upgrading banking technology and information system

•  We provided high quality financial services to strengthen the well being and success of individual, industries and business communities

• We believe in strong capitalization.

•  We maintain high standard of corporate and business ethics.
•   We extend highest quality of services, which attracts the customers to choose us first.
•  We create wealth for the shareholders.
•   We maintain congenial atmosphere for which people are proud and eager to work with HSBC Bank.
•   We believe in disciplined growth strategy.
• We encourage various term investments to investors to buy our stock.
•   We intend to plat more important in the economic development of Bangladesh and its financial relation with the rest of the world by interlining both domestic and international operations.

4.3 Organizational Structure of HSBC Bangladesh

4.3.1Importance of Organizational Design

Organizational design means selecting the combination of organizational structure and control systems that lets a company pursue its strategy most effectively—that lets it create and sustain a competitive advantage. The primary role of organizational structure is twofold:

(1) To coordinate the activities of employees so that they work together most effectively to implement a strategy that increases competitive advantage.

(2) To motivate employees and provide them with the incentives to achieve superior efficiency, quality, innovation, or customer responsiveness.

Good organizational design increases profitability of a firm, as it can be seen from the figure. Thus a well planned organizational structure is crucial for a firm.

The organizational structure of HSBC Bangladesh has been created, keeping these factors in mind. The structure can be analyzed in terms of differentiation.

4.3.2 Vertical Differentiation in the Organizational Structure

 The aim of vertical differentiation is to specify the reporting relationships that link people, tasks, and functions at all levels of a company. This means that management chooses the appropriate number of hierarchical levels and the correct span of control for implementing a company’s strategy most effectively. The organizational hierarchy establishes the authority structure from the top to the bottom of the organization. The span of control is defined as the number of subordinates a manager directly manages. The basic choice is whether to select a flat structure, with few hierarchical levels and thus a relatively wide span of control, or a tall structure, with many levels and thus a relatively narrow span of control.

HSBC bank Bangladesh has a flat structure, with only five levels in the management. The top most level is the CEO (Chief Executive Officer) level. The CEO, Mr. David J. Griffiths is the head of the organization. The next top position is Manager. The “Managers” of HSBC can be compared to the departmental heads of other organizations that are doing business in Bangladesh. The head of human resources is the HR Manager in HSBC. In other organizations, entry level employees are termed as “Executives”, which is a mistake. By definition, executives should be the topmost employees of an organization. In HSBC, CEO and the managers are called executive level employees.

The managers report to the CEO. The managers have three levels of non-executive employees reporting to them. When a person first joins HSBC, in most cases, he or she joins as an Assistant Officer. Only in extremely rare cases, where the applicant has ample job experience, a person might join as a Supervisor or Staff Officer. Supervisors and Assistant Officers are required to follow a predefined dress code. The dress code is relaxed for staff officers, the managers and the CEO. They may or may not wear the assigned dresses.

The flat structure of HSBC helps in keeping the bureaucratic costs low. Tall structure results in the following problems, which leads to bureaucratic costs:

1. Too many middle managers

2. Motivational problem

3. Coordination problem

4. Information distortion

 HSBC is free from these problems.

4.3.3 Horizontal Differentiation in the Organizational Structure

Whereas vertical differentiation concerns the division of authority, horizontal differentiation focuses on the division and grouping of tasks to meet the objectives of the business.

HSBC Bangladesh uses the most popular and common structure, the functional structure. Functional structures group people on the basis of their common expertise and experience or because they use the same resources.

Functional structures have several advantages. First if people who perform similar tasks are grouped together, they can learn from one another and become better—more specialized and productive at what they do.

Second, they can monitor each other to make sure that all are performing their tasks effectively and not shirking their responsibilities. As a result the process becomes more efficient, reducing manufacturing costs and increasing operational flexibility.

A third important advantage of functional structures is that they give managers greater control of organizational activities. In HSBC, every department has reports to the CEO, COO or a manger of a particular department. Five departments report to the COO (Chief Operating Officer), who is the second most powerful individual at HSBC. The five departments are:

a) Financial Control Department (FCD)

b) Administration Department (ADM)

c) Hongkong Universal Banking (HUB)

f) Information Technology Department (IT)

g) Network Service Center (NSC)

The manager, corporate banking, is responsible for the following three departments:

a) Trade Services (HTV)

b) Payment & Cash Management (PCM)

c) Institutional Banking (IB)

All the branch managers report to the manager, Personal Financial Services (PFS). The sales team also reports to him. The sales team consists of MSO (Mobile Sales Officers) and call center representatives.

The other four departments report to the CEO. These are:

1. Marketing and Public Relations (GPA)

2. Human Resource and Training Department (HR)

3. Treasury (TRSY)

4. Credit and Risk Management (CRM)

5. Internal Control (MIC)

These departments are called the “Small” departments, due to smaller workforce.

All the departments follow the previously mentioned flat structure. That is, there are managers, supervisors, staff officers and assistant officers in almost all the departments. Corporate banking and PFS—these two departments have their own workforce. There are certain divisions within some departments, as well, e.g. HTV is divided into HTV Import and HTV Export.

4.4 Functions of the Major Departments

4.4.1 Information Technology (IT)

This department relates to all other departments in order to provide technical services. This department’s job is to plan, negotiate and purchase maintenance of IT, communications, PABX, security system etc.

Operations:

•           Maintains communication media and security system.

•           Provides technical support to LAN communication system.

•           Maintains database

•           Submit off-line batch run report

•           Does trouble shooting

•           Develop in-house software.

4.4.2 Hongkong Universal Banking (HUB)

This department is responsible for all offline branch run report. The HUB officer is responsible for coordination with Technical service department to ensure the system is used and understood to HUB’s full potential and is available to end   user for maximum available time. It ensures department operations in accordance with group statement and procedure.

Operations:

•           Assists HUB operations operated by other staffs.

•           Execute trouble shooting

•           Generate reports

•           Controls HUB access

•           Assists audit programs

4.4.3 Administration Department

Like that of any other organizations, the Admin department of HSBC makes sure that the organizations moves on with all its departments and staffs operating according to all the rules and regulations of the company. It also prevents any bottlenecks within the work process and ensures smooth functioning. The admin department has two divisions – General Administration and Business Support Services.

The general admin division is pretty much similar to the admin departments of other companies that ensure discipline and regulatory concerns. The business support services provide supports to the departments during employee leaves and sudden terminations so that the department can function without problems.

4.4.4 Network Service Centre

This department can be described as the ‘Power House’ of HSBC Bangladesh. NSC does the back office job for the bank. The main four jobs that are performed by NSC are Clearing, Scanning of signature cards, issuing checkbooks and sending & receiving Remittances. NSC looks after the clearing process of HSBC and makes necessary contact with the central bank for maintaining account flows. All the customer signatures are scanned in this department and are entered into the system. NSC also issues checkbook for new and old accounts based on requisition from various branches. ‘Remittance’ is a banking term, which means ‘Transfer of funds through banks’. When a bank remits on behalf of its customers, it is termed as outward remittance. On the other hand, when the bank receives the remittance on behalf of the bank, it is inward remittance. The following are the methods that NSC used to remit money for customers: Telegraphic Transfer (TT), Demand Draft (DD) & Cashier’s Order.

HSBC is nationally on-line. Anyone having account in any branch in Bangladesh can transact in any branch of HSBC Bangladesh. NSC facilitates this network-service. Any type of information about the customers are loaded or composed in the system through NSC.

Operations:

•           Facilitates the network service.

•           Updates the information system.

•           Generate the Phone Banking PIN and the ATM PIN.

4.4.5 Financial Control Department

FCD is responsible for the preparation of the Annual Operating Plan (AOP), monitoring treasury risk limits, profit exposure and maintaining strong liquidity. FCD is the key member of the Asset Liabilities Committee (ALCO), which deals with how efficiently the bank’s assets and liabilities are managed.

Operations:

•           Annual Planning.

•           Analysis of the reports.

•           Scrutinizing daily functional statement.

•           Checking the accounts and giving necessary feedbacks.

•           Monitoring risks and profits.

•           Analysis of the transactions.

•           Maintains bills and vouchers.

4.4.6 Treasury Department

This department deals with the cash management. As continuous cash transaction goes on and there is a limit of keeping money in the bank-volt this department should be sincere about the availability of money when needed. Moreover foreign exchange rates are also monitored by this department.

Operations:

•           Monitor the call money rate.

•           Monitor the foreign exchange rate.

•           Confirm the availability of money.

•           Cash management through participating in call money market.

•           Fulfill the requirements of Bangladesh Bank.

4.4.7 Human Resources & Training Department (HRD)

The functions of Human Resources Department are strategic planning and policy formulation for compensation, recruitment, promotion, training, development and appraisal. This department also contributes to employees’ performance by providing standard of training.

Operations:

•           To assist the top level decision making process on compensation, promotion, training,

            development and appraisal.

•           Communicate with all external and internal entities.

•           Monitor leave, payroll, increments and allowances etc.

•           Maintains financial flows related to HRD.

•           Plan and arrange the development training programs for the employees.

•           Ensure the standard of the group.

•           Help to ensure the cost effectiveness.

•           Provide full logistics supports to all departments for quality services.

•           Deals with intra and inter communication for administrative issues

•           Ensures value actability.

•           Plan for development of the company.

•           Facilitates admin officers’ job

•           Develop plans for support services.

•           Ensures security of the company

•           Conduct the performance evaluation.

•           Execute recruitment arrangements.

4.4.8 Internal Control

Internal Service Officer is responsible for ensuring quality. Through fulfilling audit requirements it maintains the local and group compliance.

Operations:

•           Ensures the standard and services

•           Ensures operational responsibilities

•           Ensures group requirements.

4.4.9 Marketing Department

This department is responsible for increasing public awareness of the Bank’s name, products and services, image etc. HSBC is giving more importance on marketing its products and services through advertising in newspapers, billboards, banner and publishing leaflets, newsletter etc

Operations:

•           Coming up with innovative and different promotional approaches.

•           Conducting, Coordinating and organizing media activities.

4.4.10 Corporate Banking or Institutional Banking (CIBM)

This department deals with all types of banking with the institution or organization rather than personal financial services.

Operations:

•           Market risk analysis regarding assistant liability

•           Analysis of credit risk.

•           Implementation and feedback of strategic decision

•           Follow-up and facilitate documentation in corporate customer relationship.

•           Assists the treasury department.

•           Collect information from different organizations and maintain liaison with them.

•           To monitor the corporate accounts on daily basis.

4.4.11 Trade Services (HTV)

This department maintains a close relationship with corporate banking, credit operations and personal banking for marketing selling trade services to the existing and targeted customers. This department handles all trade related businesses of the bank.

Operations:

•           Deals with amendment and bills.

•           Maintains customer relation and banking

•           Maintains export and import formalities.

•           Checks vouchers

•           Process export-import documents.

•           Ensure quality services for the customers.

4.4.12 Securities Department

This department facilitates the development of money market and investment activities of bank. This department explores the FI (Financial Institution) market; identify customers and FI related issues. Maintain close relation with the foreign exchange issues. The prime duty of this department is to make sure that the bank complies with BB (Bangladesh Bank), SEC (Stock Exchange Commission), DSE (Dhaka Stock Exchange), CSE (Chittagong Stock Exchange) and client reporting requirements.

Operations:

•           Complies with financial institutions’ requirement.

•           Monitor feedback and supervise operation in the financial markets.

•           Make liaison with different level.

•           Prepare the plan of activities for different department in the financial market.

•           Facilitate the transfer of share certificate.

•           Maintain documents related to share market.

4.4.13 Credit Management

This department coordinates the lending facilities. This is also a member of ALCO. This department is responsible for all necessary documents and securities related to corporate and personal lending.

Operations:

•           Prepare and supervise credit approval

•           Coordinates documents of Group and Bangladesh Bank

•           Ensure customer credit documents and necessary papers.

•           Analyses the financial statements of the customers and analyses the data to identify

            possible risk.

•           Conducts stock statements

•           Deals with insurance documents

•           Calculate and Analyze the profitability

There are two separate departments under Credit management: PFS credit which deals with individual lending and CMB credit which deals with the Commercial lending.

4.4.14 Personal Financial Services (PFS)

This department supervises the Customer Service Department (CSD), ATM (Automated Teller Machine) center & Product Development department.

Operations:

CSD

• Provides support for the customers, through phone or face to face
• Handles requests of changing of address and phone numbers
• Answers customer queries regarding products and services

ATM

• Ensures the trouble free operation of all the ATM centers
• Disburses money to the ATM centers

PFS Product

• Conducts research on new product possibilities
• Designs new products
• Designs product brochures
• Test markets products, internally

4.5 Business Principal and Values

The HSBC Group is committed to five Core Business Principles:

•     Outstanding Customer Service;
•     Effective and efficient operations;
•      Strong Capital and Liquidity;
•     Conservative lending policy;
•     Strict expense disciplines;

Through loyal and committed employees who make lasting customer relationships and international teamwork easier to achieve these principles.

To conform to these principles the Group has defined value as:

•           Valuing people (Applicable to both our customers and staff employees)

Staff: ensure amicable work environment foster trust among colleagues allow fairness to prevail at all times demonstrate sincerity and sense of belongingness ensure respectful environment.

Customer: make sure importance is assigned to each customer courteous behavior to be provided at all times to ensure that no tangible discrimination occurs.

•   Quality First (Customer focused):
•     provision of services that would be labeled as “value for money”
•    provision for effective and efficient service
•      priorities of customer satisfaction
•      ensure commitments are met
•      courage to apologies for mistakes rather than attempting to camouflage
•     avoid complacency

• •Professionalism (Staff focused):  Ensure staffs are thoroughly aware of respective responsibilities.
•  Ensure job descriptions are executed properly
• Address areas where improvement may be necessary expeditiously
• Advocate team spirit

•           Profit Driven (Internally focused):

Focus on augmenting/enduring profitability of the bank through a combination of:

1.         selection of quality accounts

2.         mitigation of avoidable expenses

3.         remaining within compliance parameters (both local and Group)

•   Innovative:
•   quick to acclimatize/adapt to changes in test/demand/environment
•    remain proactive
•   remain flexible
•    Integrity:
•    Ensure moral uprightness and honesty among the staff
•   Ensure soundness and wholeness in the job

To conform to the stated Group principles and above definition of value HSBC also operates according to certain Key Business Values (KBV). Those are:

•           The highest personal standards of integrity at all levels;

•           Commitment to truth and fair dealing;

•           Hand-on management at all levels;

•           Openly esteemed commitment to quality and competence;

•           A minimum of bureaucracy;

•           Fast decision and implementation;

•           Putting the Group’s interest ahead of the individual’s;

•           The appropriate delegation of authority with accountability;

•           Fair and objective employer;

•           A merit approach to recruitment/ selection/ promotion;

•           A commitment to complying with the spirit and letter of all laws and regulations wherever we conduct our business;

•           The promotion of good environmental practice and sustainable development and commitment to the welfare and development of each local community.

HSBC’s reputation is founded on adherence to these principles and values. All actions taken by a member or staff member on behalf of a Group company should conform to them.

4.6 Products and Services Provided

4.6.1 Corporate Credit

HSBC offers the convenient and flexible form of short-term financing for routine operating expenses and overheads of the company.

Import and Export Loans

 Loans against import are available when the company purchases under Documentary Credit or Documentary Collections terms.

Pre-shipment finance is available to meet the working capital requirements. Advances are granted upon production of a buyer’s contract or export DC.

DP / DA Purchase

A cash advance is made when a company exports goods to a buyer through Documentary Collections, either on a Documents against Acceptance (DA) or Documents against Payments (DP) basis.

Long-term Loans

HSBC can customize a Term Loan to finance the fixed assets that the business needs (such as land, new premises, equipment and machinery). It may be a green-field project or an expansion of an existing plant that may be financed at competitive floating rate of interest.

Guarantees and Bonds

HSBC in Bangladesh issues a full range of Performance Guarantees, Advance Payment Guarantees, Financial Guarantees and Bid bonds for supporting the underlying business of the customers.

4.6.2 Trade Services

Export Services:

•           Pre-shipment Finance

To assist the cash-flow when companies are manufacturing or packing the goods, HSBC can arrange pre-shipment finance facilities. A Packing Credit (PC) can be offered which will enable the company to purchase raw materials or other related expenses that may require to process and export.

•           Post- shipment Finance

If the documents, after checking, are found to contain no discrepancies, HSBC can consider negotiating and paying the company the discounted value of the invoice. No facilities are required, and funds will typically be advanced on the same day if documents are presented before noon.

•           Documentary Credit (DC) Advising

Electronic export DC Advising is a new and alternative way to receive a full copy of the Export Documentary Credits (DCs), amendments and export transaction advices via email. The service brings direct benefits to the business at no extra cost.

In this increasingly competitive environment, the Electronic DC advising services will help by offering:

– Enhanced Accuracy in the Preparation of Documents

– Convenience

– Reduced Courier Expenses

Import Services:

•           Import bills

HSBC provides incoming documents against imports from Bangladesh that are processed for a fee by the Bank.

•           Import Loans

HSBC provides the loans granted to importers to pay for their imports into Bangladesh.

•           Shipping Guarantees

HSBC provides a guarantee issued to shipping companies to allow release of goods prior to arrival of import documents.

4.6.3 Payment and Cash Management

•           Account management services

HSBC’s Global Payments and Cash Management services provide domestic and regional transaction solutions to blue-chip companies throughout the world. Services include a comprehensive range of traditional account and transaction services, augmented by HSBC’s liquidity and financial management techniques and delivered via our global electronic banking system, Hexagon.

HSBC’s commitment to service excellence, reputation for stability and understanding of the region has repeatedly been recognized through citations by major business publications. With the local expertise in Bangladesh, HSBC is well versed in local practices and regulations affecting the management of cash on a domestic and regional basis.

•           Payment and collection

Country-wide Payments:

Most corporate treasurers cannot afford to spend time worrying about routine payments. HSBC in Bangladesh has the technology to put you in better control of routine operations and has been successfully handling payment requirements throughout the nation for its corporate clients. It provides the benefits, which include:

Country-wide Collection:

As receivable management is crucial to the financial cycle, HSBC has developed products to efficiently manage the requirements and reduce cost. The services and benefits include:

This payment and cash collection service provides the customer the following benefits:

– Reduction in payment time.

-Cost reduction through efficient fund management.

-Detailed MIS on cash collection and payment, resulting in better management.

-Reconciliation done through Hexagon.

-Centralization of control of all your cash and instruments.

-Network coverage of almost 200 locations nation-wide.

-Quicker cash collection in a central account, resulting in greater earnings.

•           Hexagon cheque writer

The latest addition in the Payments and Cash Management services is Hexagon Cheque Writer. It is a cheque writer product which is also a built-in module of Hexagon, global electronic banking. It is designed to facilitate the corporate customers for preparing, printing and updating the PC ledger (ledger maintained in cheque writer). Services and benefits include:

       Preparation of cheques through Hexagon Cheque Writer.

       Reconciliation of cheques at the Hexagon ledger.

       Advice along with cheque leaves.

       No further installation required since it is built in our Hexagon module.

       Recurrent payments can be stored and printed.

       Convenience of in-house cheque printing.

4.6.4 Personal Financial Services

Banking Across the Country

The organization’s computer system provides the customer the opportunity to make transaction between accounts at different branches. No matter where the organization’s account is held the customer can withdraw money from any HSBC branch or ATM in Bangladesh.

Money Savings Schemes

HSBC offers both local and foreign currency current accounts and local currency savings accounts for its customers to save money.

Investment Schemes:

Both local and foreign currency time deposit schemes are offered by HSBC for its individual customers.

Personal Loan Schemes

HSBC offers Personal Installment Loan (PIL), Personal Secured Loan (PSL), Personal Installment Credit (PSC), Home Loan and Car Loan.

More details on these products are provided in the appendix.

Car Loan

Under the car loan scheme HSBC offers a loan up to 70% of the car value. Cash security or personal guarantee is not required for the loan. Cars can also be insured at discounted rates.

Education Loan

HSBC’s education loan can help the customer accomplish the desire for higher studies. Cash security or personal guarantee is not required.

Support Services

To make the products more attractive HSBC offers free ATM cards and ATB pins to its customers with its products. The benefits of ATM card are described under the description of ATM centre in the project part and the features and facilities provided by ATB are given below:

To avoid the long queues at the branch HSBC offers the Phone-banking service, doing the banking is just a phone call away. The futures of phone banking are,

•           Private and Secure: Phone-banking is designed for total privacy. To ensure the confidentiality of the transactions, the account can be activated only by keying in both the Phone-banking Number (PBN) and the Personal Identification Number (PIN). User can also change the PIN as often as he or she like for added security.

•           Fast and Easy: Simple-to-follow instructions, will guide the user all the way through multiple transactions. For added convenience HSBC has developed a Quick Search function to speed the various transactions.

•           Comprehensive: The Phone-banking service allows the user to perform a wide range of transactions, from fund transfers to term deposit placements.

The facilities of phone banking are,

•       Check balances on the primary and linked accounts
•        Transfer funds between one’s own accounts
•      Hear the details of the last five transactions
•        Order a statement
•        Order a chequebook
•        Pay bills to pre-designated third parties in local currency
•          Report a lost or stolen ATM card
•        Open or renew a time deposit
•        Enquire about foreign exchange rates

4.7 Pricing Information

A quick guide to personal banking charges

A quick guide to personal banking charges is intended to give a clear picture of the fees HSBC charges for their most commonly used services. HSBC hopes that the simple tables will help the customers manage their money more effectively. The sections on specific account types should be read in conjunction with the section entitled “general services—all accounts”.

The charges in this guide were correct at the time of printing (July 2002) but remain subject to change. These changes are applicable only to the accounts maintained in Bangladesh with The Hongkong and Shanghai Banking Corporation Limited, which reserves the right to introduce charges not included in this guide. For charges that are not mentioned in this guide, please refer to the relevant promotional material.

Payment of foreign currency notes is subject to availability. The charges for remittances do not include any charges that may be imposed by other banks.

General services—all accounts

insufficient fundTk. 300Transaction ChargeThe bank reserves the right to levy a charge on transactions conducted

Tk. 300 if needed the next day

Deposit accounts/services

(3 monthly basis)* (Relationship is all accounts under one customer ID. i.e. Loans, FCY and Taka accounts)Account closureClosing of accountsTaka AccountsTk. 300Foreign Currency A/CUSD 10/GBPSClosing of unsatisfactory accountsImproperly conducted account closed by the Bank or a an account closed within three months of its openingTk. 500 or USD 12 or GBP 10Personalized cheque book

Specially printed cheque book

Issuance of counter chequeFree

At actuals

Tk. 200Returned ChequeEach clearing cheque returned due to insufficient fundTk. 500Each clearing cheque returned due to other reasonsTk. 200Stop payment orderTo stop payment on each or a series of cheque(s) in sequential order issued by the account holderTk. 200To cancel each stop payment orderTk. 100Time DepositsMinimum balance

Tk. 100,000

USD 1,000

GBP 1,000

EURO 1,000* Interest is calculated daily for savings accounts and payable half yearly at the Bank’s prevailing interest rate.* Overdraft interest is calculated daily and charged quarterly at the Bank’s prevailing interest rate

Payment services

(collection and purchase)OD buying rate, 0.50% min Tk. 500 commission plus courier charges, Tk. 1500 & other bank’s charges(Free for less than 5 cheques. Tk. 10 per cheque in excess of 5

Over six month

Over one year

Over two yearsTk. 300

Tk. 600

Tk. 1000

Tk. 2000Duplicate certificateTk. 200Attestation of certificateTk. 100Indenting Commission Processing chargeTk. 15005% Tax CertificateTk. 3004% TOT/15% VAT CertificateTk. 300Outward remittanceDomesticTo issue of other bank draftTk. 250 plus other bank chargesTo issue a telex transferTk. 300 plus other bank chargesInvestigation chargesTk. 300 (if the beneficiary has already been credited)Cancellation of Demand DraftTk. 250Cancellation TTTk. 300Overseas To issue a Demand DraftUSD 10To issue a TT (Beneficiary maintains A/C with HSBC group)USD 25To issue a TT (Beneficiary a non-group customer)USD 40Overseas bank charges (if any) is not included above and bank reserves right to send payment messages by its own wayInvestigation charges for TTUSD 10 (if beneficiary A/C has already been credited) + FCCAmendment charges for TTUSD 10Cancellation of DDUSD 10Cancellation of TTUSD 20Loss of DDUSD 10Investigation charges for inward payment messageUSD 10Investigation charges (inward/outward remittance)USD 60 (for transaction dated 60 or more days prior to the inquiry)

Each amendment in BDT of AMEX traveller’s cheques

0.50% min. Tk. 250Sale of traveller’s Cheques

Sale of traveller’s cheques (customer)

1% min. Tk. 100Endorsement chargeTk. 250Traveller’s cheque sent for collection

Each batch (up to a maximum of 10 cheques) to a single destination

Tk. 250 + courierOther special services Auto pay servicesAs per negotiationInter branch transaction arrangementFrom Dhaka to Chittagong and Vice VersaCash deposit

Tk. 100,000 & below

Tk. 100,000 to Tk. 500,000

Tk. 500,000 to Tk. 1M

Tk. 1M to Tk. 5M

Over Tk. 5M

Tk. 150

Tk. 500

Tk. 1,500

Tk. 5,000

Tk. 10,000It is not the Bank’s intention to charge customers for inter branch cash transfers. However, the Bank does reserve the right to charge a fee as above if customer’s inter-branch transfer does not commensurate with the customer’s average deposit balance. Charges are to be applied only for investigations generated by errors and omissions on the part of the customers on a per transaction basis. The conditions for investigation charges to be applied where the investigation concerns:

1. A transaction dated 60 or more days prior to the inquiry, or,

2. Duplicate payments,

3. Cancellation of payment order,

4. Amendment of payment,

5. Non-receipt of funds where the account has already been credited,

6. Non-receipt of payments/settlement instructions where the nostro account has already been creditedOther charges/commissions etc.As agreed with customers

NB:

• These charges are standard charges, and concession rates may be granted at the discretion of Management
• Any Government Taxes, Duties or other charges will be recovered in addition to the foregoing
• Correspondents/other Bank charges, if any, will be additionally recovered from client.
• Charges are subject to adjustment for overall business volumes

4.8 Promotional Activities

As discussed above the Marketing Administration Department formulates & executes various marketing strategies of HSBC Bangladesh. This department also administers various marketing research activities on the existing and potential customers of HSBC. Some such research activities are: mystery shopping, critical incident surveys, customer suggestion surveys, etc. The results of these surveys are integrated while formulating various marketing strategies. This department also deals with the billing and invoicing of various marketing & advertising costs of HSBC Bangladesh.

The Promotion Division under the Marketing & Product development Department of PFS deals with all the promotional activities of HSBC Bangladesh. Prime responsibilities of this department are: Maintaining strong public relations with various media intermediaries, Advertising the companies products and services, building a strong corporate image of HSBC in Bangladesh.

•           Public Relations:

The promotion department organizes various environmental and social activities in order to build a strong corporate image of HSBC in the minds of customers as well as in the media. Maintaining strong relationship with news media is another major duty of this department.

•           Advertising:

The promotion also coordinates all the advertising of HSBC products within Bangladesh. Some of the advertising tools that are frequently used by the company are as follows:

a)         Newspapers Advertising: Regular advertisements of various products and services of HSBC are given in some of the countries most renowned daily newspapers.

b)         Billboards: Huge colorful billboards with HSBC logo are found in various major areas of Dhaka and Chittagong. These billboards emphasize on the needs of customers and shows HSBC logo as solution to their needs.

c)         Road Side Signposts: Medium sized multi color signposts focusing on various products of HSBC are found on the roadsides of various posh areas such as, Gulshan, Dhanmondi, Baridhara, Motijheel, etc.

d)         Mailers: various product updates and new product information are regularly sent to existing customers of HSBC.

e)         Brochures: Various colorful brochures featuring specific products of HSBC are being displayed and distributed to existing and potential customers via branch offices and Mobile sales officers.

These are some of the promotional activities conducted and coordinated by the Marketing department.

4.9 Place Information

HSBC’s five branches are located in:

1. Dhaka Main Office

Anchor Tower, 1/1-B Sonargaon Road, Dhaka 1205

2. Gulshan

House No. SWG-2 (Corner of Road No. 5)

Gulshan Avenue, Dhaka 1212

3. Dhanmondi

House No. 352 ()ld), Road No. 27 (Old)

Dhanmondi, Dhaka 1205

4. Motijheel

1/C Rajuk Avenue, Motijheel C/A, Dhaka 1000

5. Chittagong

Osman Court, 70 Agrabad C/A, Chittagong 4100

There are also three off site booths, which are located in Dhanmondi, Uttara and Shantinogor.

4.10 HSBC’s Contribution to the Society

HSBC is not only maintaining the relationship to its customers and employees but also with the society. It is committed to the community to its (community) development. HSBC always tries to contribute to the society by helping the people who are less fortunate and are deprived of their right.

4.10.1 The Acid Survivors Foundation (ASF)

ASF is an organization established in May 1999 to tackle the problem of acid violence in Bangladesh. ASF works with NGOs, the Government of Bangladesh and the international community to prevent future attacks, to ensure survivors have better access to quality medical care, to provide survivors with better access to Bangladesh’s criminal and legal justice systems, and to assist with the survivors’ rehabilitation-access to education, training for new skills, and finding employment.

HSBC Bangladesh supports the work of the Acid Survivors Foundation in providing medical support and assistance to the victims of this abuse.

4.10.2 Centre for the Rehabilitation of the Paralyzed (CRP)

CRP is the most common institution where HSBC Bangladesh constantly makes donations for different purposes. For example, HSBC Bangladesh organized a painting exhibition of Lovely in the Gulshan office on Thursday, 8th August 2002.

Lovely is a mouth painter and resident of the Centre for the Rehabilitation of Paralyzed (CRP). She has no sensation or muscle power below her neck. She suffered a cervical spinal cord injury as a result of a fall from fourth floor of a building in 1995 when she was about ten years of age. Her treatment at CRP, like that of many other desperately poor people in Bangladesh, was entirely supported by donations. During her treatment at CRP, she developed a fascination in painting pictures and had developed a skill to paint with her mouth.

The proceeds from this Painting Exhibition were donated to the Centre for the Rehabilitation of the Paralyzed (CRP) for the physiotherapeutic treatment, education and occupational development of Lovely and others like her.

4.10.3 Flood Affected Victims

HSBC Bangladesh looks to areas where it can make a difference in the community. Some of the employees came forward to help the flood affected victims in Bangladesh, the Bank too made a contribution to this staff initiative.

4.10.4 Society for the Welfare of the Intellectually Disabled, Bangladesh

Society for the Welfare of the Intellectually Disabled, Bangladesh (SWID, Bangladesh) is a non-government voluntary organization working for the cause of intellectually disabled. It has been established in 1977 by some parents and professionals for children with intellectual disabilities to fill a major gap in the country for their treatment. This charity assists mainly young people and children who are mentally retarded by raising awareness and through 39 schools they run throughout the country. HSBC’s donation is used for educational material for the students.

4.10.5 Bangladesh Protibandhi Kallyan Samity (BPKS)

HSBC in Bangladesh is committed to directly working with these people with disabilities and enabling them to be self-reliant and contributive to society’s development. This charity assists disabled people return to normal life through provision of devices such as wheelchairs. HSBC’s donation will help 62 men; women and children regain their physical independence.

4.10.6 Computers for the students of BUET

A number of used computers and the network devices have been donated to Electrical and Electronic Engineering Department of Bangladesh University of Engineering and Technology (BUET) for demonstrations and laboratory purposes.

4.10.7 British Women’s Association

Women from the British Community in Bangladesh help raise money for various charities. Our donation went towards a Street Party they had arranged for children, Acid Survivors Foundation (ASF), Centre for the Rehabilitation of the Paralyzed (CRP) and the Sreepur Orphanage.

4.10.8 School of Hope

The School of Hope was established in January 1990 with the general aim to provide education to economically disadvantaged children. The school provides nearly free primary education for children living in the slums adjacent to the school. The school has grown from 25-30 students to 125 students, which alone is the testimony of its success.

The school runs mainly on donations among which HSBC in Bangladesh is one of the donors.

A few years back, as it became evident that some children did not get anything to eat before coming to school, the school board decided to start a snack program. The snack program includes the following: milk-everyday, a warm meal-twice a week and a fruit or another kind of snack once a week.

When a child needs medical care, the headmaster usually sends the child to a centre near by. Once a year, the students get a dental check up courtesy of Johnson’s Place Dental Practice. The school pays for students requiring any serious or urgent treatment.

The school has introduced a new library project where donations of books, appropriate for children are welcome. Also every year the school provides warm clothes during winter.

In August 2002, HSBC in Bangladesh took the initiative of computer training classes to those students from the top class at the School of Hope in their training centre at Motijheel office with HSBC volunteers as part of our commitment to help those less fortunate.

Chapter 5: HSBC Bank PLC and Amacis

5.1 From Traditional to Modern Banking

In 1999 HSBC Bank plc launched the first nationally available interactive TV banking service and was also developing an Internet banking offering. HSBC was quick to realize that e-mail and web forms are the natural channels for Internet based customer contact. However, many issues had to be resolved if HSBC was to manage effectively the customer interactions that the new services would generate. Not only would there be extremely large volumes of electronic interactions with these customers, but the bank would need to ensure it maintained high quality customer service. HSBC evaluated a number of e-mail management products and vendors against its requirements. In April 2000 Amacis was chosen as the vendor to provide the customer interaction management application to answer the bank’s needs. The Amacis Visibility product – and the business partnership between Amacis and IBM – impressed the bank. Amacis Visibility met all of HSBC’s non-negotiable system requirements and also exceeded some of its expectations, in particular with regard to scalability and integration with its existing systems.

5.2 Amacis and HSBC

5.2.1 Introduction

HSBC Bank plc is a wholly-owned subsidiary of HSBC Holdings plc. With more than 5,000 offices in 80 countries and territories and assets of US$569 billion at 31 December 1999, the HSBC Group is one of the world’s largest banking and financial services organizations. Through a global network linked by advanced technology, the Group provides a comprehensive range of financial services: personal, commercial, investment and private banking; trade services; cash management; treasury and capital markets services; insurance; consumer and business finance; pension and investment fund management; trustee services; and securities and custody services. In 1999 HSBC Bank plc launched the first nationally available interactive TV banking service and was also developing an Internet banking offering. HSBC was quick to realize that e-mail and web forms are the natural channels for Internet based customer contact. However, many issues had to be resolved if HSBC was to manage effectively the customer interactions that the new services would generate. Not only would there be extremely large volumes of electronic interactions with these customers, but the bank would need to ensure it maintained high quality customer service. The majority of the customer interactions would require responses incorporating data that was stored in existing customer databases. Pulling information from these systems manually would make the large volume of interactions virtually impossible. In addition, with a large financial and intellectual investment in these systems, HSBC didn’t want to replace them. HSBC needed to implement a system in which it could invest full confidence. High accuracy classification, precise distribution and optimization of agent productivity were required to meet this need, in addition to safeguarding the confidentiality and integrity of each customer interaction. Finally, HSBC’s diverse customer base meant that a number of languages needed to be supported. All customers needed to be handled in a consistent fashion regardless of the customer service request language. In short, HSBC realized that it needed a system that integrated the electronic customer service requests that would result from its front-end implementation with its back-end systems, while satisfying a host of other vital requirements. HSBC initiated a search for a message management solution that could satisfy these needs.

5.2.2 System Requirements:

To begin the search for a message management solution, HSBC first endeavored to translate its business problems into a set of system requirements. Weighing their existing infrastructure against the needs of customers using these new channels, the following specification was defined:

5.2.3 Integration and Scalability

1.Platform: The solution had to be portable across multiple platforms in order to support existing and proposed server platforms within both the bank and its contact centers worldwide.

2.Scalability: The solution had to be capable of handling the considerable volume of interactions anticipated from both TV banking and Internet banking initiatives.

3.Integration: The solution had to integrate with HSBC’s existing customer systems, databases and other applications rather than demanding the replacement of these systems.

5.2.4 Functionality

1. Classification and Routing:

The solution had to demonstrate a high degree of precision (the degree to which the system returns correctly categorized responses) and recall (the degree to which the system returns a complete set of responses) in order to provide accurate classification and skills based routing functionality.

2. Security:

The product had to provide an infrastructure that would guarantee secure customer interaction.

3. Multilingual Support:

The solution had to support multiple languages allowing for the probability of global roll-out.

4. Management Features:

Various features that allowed HSBC to monitor and manipulate existing electronic requests including real-time monitoring and system alert functionality.

5. Administration Features:

 Requirements included service level parameter setting, system back-up and archive scheduling, template management and routing policy set-up.

5.2.5 Vendor Company Issues

1. Vendor background:

The solution vendor required reputable references to ensure the highest quality not only of the technology but also of the vendor’s project management team.

2. Understanding of issues:

The vendor would be judged on its understanding of the various issues regarding message management within the bank.

3. Flexibility:

The vendor was required to be flexible enough to work with HSBC to resolve any issues that may arise during the course of the project.

4. Implementation:

The solution required a rapid implementation time.

5.2.6 The Vendor Selection

HSBC evaluated a number of e-mail management products and vendors against its requirements. In April 2000 Amacis was chosen as the vendor to provide the customer interaction management application to answer the bank’s needs. The Amacis Visibility product – and the business partnership between Amacis and IBM – impressed the bank. Amacis Visibility met all of HSBC’s non-negotiable system requirements and also exceeded some of its expectations, in particular with regard to scalability and integration with its existing systems. “It wasn’t a difficult decision to make,” said John Rendle, Internet Services Manager at HSBC, “in the end it came down to technology. The IT view was that the Amacis Solution was truly scalable and a good fit for our architecture.” Amacis CEO, Tom Montgomery was delighted with the outcome, “Amacis Visibility was designed with this kind of organization in mind. HSBC made the right decision, realizing that our product was the only solution that would meet its current needs, and could also scale up to its future global requirements. Amacis Visibility’s connectivity features mean that HSBC can maximize current investment in their existing IT infrastructure.” He continued, “In addition to the product advantages, HSBC was attracted to our personal customer approach. Amacis sees its customer partnerships as paramount. We listened to their needs, providing HSBC with a solution to fit their core requirements and also tailoring the product to best fit their wants.” Lee Longhurst, Manager of Internet Systems at HSBC concurred, “It was the only product that could handle the message volumes we proposed. We knew that Amacis would be flexible enough to provide a solution for our needs on a timely basis.”

5.2.7 The Project

Amacis began implementing Amacis Visibility in May 2000, over a period of six weeks. HSBC intends to roll out the new service in 3 key stages. Each phase will allow time for agents and administrators to come up to speed with the new skills required for e-mail response management and will enable web administrators to optimize the service.

Phase 1: A number of specific web forms to cover technical support and feedback for Internet Banking Customers.

Phase 2: E-mail support for customers of specific business units in the Commercial sector.

Phase 3: Will offer management of secure, authenticated, free format messages delivered through Internet Banking.

HSBC has no doubt that it will be a global leader in Internet banking – embracing pervasive computing developments such as digital TV. The bank will be rolling out Internet banking in other key geographies and will implement Amacis interaction management as a key component of its Internet proposition.

5.2.8 About Amacis Ltd.

Amacis Ltd, the e-channel and m-channel management company is a leading provider of customer relationship management software that transforms the way global enterprises manage customer interaction. Amacis offers a unified e-channel and mobile-channel management environment called Amacis Visibility. An Amacis solution allows traditional brick-and-mortar companies and e-business enterprises to maximize customer retention and profitability, through provision of the most scalable and secure customer interaction management environment available. Amacis manages all forms of Internet-based customer contact consistently across a variety of channels and integrates with other corporate customer systems and call centre operations. With its main R&D facility in Belfast, Northern Ireland, Amacis also has offices near London and its US headquarters are in Boston, MA.

5.2.9 News Release

Below provided is the news release through which HSBC PLC declared that they have chosen Amacis as their business partner:

AMACIS SELECTED AS eCRM SOLUTION OF CHOICE FOR HSBC

Amacis and IBM implement strategic solution for customer interaction management in one of the world’s largest banking and financial services organizations BOSTON, MA, August 14, 2000– Amacis, Inc., the only company to provide global-class solutions for customer interaction management, today announced that it has been chosen by HSBC to implement its Amacis Visibility solution. HSBC Group’s international network comprises more than 5,000 offices in 80 countries and territories, including APAC, EMEA and the Americas. This implementation by Amacis and IBM will allow HSBC to build better relationships with its online customers by directly managing all forms of electronic interactions. Amacis was selected by HSBC specifically for its e-suite’s scalability, portability across multiple platforms and ability to integrate with the bank’s existing customer systems. In addition, HSBC saw the strengths of Amacis and IBM’s relationship as a significant factor that impressed them relative to Amacis’ offering. HSBC was quick to realize the need for a strategic customer relationship management solution as it brought its services online, and selected Amacis in an open bid. HSBC has already implemented within the UK and will use Amacis Visibility to support all of its customer interactions that are anticipated from digital television, Internet and wireless banking initiatives. The ability of Amacis Visibility to handle large volumes of customer interaction coupled with the e-suite’s language capabilities meant that it was robust enough for HSBC’s highly distributed environment. “It was the only product that could handle the message volumes we proposed,” said Lee Longhurst, Manager of Internet Systems at HSBC. “We knew that Amacis would be flexible enough to provide a solution for our needs on a timely basis.” HSBC needed to implement a system in which it could invest full confidence. High accuracy classification, precise distribution and optimization of agent productivity were required to meet this need, in addition to safeguarding the confidentiality and integrity of each customer interaction. “Amacis Visibility was designed with this kind of organization in mind,” said Tom Montgomery, CEO, Amacis Inc. “HSBC made the right decision realizing that our product was the only solution that would meet its current needs, and could also scale up to its future global requirements. In addition to Visibility’s product advantages, HSBC was attracted to our personal custom approach. Amacis sees its customer partnerships as paramount. We listened to their needs, providing HSBC with a solution to fit their core requirements as well as further tailoring the product to best fit with their business.” Amacis began implementing Amacis Visibility in May of 2000, over a period of six weeks, meeting HSBC’s need for rapid implementation. The product integrates with HSBC’s existing customer systems, databases and other applications, protecting its financial and intellectual investment in these systems. Amacis stood out from the competition by providing a strategic enterprise solution, rather than a small tactical one.

 Chapter 6:  Amacis and HSBC Bangladesh

Figure 6.1: Location of HSBC DAK

6.1 How It Began

In this year, the CEO of HSBC Bangladesh, advised the marketing and public relations department to partially implement the Amacis Visibility solutions for the customers. In Bangladesh, internet banking has not been introduced by HSBC. However, marketing through sending e-mail messages is a viable option. HSBC mainly operates in the upper end of the market, that is, customers who are able to deposit higher amounts are targeted. It is quite logical to believe that at least half of the customers of HSBC have their own e-mail addresses. The Marketing and PR department of HSBC Bangladesh expects that it can get high response from its existing customer base, through sending them e-mail information regarding new products and services. These messages will tell the customers how to get the most out of their existing product subscriptions, as well as how availing new services will enhance their wealth.

The interns of HSBC’s marketing department have been assigned the task of building the e-mail database of the customers of HSBC. Way back in 1996, not many people had e-mail addresses in Bangladesh. Thus the e-mail addresses had not been collected from the customers then. Equipped by the home and office phone numbers of those customers, the researchers will collect the e-mail addresses from the customers, in a polite and professional manner. After collection e-mail addresses, e-mail messages will be sent. Amacis has all the ability of managing this campaign. Once all the e-mail addresses are inputted in the software, it starts working. It sends the e-mails. It can also track how many person received the messages, how many of them read it, how many of them deleted it without opening, etc. information. This information is critical in judging the performance of the campaign.

Though Amacis Visibility 2 provides a spectrum of facilities and options, HSBC Bangladesh has opted for the email campaign option. The project has been assigned to the GPA (Group Public Affairs) or Marketing and Public Relations department, as already mentioned. The IT (Information Technology) department is providing the technical support for this project. HSBC Bangladesh is using a shared version of the software. HSBC PLC procured a version of the software which’s license enables its Bangladeshi concern to use the software without incurring additional costs. Before launching the campaign, the Marketing department had to consider many factors.

6.2 The Email Marketing Process

The email marketing process of HSBC Bangladesh has been divided into three phases.

These are:

1. The Preliminary Phase

2. The Interim Phase

3. The Final Phase

6.3 The Preliminary Phase

In the preliminary phase, all the details of the campaign are finalized. No email is sent during this phase. HSBC Bangladesh went through the following steps in this phase:

1. Key strategy formulation

2. Choosing the tools

3. Writing an eye-catching copy

4. Following up effectively

5. Starting an Ezine or Newsletter

6. Complementing the email messages with links to website resources

7. Including unsubscription/remove from mail list option in the mail message

8. Choosing the Appropriate Software for Sending Automated Email messages

6.3.1 Key Strategy Formulation

Here are some key strategies adopted by HSBC for their email marketing campaign:

1) Developing powerful benefits packed sales letters and ads for the products

HSBC plans to write the email messages in a way so that it clearly indicates the key benefits of the discussed products.

2) Continuously comparing email marketing with other forms marketing

HSBC plans to monitor the effectiveness of the campaign, continually, by comparing it with other traditional means of marketing. However, this will only be effective if the customers can buy their products online. If a customer clicks on a link provided in an email, and eventually ends up availing a new product or services, that can be treated as a success of the campaign.

3) Building and marketing towards the contact database and then following up

HSBC has to make sure that only interested people are included in the email database. If someone is not willing to receive promotional offers through emails, he or she should be removed from the mailing list. The other things that HSBC are planning to do are:

• Offering and advertising free reports and other information
• Following up systematically and consistently with the contacts.
• Writing articles that appeal to the target market
• Providing great content and information which are valuable for the contacts.
• In the sales letters and follow-up, providing hyperlinks so that contacts can be driven back to the web site and order forms

4) Know who the target market is and working hard to find them

Currently, only the existing customers of HSBC are being included in the mailing list. However, there are many other people who are interested in the different products and services offered by HSBC. HSBC should work hard to trace out these people. Similarly, the uninterested people should be immediately removed from the mailing list.

6.3.2 Choosing the tools

The types of tools that are required for launching a typical email marketing campaign are:

• Follow-up Auto responders
• Secure Ordering Pages
• Email Marketing Software
• Web Page Designer Software

Auto responders are software program, which reply to email messages, through an objective judgment of the email content. That is, it has a list of certain words in it—in order to describe certain customer attitudes. If the program sees “don’t send”, “useless”, “I don’t want”, etc. phrases in the emails sent by a customer, the program will assume that the customer is not satisfied with the emails sent to him. It will then remove that respondent from the mailing list. However, there are ample chances of errors in such an automated system, due to the fact that human beings use the same words to describe different matters. Moreover, email marketing is still a test case in Bangladesh. HSBC does not want to use Auto responders, at this moment. HSBC wants to maintain a personalized touch in this phenomenon.

Secure ordering pages are very crucial for the success of an email marketing campaign. If a customer cannot order the products and services offered in the email messages in a secured manner, he or she will never feel confident about any such approaches. HSBC Bangladesh gets most of its web resources from HSBC group head quarters. Thus the security issue is taken care of by world class experts, who have the experience of handling online banking transactions for a long time.

The email marketing software is very important. HSBC went through a lengthy research procedure before selecting Amacis Visibility 2 as the appropriate software for this campaign. The decision for HSBC Bangladesh was easy—as the group is using this software, they did not have to look elsewhere. The reasons for selecting Amacis have already been discussed in another part of this paper.

The web page of HSBC Bangladesh (http://www.hsbc.com.bd) is the heart of the email marketing campaign. Every email message contains some links to the different sections of this site. The software used for designing this site was selected after taking advices from the concerned authorities. Only globally accepted and licensed, full version software had been used in the designing process. The web content was mainly created in html (Hyper Text Markup Language), using Notepad™ as the editor. The graphics and images were created by Macromedia Flash™ and Adobe Photoshop™, as well as Adobe Illustrator™.

6.3.3 Writing the Copy

Copy writing is a creative process. This requires imagination, creativity, as well as in depth knowledge of the subject matter. All the members of the marketing department sit down, and decide upon the copy before converting it into an email message. During writing the copy, they seek advice from the product team of HSBC. Their input is of immense value, because they are the creative brains behind the product.

6.3.4 Effective Follow Up

Following up is often the toughest task in email marketing. Many email addresses will bounce back, some emails won’t be sent at all, and to make things worse, some customers will send replies to the sent mails! To make the campaign truly effective, HSBC needs to find out why some mails are bouncing back. There might be a number of reasons behind bounced back email messages:

Firstly, if the address is invalid

Secondly, if the user has exceeded his mailbox size

Thirdly, if the address has become inactive

If the address is invalid, HSBC can ask the owner of the address to provide an updated email address. The same measure can be taken for inactive email addresses. However, for the second case, HSBC cannot do much. The main problem regarding bounced back mails is that it is almost impossible to know why the mail bounced.

6.3.5 Starting an Ezine or Email Newsletter

The email marketing campaign can be further enhanced by starting an email newsletter. This way HSBC can let the customers know more the bank itself. This could work as a welcome change for the customers who would get bored by viewing product information, on an on. Currently, HSBC has a newsletter that is printed out and sent to every customer via courier. The software version of this newsletter can be sent to the users via email.

6.3.6 Complementing the email messages with links to website resources

This point has already discussed in the strategy formulation part. HSBC intends to include links in the email messages, so that the users can seek further information on the products. As an example: the email about HSBC’s “Day & Night Banking” included basic information about the whole service package, but it only had links for each of the different services (ATM Card, EasyPay Machine, etc.). The user can get more information on each components of the service package by clicking on the links. This is done with the intention that after the user has seen the particular page, he or she might like to browse the other pages of the website as well. Thus the marketing objective will be further enhanced.

6.3.7 Including unsubscription/remove from mail list option in the mail message

This is a very critical option. The customers do reserve every right of opting not to receive any promotional mails. Thus an “Unsubscribe” option should be included with every email message sent. This will ensure customer satisfaction, which is in the top priority list of HSBC.

6.3.8 Choosing the Appropriate Software for Sending Automated Email messages

This topic has been thoroughly discussed in the previous chapter.

6.4 The Interim Phase

In the interim phase, the customer database is created. There were several criterions for this process. There are different types of account holders at HSBC. Some are:

a) Power Vantage Account Holder (PVA)

b) Corporate Employee Privileged Scheme (CEPS) Account Holder

c) Non-Ceps/Normal Account Holder

The PVA customers have the highest deposits in the bank. To become a PVA account holder, one has to deposit at least 5 lac Taka in HSBC. These customers were approached first. Then gradually CEPS, CEPS with account balance above 50 thousand, CEPS below 50 thousand taka, Non-CEPS above 50 thousand and finally Non-CEPS below 50 thousand balance customers were approached. The customers were approached through telephones, both land and mobile. The guidelines for approaching customers were:

a) Try not to say or do anything that might dissatisfy the customer

b) Do not ask any irrelevant question

c) When calling at someone’s home, apply extra caution

d) If a person could not be reached after calling at the same number twice, that particular number should be leaved alone

e) If a person did not provide a local number, he or she would not be contacted

f) Customer’s of Chittagong will not be contacted

g) If the customer asked for any information during the collection process, the researchers were advised to forward them to the concerned departments

These guidelines were strictly followed during the interim phase. This ensured that customer satisfaction levels would not go down. After 1,000 customers were contacted, the information was inputted into computers. Two databases were actually made, from this data. The second database is a derivative of the first one, and it is required for the third phase. The following information was included in the first database:

1. Serial Number

2. Branch Code

3. Name of the Customer

4. Email Address

5. Home Telephone Number

6. Office Telephone Number

The final database looked like the one provided below:

The serial number is an arbitrary number assigned for each customer. There were repetitions, because every new list started from 1. The lists were based on the type of account and average balance, as already mentioned.

The branch code denotes in which branch the customer opened his account.

1 means the account had been opened in HSBC DAK, the Head Office of HSBC Bangladesh at Sonargaon Extension Road

2 means the account had been opened in HSBC DMO, the Dhaka Motijheel Office

3 means the account had been opened in HSBC DGU, the Gulshan Branch

4 means the account had been opened in HSBC CHG, the Chittagong Branch

5 means the account had been opened in HSBC DHA, the Dhanmondi Branch

At first the researchers were provided with secondary data, which included at least these two data, the branch name and the name of the account holder. The rest information— employee name, email, home telephone number and office telephone number were provided for some accounts, while some were not. The objective was to make sure that the column “email” did not have any blank entry. Only five types of entries were given into this column. These were:

1. Email address

2. N/A (Not Available)

3. UNR (Updated Number Required)

4. TNR (Telephone Number Required)

When a customer could not be found in any of the provided phone numbers, or when all the provided number are overseas numbers or number of other districts of Bangladesh, the entry would be “UNR”, which means that an updated phone number for that customer is required

When no telephone number was provided for a particular customer, the entry would be TNR, which means a telephone number is required.

If the customer declined to disclose his or her email address, or a customer did not have an email address, the entry would be N/A or Not Available.

During the interim phase, daily results were calculated and strictly monitored. The average expected efficiency was fifty percent. Efficiency was calculated through using the following formula:

Efficiency=           Total Number of Emails Collected   × 100

                                           Total Attempts

Where total attempts = N/A + UNR + TNR + Email

On 21st July,

Total Number of Emails Collected were: 198

Total Attempts were: N/A (41) + UNR (16) + TNR (5) + Email (198) = 260

Efficiency = 198/260 × 100 = 76.15 %

Shown below is part of a result sheet:

On Thursdays the number of email addresses was comparatively lower, because, on Thursday the researchers would work half day, from 9 AM to 2: 30 PM, compared to 5:30 PM on other days of the week. After all the lists had been completed, the final phase starts.

6.5 The Final Phase

This phase begins with the creation of the second database. This database is called the “Name & Email database”.  This database was created from the database created in the previous phase. The first database had six columns. The second database had only two columns; the name and email column. There were some criteria for this database. These were:

1. There should be only one name for each email entry.  If two or more customers had a joint account, only one person’s name had to be used.

2. Customer names cannot include these signs: . (period) , (comma) & (ampersand) – (dash) \ (slash) / (back slash) ` (quote sign) etc.

3. Only one email address had to be used for a customer, even if he or she has multiple email accounts.  As a rule of thumb, the web mail addresses were preferred over the ISP (e.g. someone@yahoo.com is preferred over someone@agni.com) accounts, because people are prone to changing ISPs every now and then.

The first two criterions are the requirements of the software, Amacis. If a name entry includes any of the forbidden signs, that particular entry will not be counted by Amacis.

After creating the Name & Email database, all the entries are saved in a CSV file (Microsoft Excel Comma Separated/Delimited File). This CSV document is then inputted into Amacis Visibility2™. Amacis analyzes all the entries, and deletes the duplicate entries. An entry is a duplicate entry; if another entry exists with the same name (same spelling of name) and same email address. However, sometimes people with same name can have the same email address. The CEPS account holder often prefer to use their organization’s email address, and it is not very unusual to find two people with the same name in a large organization. This problem would not occur, if a third variable could be added into Amacis, e.g. home phone number, or home address.

After creating the CSV file, the email message is created. The messages are usually a combination of text and graphics. The text is in html format, and the image is usually in JPEG format. Usage of the compressed image format JPEG keeps the mail size minimal. Using html enables HSBC to include hyperlinks within the mails. The significance of hyperlinks has already been discussed.

Once the email message is finalized, the campaign supervisor has to run a dummy campaign. Some local and overseas staffs of HSBC are sent the email message through Amacis. If everything runs smoothly, the CSV file is fed into Amacis. Then Amacis sends emails to the customers. Amacis provides instant statistics regarding the campaign. The campaign results are saved in the HSBC’s group intranet. Authorized personnel can download and view the results by using an appropriate user ID and password.

Chapter 7: Analysis of Campaign Results

7.1 Email Campaigns at HSBC

Till now, HSBC’s marketing department has conducted two email marketing campaigns. Another campaign is on the way. The first campaign was regarding the monthly interest bearing time deposit scheme. This campaign was codenamed MITD. The second campaign was regarding “Day and Night Banking”, the latest service package offered by HSBC. This campaign was code named DAY.

7.2 Campaign Results

The results of both the campaign are given below:

Eighteen thousand (18,000) customers were approached, during the research phase of the campaign. Out of these 18,000 customers, 9604 customers provided their email addresses. The rest 8396 entries had to be marked “N/A”. It has already been discussed in sections 1.5 and 6.4, for what reasons an entry has to be termed as N/A.

The following table and chart shows the email collection results, in brief:

Email Address Collection Results

Figure 7.1: Email Addresses Versus N/A Entries

7.3 Statistical Analysis of Results

The researchers had to work with a sample of all the customers of HSBC Bangladesh. The population consists of all thirty five thousand customers of HSBC. For this reason, direct inferences cannot be made, from the obtained results. Although the sample was quite big, it cannot be said that HSBC’s 53% customers have email addresses. Thus we have to apply statistical analysis in order to get some reliable inferences.

7.4 Sample Size Determination

Stratified Sampling Technique will be used for determining the sample for this research. The total population of 18,000 customers will be divided into nine stratums. Each stratum contains 2000 entries. From these 9 stratums, stratum 2 (entries 2000-4000) is selected through lottery. Now a sample of 50 will be determined from this stratum using SRS (Simple Random Sampling).

The 50 entries are:

2236, 2413, 3757, 2891, 3263, 2933, 2967, 2597, 3997, 3685, 2138, 3236, 2700, 3306, 2059, 2641, 2559, 2252, 3336, 3378, 2242, 2883, 3906, 2566, 2988, 3327, 2420, 2643, 2642, 3099.

The values obtained from these entries will be used in all statistical inferences.

After analyzing the values, the following results were obtained:

7.5 Hypothesis Testing

Hypothesis testing is an effective statistical tool. It is a very popular marketing research tool. There are eight steps involved in this process.

7.5.1 Formulating the Hypothesis

The null hypothesis for this test is:

H₀ : Most customers of HSBC do not have an email address

The alternative hypothesis for this test is:

H_a : Most customers of HSBC have an email address

Thus the appropriate formulation for the hypotheses is as below:

H₀ : π ≤ 0.50

H_a : π ≥ 0.50

7.5.2 Selecting an Appropriate Test

As the sample size n>30, the appropriate test here will be z test.

z= p – π/ σ_p

Where σ_p² = π(1- π).n^-1

7.5.3 Choosing Level of Significance

Level of significance is denoted by α. The α for this test is 5%, which means 5% error levels will be tolerated, and the confidence interval is 95%.

7.5.4 Determination of Sample Size and Calculating the Value of Test Statistic

Sample Proportion p = 13/30 = 0.433

σ_p² = π(1- π).n ^-1

      = .5(1-.5).(30) ^-1

σ_p =   0.091

thus z = p – π/ σ_p

          = (.433-.5)/ 0.091

          = -0.734 = -0.74 (approx)

7.5.5 Determining The Probability 

Using standard normal tables, the probability of obtaining a z value of -0.74 can be calculated.

Figure 7.2: Hypothesis Testing

The lined area between –infinity and -0.74 is 0.2296 (0.5-0.2704). Therefore, the shaded area to the right of z= -0.74 is 0.2704 + 0.5 = 0.7704

7.5.6 Comparing the Critical Value and Making the Decision.

Here, the probability of getting a p value of 0.433 is 0.2296, which is lower than the level of significance (0.5).

Thus we can reject the null hypothesis.

Here probability of TS_CAL (0.2296) < significance level (0.5)

Final Decision: Most Customers of HSBC Have an Email Address

7.5 Chi Square Test

The chi-square statistic (χ2) is used to test the statistical significance of the observed association in a cross-tabulation. The following two-factor cross table will be used for this test:

Mail Subject Line and Mail Opening Rate

Note: For both campaigns. 2000 mails were bounced back. That category has been overlooked for this test.

Now,

f_e = n_rn_c/n

Where f_e = Expected cell frequency

            n_r = total number in row

            n_c = total number in the column

            n   = total sample size

For the data in the table, the expected frequencies for the cells, going from left to right and from top to bottom are:

Then the value of χ2 is calculated as follows:

χ2 = ∑_{all cells}(f₀-f_e)² ¸ f_e

f₀ here is the observed value for each cell

For the data in the table, the value of χ2 is calculated as:

χ2 = {(2219 – 2400.5)² ¸ 2400.5} + {(5382-5200.5) ² ¸ 5200.5} + {2582 – 2400.5) ² ¸ 2400.5} +

         {(5019-5200.5) ² ¸ 5200.5}

      = 13.72 + 6.33 + 13.72 + 6.33

      = 40.1

Now, for this chi square test, the null hypothesis is that there is no association between people’s tendency to open email messages and the subject line of the mail.

In order to accept or reject this hypothesis, we need to determine the degrees of freedom

Degrees of freedom (df) = (r-1) ´ (c-1)

Here, r= number of rows and c=number of columns

Thus df= 1´1 = 1

The critical value = 3.841 (for df =1 and level of significance 0.5)

The calculated value = 40.1

T_cal (40.1) > T_theory (3.841)

Thus, the null hypothesis of no association cannot be rejected indicating that the association is not statistically significant at the .05 level.

Final Decision: There Is No Association Between The Subject Line of The Email Messages,

                          and Viewing Tendency

7.6 Statistical Findings

From the first test, we found out that most HSBC customers have an email address. This means that it is actually feasible to run more email marketing campaigns in the future. If most customers did not have email addresses, running an email campaign would be too expensive and less results bearing.

From the second test, we found out that the subject of the email messages do not play a significant role in motivating people to open the email. It can be assumed that people open the emails because they are sent from HSBC. People do not open the emails because they are interested about MITD or Day and Night Banking—they open them because the messages are from HSBC. This is an alarming fact for HSBC, because after some time people will realize that the mails sent from HSBC contains only product information, and therefore is not important. They will then simply delete the messages, as soon as they realize that they have been sent from HSBC.  In order to change this situation, HSBC has to make the email messages more informative. Ways of improving the quality of the messages has already been discussed in another part of this report.

7.7 Other Findings

From this table, we can get the following data:

34.75% People Responded to The Day & Night Campaign, by clicking on the links for additional information

41.9% People  Responded to The Day & Night Campaign, by clicking on the links for additional information

This data is true for those people who opened the email messages. Thus, this data cannot be used for making conclusions. Out of 2219 people (23.11% of the population that has email addresses), 34.75% clicked on the links. Thus the effect created by the email messages is quite poor. As most people did not even bother to open the emails, the justification of the entire campaign comes under question. There are also a high number of bounced back emails. This matter can be resolved by double checking with the customers, and updating the database once more. The only ray of hope for HSBC is that most of their customers have email addresses. They need to increase the value of the email messages sent. The email message should bear some value for the customers instead of providing raw facts.

Chapter 8: Culmination

8.1 Recommendations

After completing the research, the researcher has came up with a number of recommendations for making email marketing campaign more successful. These are:

1. Whenever a customer opens an account, he should provide his email address in the account opening form.

2. Customers should be asked whether they want to receive email messages or not

3. The email address collectors should be trained extensively, so that their actions do not result in any dissatisfied customer

4. In order to decrease costs, only land phone lines should be used in collection

5. Email databases should be checked manually, and “same name, same email address” cases should be carefully analyzed

6. Similar name entries should be differentiated by using variants and shortened forms of one’s name, e.g. Mesbah Ur Rahman can be written as M U Rahman, Mesbah U Rahman, etc.

7. More people should know how to operate and use Amacis, so that absence of a certain individual does not harm the campaigns

8. Customers replies should be read and acted upon accordingly

9. Customer requests for removal from the list should be fulfilled within the shortest possible time

10. Customer requests for additional information should also be fulfilled within the shortest possible time

11. The value of the email messages should be enhanced by providing discount coupons, raffle draw tickets, critical information, new investment opportunities, etc.

12. People who click on the links should be treated in a special way, both in the web site and through future email messages. This can be implemented by using “cookies”.

8.2 Conclusion

Email marketing is still an experimental case for HSBC. Although there is a gulf of difference between expected results and the actual scenario, the future seems bright for email marketing. More than 50% of HSBC’s customers have an email address, which is quite amazing. Although  we are reportedly going through a large scale IT adoption process, the usage of internet is quite low in the corporate context. If HSBC can create maximum value within their concise email messages, they might remarkably improve their sales and eventually they may end up with a higher market share. No other bank is pursuing email marketing at the moment, which is a great opportunity for HSBC. Whether HSBC can capitalize on this opportunity or not, will depend largely on the clever execution of the campaigns.

The End