Customer Experience Index (CEI): Analysis of Azerbaijan’s Banks in 2023

Customer Experience Index (CEI): Analysis of Azerbaijan’s Banks in 2023
05/10/24
05/10/24
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In the ever-evolving global marketplace, Azerbaijan’s economy has witnessed substantial growth, driven by an expansion in foreign trade activities. This growth can be largely attributed to the surge in oil and gas prices, coupled with a strategic shift in energy supply dynamics, particularly the partial displacement of Russia as a significant energy supplier to Western European nations. Alexey Veretenov, Managing Partner at Senteo Inc., offers an insightful scrutiny of the banking sector’s response to these developments. Veretenov provides a pragmatic assessment of the digitalization efforts undertaken by banks in the country, offering valuable insights into their operational strategies and customer experience initiatives. 

The economic growth of the region, alongside the proactive regulatory measures of the Central Bank of Azerbaijan, has significantly bolstered the stability of the banking sector. In 2023, this stability manifested in notable increases across key metrics: a 4.5% uptick in assets, a robust 17.7% surge in net profit, and a noteworthy expansion in the share of loans within the country’s banks, rising from 40.6% to 46.6% of total assets. 

Furthermore, the positive trajectory of Azerbaijan’s banking system aligns with contemporary global banking trends, notably the ongoing process of digitalization. This transformative shift is evidenced by the burgeoning prevalence of non-cash transactions, which accounted for 54% of the total money turnover in 2023. Concurrently, there has been a notable emphasis on the development of online banking services, reflecting a concerted effort by banks to enhance convenience and accessibility for their clientele. This customer-centric approach underscores a broader trend toward customization, as banks strive to tailor their services to meet the evolving needs and preferences of their customers. 

Customer Experience Index: Methodology  

At Senteo, we have cultivated our own methodology for assessing banks, refining it over 17 years to meticulously evaluate banking systems worldwide. 

Our Customer Experience Index (CEI) hinges on five fundamental components: 

  • Brand: This encompasses customer appeal and the alignment of brand values with customer perceptions. 
  • Communications: We assess the effectiveness of advertising efforts and the accessibility of information about the business. 
  • Environment: We scrutinize the visibility, simplicity, and convenience of customer touchpoints. 
  • Offering: This pertains to how well the products and solutions cater to the needs and values of the customer. 
  • Culture: We explore how the organization cultivates an environment conducive to positive customer interactions. 

In recent years, our research has been concentrated on the banking sector in Central Asia and the Middle East. Previously, we published evaluations of banks in Uzbekistan, Kazakhstan, Kyrgyzstan, and Armenia. From these assessments, we observed that only a fraction of banks managed to attain a CEI score of 3 or higher, with the index exhibiting a volatility range of 1.5 to 2.0 points. 

In developed markets, a CEI score of 3 represents the minimum acceptable level, while it is the expected level for actively developing countries. The pinnacle of global best practices typically corresponds to CEI values exceeding 4.50 points. 

Classification and Selection of Branches  

Branch classification and selection is a crucial aspect of our methodology. In this case, we chose only one city, the economic capital of the country. 

And then we identified three distinct area types: 

  • The tourist center: Areas with high foot traffic and a concentration of tourist attractions. 
  • Business/Commercial districts: Zones characterized by corporate offices, commercial establishments, and bustling economic activity. 
  • Residential neighborhoods: Residential areas where local communities reside. 

The branches that will be analyzed are then chosen based on the distribution of area types to ensure comprehensive coverage. 

The selected branches are then organized into clusters, comprising closely located branches from different banks. 

Each branch undergoes evaluation by rigorously trained mystery shoppers with a standardized score card, to mitigate any potential study bias. 

The customer journey, spanning from entry to departure, is meticulously scrutinized on an emotional scale, ranging from “anger” to “delight.” These assessments are aggregated, subjected to rigorous analysis and cross-checking, culminating in the formation of a comprehensive rating. 

Results of the Customer Experience Index in Azerbaijan’s Banks 2023  

In 2023, Azerbaijan’s banking landscape comprised 23 commercial banks. Senteo’s experts meticulously evaluated the Customer Experience Index (CEI) for the vast majority of these banks, covering a total of 22 institutions. The results of this comprehensive assessment are outlined below in Figure 1. 

Customer Experience Index: Azerbaijan 2023 Overview 

Customer Experience Index: Azerbaijan 2023 Overview
Fig. 1

In 2023, the average CEI Index value stood at 2.93, closely approaching the customer-centric benchmark of 3.0 points, indicative of Azerbaijan’s status as an actively developing nation in the South Caucasus region. 

The weakest component of the Customer Experience Index was “Offering,” scoring 2.87 points, indicating that customers perceive existing products and solutions as inadequately aligned with their values. This signals an opportunity for the bank leaders to focus on developing offerings tailored to better meet customer needs. 

The CEI volatility for 2023 was measured at 1.26 points, notably higher than average, highlighting the instability of customer experiences across individual bank locations. 

The top 5 banks that claimed the highest positions in the Customer Experience Index rating by the close of 2023 were: ABB, AFB Bank, ATB Azer-Turk Bank, Rabitəbank, Bank of Baku (see Fig. 2). 

Top 5 Banks of the Country

Top 5 Banks of the Country
Fig. 2

To gauge the uniformity of customer experience across a bank’s branches, we analyze the CEI volatility indicator (customer experience stability), where lower values denote better consistency. A lower CEI volatility signifies that customers encounter similar experiences when visiting different branches of the bank. In practice, an average customer experience volatility score of 1.00 is considered acceptable, avoiding customer frustration and inflated expectations, while international best practices aim for levels below 0.50. 

The top 5 ranking of banks with the lowest volatility include Premium Bank, Bank of Baku, Pasha Bank, Unibank, and Yelobank. Detailed data can be found in Figure 3. 

Customer Experience Stability 

Customer Experience Stability 
Fig. 3

Premium Bank and Bank of Baku stand out in the rankings for meeting international standards. Among the top 5 banks, each institution not only prioritizes brand attractiveness, effectiveness in their communications, convenience offering, and quality customer touchpoints but also ensures the consistency of these elements across all branches throughout the country. 

Retail vs. Corporate Banking (SME)  

During the CEI survey of banks in Azerbaijan, we conducted a comparative analysis of customer experiences between retail and corporate (SME) customers. The findings are outlined in Figure 4. 

Retail vs. Corporate Banking (SME) 
Fig. 4

In the Azerbaijani banking sector, the CEI value for the corporate segment falls below that of the retail segment. However, both indicators hover around the customer-centric average of 3.0 points. The analysis highlights opportunities for the development of both retail and corporate sectors, emphasizing the need for the introduction of new offerings, technologies, and service standards. 

Notably, the volatility level of the top five CEI retail-oriented banks exceeds 1.0, indicating fluctuations. Conversely, three of the top five in the corporate segment ranking exhibit volatility levels closer to international standards of 0.5. This suggests that the country’s leading banks have prioritized the development of the corporate sector, potentially failing to address evolving priorities and customer needs of the retail customers. 

2023 Survey Insights and Conclusions 

Based on the 2023 study findings, the average CEI value in Azerbaijan stood at 2.93 points, aligning with the average score for actively developing nations. 

A noteworthy observation is that the country’s largest banks, by assets, lead the CEI rankings, signaling a collective push towards robust development and enhanced customer experiences across the banking sector. The overall volatility score in Azerbaijan registered at 1.26, indicating fluctuating customer experiences across different branch visits and times. Notably, several major banks in the country exhibit CEI volatility levels on par with international standards (0.5 points), underscoring a commitment to delivering consistently across all branches nationwide. 

The “Offering” component emerged as the weakest aspect of the index, scoring 2.87. This suggests that banking products and solutions, and associated information fail to adequately meet customer needs. Addressing and accommodating customer requirements could serve as a catalyst for enhancing banks’ profitability in the short term. Conversely, the “Culture” component of the index received a higher score of 2.97, highlighting the pivotal role of human interaction in customer service. In an era of brand commoditization, a strong culture serves as the bedrock for sustaining a positive customer experience trend in Azerbaijan’s banking sector. 

The corporate segment appears to better meet the customer needs compared to the retail segment. Moreover, the volatility of CEI index values for individual large banks in the SME sector approaches the best international standards (0.5 points). Banks’ emphasis on customer experience and a healthy corporate culture fosters greater customer engagement, loyalty, and predisposition for long-term relationships. 

At Senteo, we are committed to empowering banks with a comprehensive solution for achieving sustained growth in the banking sector. The CEI not only offers international benchmarking but also enables banking leaders to make informed strategic decisions and prioritize development areas effectively. Together, we strive to advance the country’s banking sector towards a future of sustainable growth in 2024 and beyond. 

05/10/24

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