Deregulation of banking in Indonesia in the 1980s had an impact on changes in the banking industry, particularly in market structure and competition or the level of competition. The deregulation policy began in 1983 to 1990. Previously, restrictions on banking operations were regulated by the government. The state banks at that time were not profit-oriented banks but only became an extension of the government regime (McLeod, 1999).
After the deregulation or liberalization policies began to be implemented, the central bank controled the interest rates as the result lending began to be reduced or even eliminated. Other consequences were reducing the establishment of branch offices and increasing market entry barriers. This policy further increased competition in the banking sector in general(Manurung & Fitrawaty, 2016). The banking industry has certain characteristics that are very different from other industries. Clear regulations and laws are needed to be able to regulate it so that it runs according to its main target, namely towards a healthy banking. Tight business competition (overcompetition) in the banking industry will force banks to be creative and always try to keep their customers from switching to other banks.
Currently, most customers are no longer interested in banks that offer various kinds of gifts/gimmicks. Customers focus more on their choice of banks that have bank image or hold the predicate “safe and healthy” and in addition there are other priorities that are no less important, namely service quality and good relationship. Therefore, banks must also be able to create marketing strategies based on alot of efforts to create value in the relationship between the bank and its customers, which is known as Customer Relationship Management(CRM). CRM is a combination of people, processes and technology, whose successful implementation depends on a balanced integration and approach between people, processes, and technology (Chen & Popovich, 2003).
