Customer service is the provision of service to customers before, during and after a purchase. According to Turban et al.

(2002),[1] Customer service is a series of activities designed to enhance the level of customer satisfaction that is, the feeling that a product or service has met the customer expectation." Its importance varies by products, industry and customer; defective or broken merchandise can be exchanged, often only with a receipt and within a specified time frame. Retail stores will often have a desk or counter devoted to dealing with returns, exchanges and complaints, or will perform related functions at the point of sale; the perceived success of such interactions being dependent on employees "who can adjust themselves to the personality of the guest,"[2]according to Micah Solomon quoted in Inc. Magazine. From the point of view of an overall sales process engineering effort, customer service plays an important role in an organization's ability to generate income and revenue.[3] From that perspective, customer service should be included as part of an overall approach to systematic improvement. A customer service experience can change the entire perception a customer has of the organization. Some have argued[4] that the quality and level of customer service has decreased in recent years, and that this can be attributed to a lack of support or understanding at the executive and middle management levels of a corporation and/or a customer service policy. To address this argument, many organizations have employed a variety of methods to improve their customer satisfaction levels, and other KPIs.[citation needed]

Contents
[hide] 1 Customer support 2 3

4 5

[edit] Customer support

Main article: Customer support Customer support is a range of customer services to assist customers in making cost

effective and correct use of a product.[5] It includes assistance in planning, installation, training, trouble shooting, maintenance, upgrading, and disposal of a product.[5] Regarding technology products such as mobile phones, televisions, computers, software products or other electronic or mechanical goods, it is termed technical support.

[edit] Automated customer service

Customer service may be provided by a person (e.g., sales and service representative), or by automated means. Examples of automated means are Internet sites. An advantage with automated means is an increased ability to provide service 24-hours a day, which can, at least, be a complement to customer service by persons.[6] However, in the Internet era, a challenge has been to maintain and/or enhance the personal experience while making use of the efficiencies of online commerce. Writing in Fast Company, entrepreneur and customer systems innovator Micah Solomon has made the point that "Online customers are literally invisible to you (and you to them), so it's easy to shortchange them emotionally. But this lack of visual and tactile presence makes it even more crucial to create a sense of personal, human-to-human connection in the online arena."[7] Automated means can be based entirely on self service, but may also be based on service by more or less means of artificial intelligence.

An automated online assistant with avatar providing automated customer service on a web page. Examples of customer service by artificial means are automated online assistants that can be seen as avatars on websites.[6] It can avail for enterprises to reduce their operating and training cost.[6] These are driven by chatterbots, and a major underlying technology to such systems is natural language processing.[6]

[edit] Instant feedback

Recently, many organizations have implemented feedback loops that allow them to capture feedback at the point of experience. For example, National Express, one of the

UK's leading travel companies invites passengers to send text messages whilst riding the bus. This has been shown to be useful as it allows companies to improve their customer service before the customer defects, thus making it far more likely that the customer will return next time.[8] Technology has made it increasingly easier for companies to obtain feedback from customers. Community blogs and forums give customers to give detailed explanations of both negative and positive experiences with an organization. A challenge working with customer service is to ensure that you have focused your attention on the right key areas, measured by the right Key Performance Indicator. There is no challenge to come up with a lot of meaningful KPIs, but the challenge is to select a few which reflects your overall strategy. In addition to reflecting your strategy it should also enable staff to limit their focus to the areas that really matter. The focus must be of those KPIs, which will deliver the most value to the overall objective, e.g. cost saving, service improving etc. It must also be done in such a way that staff sincerely believe that they can make a difference with the effort. One of the most important aspects of a customer service KPI is that of what is often referred to as the "Feel Good Factor." Basically the goal is to not only help the customer have a good experience, but to offer them an experience that exceeds their expectations. Several key points are listed as follows: 1. Know your product Know what products/service you are offering back to front. In other words be an information expert. It is okay to say "I don't know," but it should always be followed up by "but let me find out" or possibly "but my friend knows!" Whatever the situation may be, make sure that you don't leave your customer with an unanswered question. 2. Body Language/Communication Most of the communication that we relay to others is done through body language. If we have a negative body language when we interact with others it can show our lack of care. Two of the most important parts of positive body language are smiling and eye contact. Make sure to look your customers in the eye. It shows that we are listening to them, not at them. And then of course smiling is just more inviting than someone who has a blank look on their face. 3. Anticipate Guest Needs Nothing surprises your customer more than an employee going the extra mile to help them. Always look for ways to serve your customer more than they expect. In doing so it helps them to know that you care and it will leave them with the "Feel Good Factor" that we are searching for.

Performance indicator
From Wikipedia, the free encyclopedia (Redirected from Key Performance Indicator) Jump to: navigation, search It has been suggested that this article or section be merged with performance metric.

(Discuss) Proposed since October 2010. A Performance Indicator or Key Performance Indicator (KPI) is an industry jargon term for a type of Measure of Performance.[1] KPIs are commonly used by an organization to evaluate its success or the success of a particular activity in which it is engaged. Sometimes success is defined in terms of making progress toward strategic goals,[2] but often, success is simply the repeated achievement of some level of operational goal (zero defects, 10/10 customer satisfaction etc.). Accordingly, choosing the right KPIs is reliant upon having a good understanding of what is important to the organization. 'What is important' often depends on the department measuring the performance - the KPIs useful to a Finance Team will be quite different to the KPIs assigned to the sales force, for example. Because of the need to develop a good understanding of what is important, performance indicator selection is often closely associated with the use of various techniques to assess the present state of the business, and its key activities. These assessments often lead to the identification of potential improvements; and as a consequence, performance indicators are routinely associated with 'performance improvement' initiatives. A very common method for choosing KPIs is to apply a management framework such as the Balanced scorecard.

Contents
[hide] 1 Categorization of indicators 2

3 4

4.1 Marketing 4.2 4.3 4.4

4.5 5 Problems 6

[edit] Categorization of indicators

Key Performance Indicators define a set of values used to measure against. These raw sets of values, which are fed to systems in charge of summarizing the information, are called indicators. Indicators identifiable as possible candidates for KPIs can be summarized into the following sub-categories

Performance measurement
From Wikipedia, the free encyclopedia (Redirected from Measure of Performance) Jump to: navigation, search This article is written like a personal reflection or essay and may require cleanup.

Please help improve it by rewriting it in an encyclopedic style. (October 2010) Performance measurement is the process whereby an organization establishes the parameters within which programs, investments, and acquisitions are reaching the desired results.[1]

Performance Reference Model of the Federal Enterprise Architecture, 2005.[2] This process of measuring performance often requires the use of statistical evidence to determine progress toward specific defined organizational objectives.

Contents
[hide] 1 The reason for measuring performance 2 3 4

5 6

[edit] The reason for measuring performance

Fundamental purpose behind measures is to improve performance. Measures that are not directly connected to improving performance (like measures that are directed at communicating better with the public to build trust) are measures that are means to achieving that ultimate purpose (Behn 2003).

Behn 2003 gives 8 reasons for adapting performance measurements: 1. To Evaluate how well a public agency is performing. To evaluate performance, managers need to determine what an agency is supposed to accomplish. (Kravchuk & Schack 1996). To formulate a clear, coherent mission, strategy, and objective. Then based on this information choose how you will measure those activities. (You first need to find out what are you looking for). Evaluation processes consist of two variables: organizational performance data and a benchmark that creates a framework for analyzing that data. For organizational information, focus on the outcomes of the agencys performance, but also including input/ environment/ process/ output- to have a comparative framework for analysis. It is helpful to ask 4 essential questions in determining organizational data: Outcomes should be directly related to the public purpose of the organization. Effectiveness Q: did they produce required results (determined by outcomes). Cost-effective: efficiency Q (outcome divided by input). Impact Q: what value organisation provides. Best-practice Q: evaluating internal operations (compare core process performance to most effective and efficient process in the industry).

As in order for organization to evaluate performance its requires standards (benchmark) to compare its actual performance against past performance/ from performance of similar agencies/ industry standard/political expectations. 2. To Control How can managers ensure their subordinates are doing the right thing. Today managers do not control their workforce mechanically (measurement of time-andmotion for control as during Taylor) However managers still use measures to control, while allowing some space for freedom in the workforce. (Robert Kaplan & David Norton) Business has control bias. Because traditional measurement system sprung from finance function, the system has a control bias. Organisation create measurement systems that specify particular actions they want execute- for branch employess to take a particular ways to execute what they wantbranch to spend money. Then they want to measure to see whether the employees have in fact taken those actions. Need to measure input by individual into organisation and process. Officials need to measure behavior of individuals then compare this performance with requirements to check who has and has not complied. Often such requirements are described only as guidelines. Do not be fooled. These guidelines are really requirements and those requirement are designed to control. The measurement of compliance with these requirements is the mechanism of control. 3. To Budget Budgets are crude tools in improving performance. Poor performance not always may change after applying budgets cuts as a disciplinary actions. Sometimes

budgets increase could be the answer to improving performance. Like purchasing better technology because the current ones are outdated and harm operational processes. So decision highly influenced by circomstance, you need measures to better understand the situation. At the macro level, elected officials deciding which purpose of government actions are primary or secondary. Political priorities drive macro budgetory choices. Once elected officials have established macro political priorities, those responsible for micro decisions may seek to invest their limited allocation of resources in the most cost-effective units and activities. In allocating budgets, managers, in response to macro budget allocations (driven by political objectives), determin alloactions at the micro level by using measures of efficiency of various activities, which programs or organisations are more efficient at achieving the political objectives. Why spend limited funds on programs that do not guarantee exceptional performance? Efficiency is determined by observing performance- output and outcome achieved considering number of people involved in the process (productivity per person) and costdata (capturing direct cost as well as indirect) 4. To Motivate Giving people significant goals to achieve and then use performance measures- including interim targets- to focus peoples thinking and work, and to provide periodic sense of accomplishment. Performance targets may also encourage creativity in developing better ways to achieve the goal (Behn) Thus measure to motivate improvements may also motivate learning. Almost-real-time output (faster, the better) compared with production targets. Quick response required to provide fast feed-back so workforce could improve and adapt. Also it is able to provide how workforce currently performing. Primary aim behind the measures should be output, managers can not motivate people to affect something over which they have little or no influence. Once an agencys leaders have motivated significant improvements using output targets, they can create some outcomes targets. output- focuses on improving internal process. outcome- motivate people to look outside the agency (to seek way to collaborate with individuals & organisations may affect the outcome produced by the agency)

5. To Celebrate Organisations need to commemorate their accomplishments- such ritual tie their people together, give them a sense of their individual and collective relevance. More over, by achieving specific goals, people gain sense of personal accomplishment and selfworth (Locke & Latham 1984).

Links from measurement to celebration to improvement is indirect, because it has to work through one of the likes- motivation, learning... Celebration helps to improve performance because it brings attention to the agency, and thus promotes its competence- it attracts resources. Dedicated people who want to work for successful agency. Potential collaborators. Learning-sharing between people about their accomplishments and how they achieved it.

Significant performance targets that provide sense of personal and collective accomplishement. Targets could ones used to motivate. In order for celebration to be a success and benefits to be a reality managers need to ensure that celebration creates motivation and thus improvements. By leading the celebration.

6. To Promote How can public managers convince political superiors, legislators, stakeholders, journalists, and citizens that their agency is doing a good job. (National Academy of Public Administrations center for improving government performance- NAPA 1999) performance measures can be used to: validate success; justifing additional resources; earn customers, stakeholder, and staff loyalty by showing results; and win recognition inside and outside the organisation. Indirectly promote, competence and value of goverement in general. To convince citizens their agency is doing good, managers need easily understood measures of those aspects of performance about which many citizens personally care. (National Academy of Public Administration-NAPA in its study of early performancemeasurement plans under the government performance and results Act) most plans recognized the need to communicate performance evaluation results to higher level officials, but did not show clear recognition that the form and level of data for these needs would be different than that for operating managers. Different needs: Department head/ Executive Office of President/ Congress. NAPA suggested for those needs to be more explicitly defined- (Kaplan & Nortan 1994) stress that different customers have different concerns(1992). 7. To Learn Learning is involved with some process, of analysis information provided from evaluating corporate performance (identifying what works and what does not). By analysing that information, corporation able to learn resons behind its poor or good performance. However if there is too many performance measures, managers might not be able to learn anything. (Neves of National Academy of Public Administration 1986)

Because of rapid increase of performance measures there is more confusion or noise than useful data. Managers lack time or simply find it too difficult to try to identify good signals from mass of numbers.

Also there is an issue of black box enigma (data can reveal that organisation is performing well or poorly, but they dont necessarily reveal why). Performance measures can describe what is coming out of black box as well as what is going in, but they do not reveal what is happening inside. How are various inputs interacting to produce the output. What more complex is outcome with black box being all value chain. Benchmarking is a traditional form of performance measurement which facilitates learning by providing assessment of organisational performance and identifying possible solutions for improvements. Benchmarking can facilitate transfer of knowhow from benchmarked organisations. (Kouzmin et al. 1999) Identifying core process in organisation and measuring their performance is basic to benchmarking. Those actions probably provide answer to issue presented in purpose section of the learning. Measurements that are used for learning act as indicators for managers to consider analysis of performance in measurements related areas by revealing irregularities and deviations from expected data results. What to measure aiming at learning (the unexpected- what to aim for?) Learning occurs when organisation meets problems in operations or failures. Then corporations improve by analysing those faults and looking for solutions. In public sector especially, failure usually punished severely- therefore corporations and individuals hide it. 8. To Improve What exactly should who- do differently to improve performance? In order for corporation to measure what it wants to improve it first need to identify what it will improve and develop processes to accomplish that. Also you need to have a feedback loop to assess compliance with plans to achieve improvements and to determine if those processes created forecasted results (improvements). Improvement process also related to learning process in identifying places that are need improvements. Develop understanding of relationships inside the black box that connect changes in operations to changes in output and outcome. Understanding black box processes and their interactions.

How to influence/ control workforce that creates output. How to influence citizens/ customers that turn that output to outcome (and all related suppliers)

They need to observe how actions they can take will influence operations, environment, workforce and which eventually has an impact on outcome. After that they need to identify actions they can take that will give them improvements they looking for and how organisation will react to those actions ex. How might various leadership activities ripple through the black box. Principles of performance measurement All significant work activity must be measured. Work that is not measured or assessed cannot be managed because there is no objective information to determine its value. Therefore it is assumed that this work is inherently valuable regardless of its outcomes. The best that can be accomplished with this type of activity is to supervise a level of effort. Unmeasured work should be minimized or eliminated. Desired performance outcomes must be established for all measured work. Outcomes provide the basis for establishing accountability for results rather than just requiring a level of effort. Desired outcomes are necessary for work evaluation and meaningful performance appraisal. Defining performance in terms of desired results is how managers and supervisors make their work assignments operational. Performance reporting and variance analyses must be accomplished frequently. Frequent reporting enables timely corrective action. Timely corrective action is needed for effective management control.

If we dont measure How do you know where to improve? How do you know where to allocate or re-allocate money and people? How do you know how you compare with others? How do you know whether you are improving or declining? How do you know whether or which programs, methods, or employees are

producing results that are cost effective and efficient? Common problems with measurement systems that limit their usefulness: Heavy reliance on summary data that emphasizes averages and discounts outliers. Heavy reliance on historical patterns and reluctance to accept new structural changes (or re-design of processes) that are capable of generating different outcomes, like measuring the time it takes them to do a task. Heavy reliance on gross aggregates that tend to understate or ignore distributional contributions and consequences. Heavy reliance on static, e.g., equilibrium, analysis and slight attention to timebased and growth ones, such as value-added measures.

[edit] Performance Measurement topics

Most of us have heard some version of the standard performance measurement cliches: what gets measured gets done, if you dont measure results, you cant tell success from failure and thus you cant claim or reward success or avoid unintentionally rewarding failure, if you cant recognize success, you cant learn from it; if you cant recognize failure, you cant correct it, if you cant measure it, you can neither manage it nor improve it," but what eludes many of us is the easy path to identifying truly strategic measurements without falling back on things that are easier to measure such as input, project or operational process measurements. Performance Measurement is addressed in detail in Step Five of the Nine Steps to Success methodology. In this step, Performance Measures are developed for each of the Strategic Objectives. Leading and lagging measures are identified, expected targets and thresholds are established, and baseline and benchmarking data is developed. The focus on Strategic Objectives, which should articulate exactly what the organization is trying to accomplish, is the key to identifying truly strategic measurements. Strategic performance measures monitor the implementation and effectiveness of an organization's strategies, determine the gap between actual and targeted performance and determine organization effectiveness and operational efficiency. Good Performance Measures Focus employees' attention on what matters most to success Allow measurement of accomplishments, not just of the work that is performed Provide a common language for communication Are explicitly defined in terms of owner, unit of measure, collection frequency, data quality, expected value(targets), and thresholds

Are valid, to ensure measurement of the right things Are verifiable, to ensure data collection accuracy

[edit] Practice
Several performance measurement systems are in use today, and each has its own group of supporters. For example, the Balanced Scorecard (Kaplan and Norton, 1993, 1996, 2001), Performance Prism (Neely, 2002), and the Cambridge Performance Measurement Process (Neely, 1996) are designed for business-wide implementation; and the approaches of the TPM Process (Jones and Schilling, 2000), 7-step TPM Process (Zigon, 1999), and Total Measurement Development Method (TMDM) (Tarkenton Productivity Group, 2000) are specific for team-based structures. With continued research efforts and the test of time, the best-of-breed theories that help organizations structure and implement its performance measurement system should emerge. Although the Balanced Scorecard has become very popular, there is no single version of the model that has been universally accepted. The diversity and unique requirements of different enterprises suggest that no one-size-fits-all approach will ever do the job. Gamble, Strickland and Thompson (2007, p. 31) list ten financial objectives and nine strategic objectives involved with a balanced scorecard. Problems in Performance Appraisals: discourages teamwork evaluators are inconsistent or use different criteria and standards only valuable for very good or poor employees encourages employees to achieve short term goals managers has complete power over the employees too subjective produces emotional anguish

Solutions Make collaboration a criterion on which employees will be evaluated Provide training for managers; have the HR department look for patterns on appraisals that suggest bias or over or under evaluation Rate selectively(introduce different or various criteria and disclose better performance and coach for worst performer without disclosing the weakness of the candidate) or increase in frequency of performance evaluation. Include long term and short term goals in appraisal process

Introduce M.B.O.(Management By Objectives) Make criteria specific and test selectively{Evaluate specific behaviors or results} Focus on behaviors; do not criticize employees; conduct appraisal on time.

[edit] See also

Performance improvement

[edit] References
^ Office of the Chief Information Officer (OCIO) Enterprise Architecture Program (2007). Rod Carnegie is a legend. Treasury IT Performance Measures Guide. U.S. Department of the Treasury. May 2007. ^ FEA Consolidated Reference Model Document. whitehouse.gov May 2005. 3. (Robert D. Behn 2003) Why measure Performance? Different Purposes Require Different Measures.

[edit] Further reading

Gamble, J., Strickland, A., Thompson, A. (2007). Crafting & Executing Strategy. (15th Ed.) New York, McGraw-Hill Simon Briscoe. 2005. The trouble with targets. OECD Observer, no. No. 246-247. , . and David P. Norton; "Putting the Balanced Scorecard to Work", Harvard Business Review, Sep/Oct 1993. Hutton, C.R.; Performance Measures Briefing Paper. Ittner, Christopher D. and David F. Larcker, "Coming up Short on Nonfinancial Performance Measurement", Harvard Business Review, November 2003. , . and Norton, David P; "The Balanced Scorecard: Measures That Drive Performance", Harvard Business Review, Jan/Feb 1992. , . and Norton, David P; "Using the Balanced Scorecard as a Strategic Management System", Harvard Business Review, Jan/Feb 1996. Kirby, Julia, "Towards a Theory of High Performance", Harvard Business Review, Jul/Aug 2005.

Mendibil, Kepa and Macbryde Jillian; "Designing effective team-based performance measurement systems: an integrated approach", Centre for Strategic Manufacturing, University of Strathclyde, James Weir Building, March 2005. , , "How the Right Measures Help Teams Excel", Harvard Business Review, May/June 1994. National Partnership for Reinventing Government, USA; Balancing Measures: Best Practices in Performance Management, August 1999. Rohm, Howard; Overview of the Balanced Scorecard, US Foundation for Performance Measurement, June 2000. Schacter, Mark. 2002. Not a Tool Kit. Practitioner's Guide to Measuring the Performance of Public Programs. Institute On Governance. http://schacterconsulting.com/docs/toolkit.pdf. Schacter, Mark. 2008. When Performance Targets Miss the Mark. The Globe and Mail, March 31. http://schacterconsulting.com/documents/targets.pdf. Van de Walle, Steven and Roberts, Alasdair, "Publishing Performance Information: An Illusion of Control?" Performance Information in the Public Sector: How it is Used, Van Dooren, W., Van de Walle, S., eds., Houndmills: Palgrave, pp. 211226, 2008. Bacon, Carl, "Practical Portfolio Performance Measurement and Attribution" September 2004, 240 pages Grau, Micah E., 2008. "Using a Model Municipal Performance Measurement System

to Assess Mid-size Texas Cities' Systems" . Applied Research Projects. Paper 282. http://ecommons.txstate.edu/arp/282

Service (economics)
From Wikipedia, the free encyclopedia Jump to: navigation, search This article has multiple issues. Please help improve it or discuss these issues on the talk page. It is missing citations or footnotes. Please help improve it by adding inline citations. Tagged since June 2009. It needs additional references or sources for verification. Tagged since October

2007.

A bellhop is an example of a service occupation. Marketing Key concepts Product Pricing Distribution Service Retail Brand management Account-based marketing Marketing ethics Marketing effectiveness Market research Market segmentation Marketing strategy Marketing management Market dominance Promotional content Advertising Branding Underwriting Direct marketing Personal Sales

Product placement Publicity Sales promotion Sex in advertising Loyalty marketing Premiums Prizes Promotional media Printing Publication Broadcasting Out-of-home Internet marketing Point of sale Promotional merchandise Digital marketing In-game In-store demonstration Word-of-mouth marketing Brand Ambassador Drip Marketing This box: view talk edit A service is the intangible equivalent of an economic good. Service provision is often an economic activity where the buyer does not generally, except by exclusive contract, obtain exclusive ownership of the thing purchased. The benefits of such a service, if priced, are held to be self-evident in the buyers willingness to pay for it. Public services are those society pays for as a whole through taxes and other means. By composing and orchestrating the appropriate level of resources, skill, ingenuity,and experience for effecting specific benefits for service consumers, service providers participate in an economy without the restrictions of carrying stock (inventory) or the need to concern themselves with bulky raw materials. On the other hand, their investment in expertise does require consistent service marketing and upgrading in the face of competition which has equally few physical restrictions. Many so-called services, however, require large physical structures and equipment, and consume large amounts of resources, such as transportation services and the military. Providers of services make up the tertiary sector of the economy.

Contents
[hide] 1 Service characteristics 2 3 4 5 6

7 8

10 10.1 Regarding Service Characteristics

[edit] Service characteristics

Services can be paraphrased in terms of their generic key characteristics. 1. Intangibility Services are intangible and insubstantial: they cannot be touched, gripped, handled, looked at, smelled, tasted or heard. Thus, there is neither potential nor need for transport, storage or stocking of services. Furthermore, a service cannot be (re)sold or owned by somebody, neither can it be turned over from the service provider to the service consumer nor returned from the service consumer to the service provider. Solely, the service delivery can be commissioned to a service provider who must generate and render the service at the distinct request of an authorized service consumer. 2. Perishability Services are perishable in two regards The service relevant resources, processes and systems are assigned for service delivery during a definite period in time. If the designated or scheduled service consumer does not request and consume the service during this period, the service cannot be performed for him. From the perspective of the service provider, this is

a lost business opportunity as he cannot charge any service delivery; potentially, he can assign the resources, processes and systems to another service consumer who requests a service. Examples: The hair dresser serves another client when the scheduled starting time or time slot is over. An empty seat on a plane never can be utilized and charged after departure. When the service has been completely rendered to the requesting service consumer, this particular service irreversibly vanishes as it has been consumed by the service consumer. Example: the passenger has been transported to the destination and cannot be transported again to this location at this point in time.

3. Inseparability The service provider is indispensable for service delivery as he must promptly generate and render the service to the requesting service consumer. In many cases the service delivery is executed automatically but the service provider must preparatorily assign resources and systems and actively keep up appropriate service delivery readiness and capabilities. Additionally, the service consumer is inseparable from service delivery because he is involved in it from requesting it up to consuming the rendered benefits. Examples: The service consumer must sit in the hair dresser's shop & chair or in the plane & seat; correspondingly, the hair dresser or the pilot must be in the same shop or plane, respectively, for delivering the service. 4. Simultaneity Services are rendered and consumed during the same period of time. As soon as the service consumer has requested the service (delivery), the particular service must be generated from scratch without any delay and friction and the service consumer instantaneously consumes the rendered benefits for executing his upcoming activity or task. 5. Variability Each service is unique. It is one-time generated, rendered and consumed and can never be exactly repeated as the point in time, location, circumstances, conditions, current configurations and/or assigned resources are different for the next delivery, even if the same service consumer requests the same service. Many services are regarded as heterogeneous or lacking homogeneity and are typically modified for each service consumer or each new situation (consumerised). Example: The taxi service which transports the service consumer from his home to the opera is different from the taxi service which transports the same service consumer from the opera to his home another point in time, the other direction, maybe another route, probably another taxi driver and cab. Each of these characteristics is retractable per se and their inevitable coincidence complicates the consistent service conception and make service delivery a challenge in each and every case. Proper service marketing requires creative visualization to effectively evoke a concrete image in the service consumer's mind. From the service consumer's point of view, these characteristics make it difficult, or even impossible, to

evaluate or compare services prior to experiencing the service delivery. Mass generation and delivery of services is very difficult. This can be seen as a problem of inconsistent service quality. Both inputs and outputs to the processes involved providing services are highly variable, as are the relationships between these processes, making it difficult to maintain consistent service quality. For many services there is labor intensity as services usually involve considerable human activity, rather than a precisely determined process; exceptions include utilities. Human resource management is important. The human factor is often the key success factor in service economies. It is difficult to achieve economies of scale or gain dominant market share. There are demand fluctuations and it can be difficult to forecast demand. Demand can vary by season, time of day, business cycle, etc. There is consumer involvement as most service provision requires a high degree of interaction between service consumer and service provider. There is a customer-based relationship based on creating long-term business relationships. Accountants, attorneys, and financial advisers maintain long-term relationships with their clientes for decades. These repeat consumers refer friends and family, helping to create a client-based relationship.

[edit] Service definition

The generic clear-cut, complete and concise definition of the service term reads as follows: A service is a set of singular and perishable benefits delivered from the accountable service provider, mostly in close coaction with his service suppliers, generated by functions of technical systems and/or by distinct activities of individuals, respectively, commissioned according to the needs of his service consumers by the service customer from the accountable service provider, rendered individually to an authorized service consumer at his/her dedicated trigger, and, finally, consumed and utilized by the triggering service consumer for executing his/her upcoming business or private activity.

[edit] Service specification

Any service can be clearly, completely, consistently and concisely specified by means of the following 12 standard attributes which conform to the MECE principle (Mutually Exclusive, Collectively Exhaustive) Service Consumer Benefits Service-specific Functional Parameters

Service Delivery Point Service Consumer Count Service Delivering Readiness Times Service Support Times Service Support Languages Service Fulfillment Target Service Impairment Duration per Incident Service Delivering Duration Service Delivery Unit Service Delivering Price The meaning and content of these attributes are: 1. Service Consumer Benefits describe the (set of) benefits which are triggerable, consumable and effectively utilizable for any authorized service consumer and which are rendered to him as soon as he trigger one service. The description of these benefits must be phrased in the terms and wording of the intended service consumers. 2. Service-specific Functional Parameters specify the functional parameters which are essential and unique to the respective service and which describe the most important dimension(s) of the servicescape, the service output or the service outcome, e.g. maximum e-mailbox capacity per registered and authorized e-mail service consumer. 3. Service Delivery Point describes the physical location and/or logical interface where the benefits of the service are triggered by and rendered to the authorized service consumer. At this point and/or interface, the preparedness for service delivery readiness can be assessed as well as the effective delivery of the service itself can be monitored and controlled. 4. Service Consumer Count specifies the number of intended, clearly identified, explicitly named, definitely registered and authorized service consumers which shall be and/or are allowed and enabled to trigger and consume the commissioned service for executing and/or supporting their business tasks or private activities. 5. Service Delivering Readiness Times specify the distinct agreed times of every day of the week when the described service consumer benefits are triggerable for the authorized service consumers at the defined service delivery point

consumable and utilizable for the authorized service consumers at the respective agreed service level

all the required service contributions are aggregated to the triggered service the specified service benefits are comprehensively rendered to any authorized triggering service consumer without any delay or friction.

The time data are specified in 24 h format per local working day and local time, referring to the location of the intended and/or triggering service consumers. 6. Service Support Times specify the determined and agreed times of every day of the week when the triggering and consumption of commissioned services is supported by the service desk team for all identified, registered and authorized service consumers within the service customer's organizational unit or area. The service desk is/shall be the so called the Single Point of Contact (SPoC) for any service consumer inquiry regarding the commissioned, triggered and/or rendered services, particularly in the event of service denial, i.e. an incident. During the defined service support times, the service desk can be reached by phone, e-mail, web-based entries and/or fax, respectively. The time data are specified in 24 h format per local working day and local time, referring to the location of the intended service consumers. 7. Service Support Languages specifies the national languages which are spoken by the service desk team(s) to the service consumers calling them. 8. Service Fulfillment Target specifies the service provider's promise of effectively and seamlessly delivering the specified benefits to any authorized service consumer triggering a service within the specified service times. It is expressed as the promised minimum ratio of the counts of successful individual service deliveries related to the counts of triggered service deliveries. The effective service fulfillment ratio can be measured and calculated per single service consumer or per service consumer group and may be referred to different time periods (workday, calenderweek, workmonth, etc.) 9. Service Impairment Duration per Incident specifies the allowable maximum elapsing time [hh:mm] between the first occurrence of a service impairment, i.e. service quality degradation, service delivery disruption or service denial, whilst the service consumer consumes and utilizes the requested service, the full resumption and complete execution of the service delivery to the content of the affected service consumer.

10. Service Delivering Duration specifies the promised and agreed maximum period of time for effectively rendering all specified service consumer benefits to the requesting service consumer at his currently chosen service delivery point. 11. Service Delivery Unit specifies the basic portion for rendering the defined service consumer benefits. The service delivery unit is the reference and mapping object for the

Service Delivering Unit, for all service costs as well as for charging and billing the consumed service volume to the service customer who has commissioned the service delivery. 12. Service Delivering Price specifies the amount of money the service customer has to pay for the distinct service volumes his authorized service consumers have consumed. Normally, the service delivering price comprises two portions a fixed basic price portion for basic efforts and resources which provide accessibility and usability of the service delivery functions, i.e. service access price a price portion covering the service consumption based on fixed flat rate price per authorized service consumer and delivery period without regard on the consumed service volumes, staged prices depending on consumed service volumes, fixed price per particularly consumed service delivering unit.

[edit] Service delivery

The delivery of a service typically involves six factors: The accountable service provider and his service suppliers (e.g. the people) Equipment used to provide the service (e.g. vehicles, cash registers, technical systems, computer systems) The physical facilities (e.g. buildings, parking, waiting rooms) The requesting service consumer Other customers at the service delivery location Customer contact

The service encounter is defined as all activities involved in the service delivery process. Some service managers use the term "moment of truth" to indicate that defining point in a specific service encounter where interactions are most intense. Many business theorists view service provision as a performance or act (sometimes humorously referred to as dramalurgy, perhaps in reference to dramaturgy). The location of the service delivery is referred to as the stage and the objects that facilitate the service process are called props. A script is a sequence of behaviors followed by all those involved, including the client(s). Some service dramas are tightly scripted, others are more ad lib. Role congruence occurs when each actor follows a script that harmonizes with the roles played by the other actors.

In some service industries, especially health care, dispute resolution, and social services, a popular concept is the idea of the caseload, which refers to the total number of patients, clients, litigants, or claimants that a given employee is presently responsible for. On a daily basis, in all those fields, employees must balance the needs of any individual case against the needs of all other current cases as well as their own personal needs. Under English law, if a service provider is induced to deliver services to a dishonest client by a deception, this is an offence under the Theft Act 1978.

Service-Goods continuum

[edit] The service-goods continuum

The dichotomy between physical goods and intangible services should not be given too much credence. These are not discrete categories. Most business theorists see a continuum with pure service on one terminal point and pure commodity good on the other terminal point.[citation needed] Most products fall between these two extremes. For example, a restaurant provides a physical good (the food), but also provides services in the form of ambience, the setting and clearing of the table, etc. And although some utilities actually deliver physical goods like water utilities which actually deliver water utilities are usually treated as services. In a narrower sense, service refers to quality of customer service: the measured appropriateness of assistance and support provided to a customer. This particular usage occurs frequently in retailing.

[edit] List of economic services

The following is an incomplete list of service industries, grouped into rough sectors. Parenthetical notations indicate how specific occupations and organizations can be regarded as service industries to the extent they provide an intangible service, as opposed to a tangible good. business functions (that apply to all organizations in general) consulting

administrators (providing services like ensuring that employees are paid accurately)

childcare , repair and maintenance services

janitors (who provide cleaning services)

construction carpentry properly) (offering the service of making wiring work

death care coroners (who provide the service of identifying cadavers and determining time and cause of death) cremation or burial) (who prepare corpses for public display,

dispute resolution and prevention services arbitration of law (who perform the service of dispute resolution backed by the power of the state)

criminals out of society) (provides the service of keeping

law enforcement (provides the service of identifying and apprehending criminals) (who perform the services of advocacy and decisionmaking in many dispute resolution and prevention processes) with other states) (performs the service of protecting states in disputes

(not really a service unless someone is negotiating on behalf of another)

The Maritime Museum in Szczecin, Poland education (institutions offering the services of teaching and access to information) library

entertainment (when provided live or within a highly specialized facility) gambling movie on a big screen) (providing the service of showing a

fabric care dry cleaning automated fabric cleaning) (offering the service of

financial services accountancy and building societies (offering lending services and safekeeping of money and valuables)

preparation

foodservice industry hairdressing / pedicurist

health care (all health care professions provide services) information services data processing services

risk management

insurance

social services social work

transport

electric power

Bank
From Wikipedia, the free encyclopedia Jump to: navigation, search For other uses, see Bank (disambiguation). "Banker" redirects here. For other uses, see Banker (disambiguation). "Bankers" redirects here. For the economics book, see The Bankers. This article has multiple issues. Please help improve it or discuss these issues on the talk page. It needs additional references or sources for verification. Tagged since July 2008. It may require general cleanup to meet Wikipedia's quality standards. Tagged since June 2010.

Banking Types of banks Central bank Advising bank Commercial bank

Community development bank Credit union Custodian bank Depository bank Export credit agency Investment bank Industrial bank Islamic banking Merchant bank Mutual bank Mutual savings bank National bank Offshore bank Postal savings system Private bank Retail Bank Savings and loan association Savings bank Universal bank Deposit accounts Savings account Transactional account Money market account Time deposit ATM card Debit card Credit card Electronic funds transfer Automated Clearing House Electronic bill payment Giro Wire transfer Banking terms Anonymous banking Automatic teller machine Loan Money creation Cheque List of banks

Finance series

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Structured finance Capital budgeting Financial risk management Mergers and acquisitions Accountancy Financial statement Audit Credit rating agency Leveraged buyout Venture capital Personal financeHYPERLINK "javascript:toggleNavigationBar(4);"[show] Credit and debt Student financial aid Employment contract Retirement Financial planning Public financeHYPERLINK "javascript:toggleNavigationBar(5);"[show] Government spending: Transfer payment (Redistribution) Government operations Government final consumption expenditure Government revenue: Taxation Non-tax revenue Government budget Government debt Surplus and deficit deficit spending Warrant (of payment) Banks and banking[show] Fractional-reserve banking Central Bank List of banks Deposits Loan

Money supply Financial regulationHYPERLINK "javascript:toggleNavigationBar(7);"[show] Finance designations Accounting scandals StandardsHYPERLINK "javascript:toggleNavigationBar(8);"[show] ISO 31000 International Financial Reporting Economic historyHYPERLINK "javascript:toggleNavigationBar(9);"[show] Stock market bubble Recession Stock market crash History of private equity vde

Personal finance

Credit and debt Pawnbroker Student loan Employment contract Salary Wage Employee stock option Employee benefit Deferred compensation Direct deposit Retirement

Pension Defined benefit Defined contribution Social security Business plan Corporate action Personal budget Financial planner Financial adviser Financial independence Financial renovator Estate planning See also Banks and credit unions Cooperatives

edit this box A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities: A central bank circulates money on behalf of a government and acts as its monetary authority by implementing monetary policy, which regulates the money supply. A commercial bank accepts deposits and pools those funds to provide credit, either directly by lending, or indirectly by investing through the capital markets. Within the global financial markets, these institutions connect market participants with capital deficits (borrowers) to market participants with capital surpluses (investors and lenders) by transferring funds from those parties who have surplus funds to invest (financial assets) to those parties who borrow funds to invest in real assets. A savings bank (known as a "building society" in the United Kingdom) is similar to a savings and loan association (S&L). They can either be stockholder owned or mutually owned, in which case they are permitted to only borrow from members of the financial cooperative. The asset structure of savings banks and savings and

loan associations is similar, with residential mortgage loans providing the principal assets of the institution's portfolio. Because of the important role depository institutions play in the financial system, the banking industry is highly regulated, and government restrictions on financial activities by banks have varied over time and by location. Current global bank capital requirements are referred to as Basel II. In some countries, such as Germany, banks have historically owned major stakes in industrial companies, while in other countries, such as the United States, banks have traditionally been prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the "keiretsu". In Iceland, banks followed international standards of regulation prior to the recent global financial crisis that began in 2007. The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472.[1]

History
Main article: History of banking Banking in the modern sense of the word can be traced to medieval and early Renaissance Italy, to the rich cities in the north like Florence, Venice and Genoa. The Bardi and Peruzzi families dominated banking in 14th century Florence, establishing branches in many other parts of Europe.[2] Perhaps the most famous Italian bank was the Medici bank, set up by Giovanni Medici in 1397.[3] The earliest known state deposit bank, Banco di San Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy. [4]

[edit] Origin of the word

The word bank was borrowed in Middle English from Middle French banque, from Old Italian banca, from Old High German banc, bank "bench, counter". Benches were used as desks or exchange counters during the Renaissance by Florentine bankers, who used to make their transactions atop desks covered by green tablecloths.[5] The earliest evidence of money-changing activity is depicted on a silver Greek drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350 325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city. In fact, even today in Modern Greek the word Trapeza () means both a table and a bank.

[edit] Definition
The definition of a bank varies from country to country. See the relevant country page (below) for more information. Under English common law, a banker is defined as a person who carries on the business of banking, which is specified as:[6]

conducting current accounts for his customers paying cheques drawn on him, and collecting cheques for his customers.

Banco de Venezuela in Coro. In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including cheques, and this Act contains a statutory definition of the term banker: banker includes a body of persons, whether incorporated or not, who carry on the business of banking' (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as cheques does not depend on how the bank is organised or regulated. The business of banking is in many English common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business. When looking at these definitions it is important to keep in mind that they are defining the business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purposes of entry regulating and supervising banks rather than regulating the actual business of banking. However, in many cases the statutory definition closely mirrors the common law one. Examples of statutory definitions: "banking business" means the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the Authority may prescribe for the purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation). "banking business" means the business of either or both of the following:

receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] ... or with a period of call or notice of less than that period; paying or collecting cheques drawn by or paid in by customers[7]

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking, the cheque has lost its primacy in most banking systems as a payment instrument. This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect cheques.[8]

[edit] Banking
[edit] Standard activities

Large door to an old bank vault. Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and automated teller machine (ATM). Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending. Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account. Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings too.[clarification needed]

[edit] Channels
Banks offer many different channels to access their banking and other services: ATM is a machine that dispenses cash and sometimes takes deposits without the

need for a human bank teller. Some ATMs provide additional services. A branch is a retail location

Mail: most banks accept check deposits via mail and use mail to communicate to their customers, e.g. by sending out statements conduct banking transactions payments etc. over the Internet is a method of using one's mobile phone to is a term used for performing transactions,

, mostly for private banking or business banking, often visiting customers at their homes or businesses is a service which allows its customers to perform transactions over the telephone without speaking to a human is a term used for performing banking transactions or professional banking consultations via a remote video and audio connection. Video banking can be performed via purpose built banking transaction machines (similar to an Automated teller machine), or via a videoconference enabled bank branch.clarification

[edit] Business model

A bank can generate revenue in a variety of different ways including interest, transaction fees and financial advice. The main method is via charging interest on the capital it lends out to customers[citation needed]. The bank profits from the differential between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities. This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclical and dependent on the needs and strengths of loan customers and the stage of the economic cycle. Fees and financial advice constitute a more stable revenue stream and banks have therefore placed more emphasis on these revenue lines to smooth their financial performance. In the past 20 years American banks have taken many measures to ensure that they remain profitable while responding to increasingly changing market conditions. First, this includes the Gramm-Leach-Bliley Act, which allows banks again to merge with investment and insurance houses. Merging banking, investment, and insurance functions allows traditional banks to respond to increasing consumer demands for "one-stop shopping" by enabling cross-selling of products (which, the banks hope, will also increase profitability).

Second, they have expanded the use of risk-based pricing from business lending to consumer lending, which means charging higher interest rates to those customers that are considered to be a higher credit risk and thus increased chance of default on loans. This helps to offset the losses from bad loans, lowers the price of loans to those who have better credit histories, and offers credit products to high risk customers who would otherwise be denied credit. Third, they have sought to increase the methods of payment processing available to the general public and business clients. These products include debit cards, prepaid cards, smart cards, and credit cards. They make it easier for consumers to conveniently make transactions and smooth their consumption over time (in some countries with underdeveloped financial systems, it is still common to deal strictly in cash, including carrying suitcases filled with cash to purchase a home). However, with convenience of easy credit, there is also increased risk that consumers will mismanage their financial resources and accumulate excessive debt. Banks make money from card products through interest payments and fees charged to consumers and transaction fees to companies that accept the credit- debit - cards. This helps in making profit and facilitates economic development as a whole.[citation needed

Risk and capital

Banks face a number of risks in order to conduct their business, and how well these risks are managed and understood is a key driver behind profitability, and how much capital a bank is required to hold. Some of the main risks faced by banks include: Credit risk: risk of loss[citation needed] arising from a borrower who does not make payments as promised. : risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). : risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. company's business functions. : risk arising from execution of a

The capital requirement is a bank regulation, which sets a framework on how banks and depository institutions must handle their capital. The categorization of assets and capital is highly standardized so that it can be risk weighted (see risk-weighted asset).

[edit] Banks in the economy

See also: Financial system

[edit] Economic functions

The economic functions of banks include: Issue of money, in the form of banknotes and current accounts subject to cheque or payment at the customer's order. These claims on banks can act as money because they are negotiable or repayable on demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of banknotes, or by drawing a cheque that the payee may bank or cash. Netting and settlement of payments banks act as both collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. This enables banks to economise on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables the offsetting of payment flows between geographical areas, reducing the cost of settlement between them. Credit intermediation banks borrow and lend back-to-back on their own account as middle men. Credit quality improvement banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as security, to raise the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position. Maturity transformation banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets).

[edit] Bank crisis

Banks are susceptible to many forms of risk which have triggered occasional systemic crises. These include liquidity risk (where many depositors may request withdrawals in excess of available funds), credit risk (the chance that those who owe money to the bank will not repay it), and interest rate risk (the possibility that the bank will become unprofitable, if rising interest rates force it to pay relatively more on its deposits than it receives on its loans). Banking crises have developed many times throughout history, when one or more risks have materialized for a banking sector as a whole. Prominent examples include the bank

run that occurred during the Great Depression, the U.S. Savings and Loan crisis in the 1980s and early 1990s, the Japanese banking crisis

Size of global banking industry

Assets of the largest 1,000 banks in the world grew by 6.8% in the 2008/2009 financial year to a record $96.4 trillion while profits declined by 85% to $115bn. Growth in assets in adverse market conditions was largely a result of recapitalisation. EU banks held the largest share of the total, 56% in 2008/2009, down from 61% in the previous year. Asian banks' share increased from 12% to 14% during the year, while the share of US banks increased from 11% to 13%. Fee revenue generated by global investment banking totalled $66.3bn in 2009, up 12% on the previous year.[9] The United States has the most banks in the world in terms of institutions (7,085 at the end of 2008) and possibly branches (82,000).[citation needed] This is an indicator of the geography and regulatory structure of the USA, resulting in a large number of small to medium-sized institutions in its banking system. As of Nov 2009, China's top 4 banks have in excess of 67,000 branches (ICBC:18000+, BOC:12000+, CCB:13000+, ABC:24000+) with an additional 140 smaller banks with an undetermined number of branches. Japan had 129 banks and 12,000 branches. In 2004, Germany, France, and Italy each had more than 30,000 branchesmore than double the 15,000 branches in the UK. [9]

[edit] Regulation
Main article: Banking regulation See also: Basel II Currently in most jurisdictions commercial banks are regulated by government entities and require a special bank licence to operate. Usually the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits, even if they are not repayable to the customer's orderalthough money lending, by itself, is generally not included in the definition. Unlike most other regulated industries, the regulator is typically also a participant in the market, being either a publicly or privately governed central bank. Central banks also typically have a monopoly on the business of issuing banknotes. However, in some countries this is not the case. In the UK, for example, the Financial Services Authority licences banks, and some commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to those issued by the Bank of England, the UK government's central bank. Banking law is based on a contractual analysis of the relationship between the bank (defined above) and the customerdefined as any entity for which the bank agrees to conduct an account.

The law implies rights and obligations into this relationship as follows: The bank account balance is the financial position between the bank and the customer: when the account is in credit, the bank owes the balance to the customer; when the account is overdrawn, the customer owes the balance to the bank. The bank agrees to pay the customer's cheques up to the amount standing to the credit of the customer's account, plus any agreed overdraft limit. The bank may not pay from the customer's account without a mandate from the customer, e.g. a cheque drawn by the customer. The bank agrees to promptly collect the cheques deposited to the customer's account as the customer's agent, and to credit the proceeds to the customer's account. The bank has a right to combine the customer's accounts, since each account is just an aspect of the same credit relationship. The bank has a lien on cheques deposited to the customer's account, to the extent that the customer is indebted to the bank. The bank must not disclose details of transactions through the customer's account unless the customer consents, there is a public duty to disclose, the bank's interests require it, or the law demands it. The bank must not close a customer's account without reasonable notice, since cheques are outstanding in the ordinary course of business for several days. These implied contractual terms may be modified by express agreement between the customer and the bank. The statutes and regulations in force within a particular jurisdiction may also modify the above terms and/or create new rights, obligations or limitations relevant to the bank-customer relationship. Some types of financial institution, such as building societies and credit unions, may be partly or wholly exempt from bank licence requirements, and therefore regulated under separate rules. The requirements for the issue of a bank licence vary between jurisdictions but typically include: Minimum capital Minimum capital ratio 'Fit and Proper' requirements for the bank's controllers, owners, directors, or senior officers Approval of the bank's business plan as being sufficiently prudent and plausible.

[edit] Types of banks

Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to high net worth individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations.

[edit] Types of retail banks

National Bank of the Republic, Salt Lake City 1908

ATM Al-Rajhi Bank

National Copper Bank, Salt Lake City 1911 Commercial bank: the term used for a normal bank to distinguish it from an investment bank. After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses. : locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners. : regulated banks that provide financial services and credit to under-served markets or populations. : not-for-profit cooperatives owned by the depositors and often offering rates more favorable than for-profit banks. Typically, membership is restricted to employees of a particular company, residents of a defined neighborhood, members of a certain labor union or religious organizations, and their immediate families. national postal systems. : savings banks associated with

: banks that manage the assets of high net worth individuals. Historically a minimum of USD 1 million was required to open an account, however, over the last years many private banks have lowered their entry hurdles to USD 250,000 for private investors.[citation needed] : banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks. : in Europe, savings banks took their roots in the 19th or sometimes even in the 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative; in others, socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralised distribution network, providing local and regional outreachand by their socially responsible approach to business and society. conduct retail banking. and Landesbanks: institutions that

: banks that prioritize the transparency of all operations and make only what they consider to be socially-responsible investments. A Direct or Internet-Only bank is a banking operation without any physical bank branches, conceived and implemented wholly with networked computers.

[edit] Types of investment banks

Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital market activities such as mergers and acquisitions. were traditionally banks which engaged in trade finance. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike venture capital firms, they tend not to invest in new companies.

[edit] Both combined

Universal banks, more commonly known as financial services companies, engage in several of these activities. These big banks are very diversified groups that, among other services, also distribute insurance hence the term bancassurance, a portmanteau word combining "banque or bank" and "assurance", signifying that both banking and insurance are provided by the same corporate entity.

[edit] Other types of banks

Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis. adhere to the concepts of Islamic law. This form of banking revolves around several well-established principles based on Islamic canons. All banking activities must avoid interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup) and fees on the financing facilities that it extends to customers.

[edit] Challenges within the banking industry

The examples and perspective in this section may not represent a worldwide view of the subject. Please improve this article and discuss the issue on the talk page. (September 2009)

This section does not cite any references or sources. Please help improve this section by adding citations to reliable sources. Unsourced material may be challenged and removed. (September 2008)

[edit] United States

Main article: Banking in the United States In the United States, the banking industry is a highly regulated industry with detailed and focused regulators. All banks with FDIC-insured deposits have the Federal Deposit Insurance Corporation (FDIC) as a regulator; however, for examinations,[clarification needed] the Federal Reserve is the primary federal regulator for Fed-member state banks; the Office of the Comptroller of the Currency (OCC) is the primary federal regulator for national banks; and the Office of Thrift Supervision, or OTS, is the primary federal regulator for thrifts. State non-member banks are examined by the state agencies as well as the FDIC. National banks have one primary regulatorthe OCC. Qualified Intermediaries & Exchange Accommodators are regulated by MAIC. Each regulatory agency has their own set of rules and regulations to which banks and thrifts must adhere. The Federal Financial Institutions Examination Council (FFIEC) was established in 1979 as a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions. Although the FFIEC has resulted in a greater degree of regulatory consistency between the agencies, the rules and regulations are constantly changing. In addition to changing regulations, changes in the industry have led to consolidations within the Federal Reserve, FDIC, OTS, MAIC and OCC. Offices have been closed, supervisory regions have been merged, staff levels have been reduced and budgets have been cut. The remaining regulators face an increased burden with increased workload and more banks per regulator. While banks struggle to keep up with the changes in the regulatory environment, regulators struggle to manage their workload and effectively regulate their banks. The impact of these changes is that banks are receiving less handson assessment by the regulators, less time spent with each institution, and the potential for more problems slipping through the cracks, potentially resulting in an overall increase in bank failures across the United States. The changing economic environment has a significant impact on banks and thrifts as they struggle to effectively manage their interest rate spread in the face of low rates on loans, rate competition for deposits and the general market changes, industry trends and economic fluctuations. It has been a challenge for banks to effectively set their growth strategies with the recent economic market. A rising interest rate environment may seem to help financial institutions, but the effect of the changes on consumers and businesses is not predictable and the challenge remains for banks to grow and effectively manage the spread to generate a return to their shareholders. The management of the banks asset portfolios also remains a challenge in todays

economic environment. Loans are a banks primary asset category and when loan quality becomes suspect, the foundation of a bank is shaken to the core. While always an issue for banks, declining asset quality has become a big problem for financial institutions. There are several reasons for this, one of which is the lax attitude some banks have adopted because of the years of good times. The potential for this is exacerbated by the reduction in the regulatory oversight of banks and in some cases depth of management. Problems are more likely to go undetected, resulting in a significant impact on the bank when they are recognized. In addition, banks, like any business, struggle to cut costs and have consequently eliminated certain expenses, such as adequate employee training programs. Banks also face a host of other challenges such as aging ownership groups. Across the country, many banks management teams and board of directors are aging. Banks also face ongoing pressure by shareholders, both public and private, to achieve earnings and growth projections. Regulators place added pressure on banks to manage the various categories of risk. Banking is also an extremely competitive industry. Competing in the financial services industry has become tougher with the entrance of such players as insurance agencies, credit unions, check cashing services, credit card companies, etc. As a reaction, banks have developed their activities in financial instruments, through financial market operations such as brokerage and MAIC trust & Securities Clearing services trading and become big players in such activities.

[edit] Competition for loanable funds

To be able to provide homebuyers and builders with the funds needed, banks must compete for deposits. The phenomenon of disintermediation had to dollars moving from savings accounts and into direct market instruments such as U.S. Treasury obligations, agency securities, and corporate debt. One of the greatest factors in recent years in the movement of deposits was the tremendous growth of money market funds whose higher interest rates attracted consumer deposits.[10] To compete for deposits, US savings institutions offer many different types of plans:[10] Passbook or ordinary deposit accounts permit any amount to be added to or withdrawn from the account at any time. NOW and Super NOW accounts function like checking accounts but earn interest. A minimum balance may be required on Super NOW accounts. carry a monthly limit of preauthorized transfers to other accounts or persons and may require a minimum or average balance. Certificate accounts subject to loss of some or all interest on withdrawals before maturity. Notice accounts the equivalent of certificate accounts with an indefinite term. Savers agree to notify the institution a specified time before withdrawal.

(IRAs) and Keogh plans a form of retirement savings in which the funds deposited and interest earned are exempt from income tax until after withdrawal. definite restrictions. offered by some institutions under

All withdrawals and deposits are completely the sole decision and responsibility of the account owner unless the parent or guardian is required to do otherwise for legal reasons. Club accounts and other savings accounts designed to help people save regularly to meet certain goals.

[edit] Accounting for bank accounts

Suburban bank branch Bank statements are accounting records produced by banks under the various accounting standards of the world. Under GAAP and MAIC there are two kinds of accounts: debit and credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and Expenses. This means you credit a credit account to increase its balance, and you debit a credit account to decrease its balance.[11] This also means you credit your savings account every time you deposit money into it (and the account is normally in credit), while you debit your credit card account every time you spend money from it (and the account is normally in debit). However, if you read your bank statement, it will say the oppositethat you credit your account when you deposit money, and you debit it when you withdraw funds. If you have cash in your account, you have a positive (or credit) balance; if you are overdrawn, you have a negative (or deficit) balance. Where bank transactions, balances, credits and debits are discussed below, they are done so from the viewpoint of the account holderwhich is traditionally what most people are used to seeing.

[edit] Brokered deposits

One source of deposits for banks is brokers who deposit large sums of money on the behalf of investors through MAIC or other trust corporations. This money will generally

go to the banks which offer the most favorable terms, often better than those offered local depositors. It is possible for a bank to be engaged in business with no local deposits at all, all funds being brokered deposits. Accepting a significant quantity of such deposits, or "hot money" as it is sometimes called, puts a bank in a difficult and sometimes risky position, as the funds must be lent or invested in a way that yields a return sufficient to pay the high interest being paid on the brokered deposits. This may result in risky decisions and even in eventual failure of the bank. Banks which failed during 2008 and 2009 in the United States during the global financial crisis had, on average, four times more brokered deposits as a percent of their deposits than the average bank. Such deposits, combined with risky real estate investments, factored into the Savings and loan crisis of the 1980s. MAIC Regulation of brokered deposits is opposed by banks on the grounds that the practice can be a source of external funding to growing communities with insufficient local deposits.[12]

[edit
CUSTOMER

Customer
From Wikipedia, the free encyclopedia Jump to: navigation, search For the British rock band, see The Clientele. This article needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (January 2010) A customer (also known as a client, buyer, or purchaser) is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services. However, in certain contexts, the term customer also includes by extension any entity that uses or experiences the services of another. A customer may also be a viewer of the product or service that is being sold despite deciding not to buy them. The general distinction between a customer and a client is that a customer purchases products, whereas a client purchases services. The word derives from "custom," meaning "habit"; a customer was someone who frequented a particular shop, who made it a habit to purchase goods of the sort the shop sold there rather than elsewhere, and with whom the shopkeeper had to maintain a relationship to keep his or her "custom," meaning expected purchases in the future. The slogans "the customer is king" or "the customer is god" or "the customer is always right" indicate the importance of customers to businesses although the last expression is sometimes used ironically.

However, "customer" also has a more generalized meaning as in customer service and a less commercialized meaning in not-for-profit areas. To avoid unwanted implications in some areas such as government services, community services, and education, the term "customer" is sometimes substituted by words such as "constituent" or "stakeholder". This is done to address concerns that the word "customer" implies a narrowly commercial relationship involving the purchase of products and services. However, some managers in this environment, in which the emphasis is on being helpful to the people one is dealing with rather than on commercial sales, comfortably use the word "customer" to both internal and external customers. OBSOLETE meaning: In the early 17th century customer was defined as a "common prostitute". This meaning is important for understanding historical literary works. ("I marry her! What, a customer?")Othello, or ("I think thee now a common customer") All's Well that Ends Well.[1] Today the meaning of "customer" has been inverted in this usage.

Automated customer service

Customer service may be provided by a person (e.g., sales and service representative), or by automated means. Examples of automated means are Internet sites. An advantage with automated means is an increased ability to provide service 24-hours a day, which can, at least, be a complement to customer service by persons.[6] However, in the Internet era, a challenge has been to maintain and/or enhance the personal experience while making use of the efficiencies of online commerce. Writing in Fast Company, entrepreneur and customer systems innovator Micah Solomon has made the point that "Online customers are literally invisible to you (and you to them), so it's easy to shortchange them emotionally. But this lack of visual and tactile presence makes it even more crucial to create a sense of personal, human-to-human connection in the online arena."[7] Automated means can be based entirely on self service, but may also be based on service by more or less means of artificial intelligence.

An automated online assistant with avatar providing automated customer service on a web page.

Examples of customer service by artificial means are automated online assistants that can be seen as avatars on websites.[6] It can avail for enterprises to reduce their operating and training cost.[6] These are driven by chatterbots, and a major underlying technology to such systems is natural language processing