CRM in Banking

Banking IndustryCRM in the

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Declaration:

The author agrees and acknowledges that all reference to logos, brand names, manufacturers etc, in this knowledge artifact, has been done so for internal consumption and use, including without limitation all text, images, graphics, multimedia materials, software and trademarks, and the selection and arrangement thereof, is and shall remain the exclusive property of the relevant owners of these brand marks.

• Project details:• Project code:ORACL-OH • Keywords:CRM, Banking industry

• Target readers: All

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Agenda

1 What is CRM?

2 Relevance of CRM in the Banking Industry

3 CRM Trends in the Banking Industry

4 Future of CRM in Banking Industry

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Agenda

1 What is CRM?

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What is CRM?

CRMEco-system

CRMEco-system

Operational CRM

Analytical CRM

Collaborative CRM

Automation of customer facing business processes. E.g. traditional applications

like Sales Force Automation, Customer service, and

Marketing

Services and infrastructure that enable interaction between a company and its channels

Use of customer data for analysis, modelling and evaluation to create a mutually beneficial relationship between a company and its customers

Gartner defines CRM as…

“a business strategy in which the outcomes optimize profitability, revenue and customer satisfaction by organizing around customer segments, fostering customer-satisfying behavior and implementing customer-centered processes”.

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Agenda

2 Relevance of CRM in the Banking Industry

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CRM in Banking Industry

Following are some the key objectives for a bank to be sustainable in the current competitive environment

Improve 360 degree customer view

Improve customer interactions & insight

Improve user interactions

Consistency across multiple communication channels

Contact Center, Partner Management

Master Data Management, Data Quality Tools

Integration to KM systems

Customer Service /

Satisfaction

Reduce business ops. & IT infrastructure costs

Reduce Training & Staffing costs

Cost Savings

Sales Force Automation, Ability to cross-sell / up-sell

Reporting & Analytics, Master Data Management

Remove risk of Legacy platform use

Reduce risk from regulatory compliance

Risk Mitigation

New customer acquisition

Increase sales to existing customers

Marketing Automation

Improve Brand Image

Revenue Generation

Retain existing customers

Improve sales effectiveness

Usage of best-in-class CRM application suites can address majority of the key objectives

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Agenda

3 CRM Trends in the Banking Industry

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Key Challenges in Banking Industry

Resolutions

Banks are employing various methods to resolve key challenges, which in effect are shaping CRM trends in the banking industry

Key Challenges

• Banks have a “product centric” strategy as opposed to a “customer centric” strategy

• Lack of common customer view across banks’ communication channels

• Diffused customer loyalty as customers react to value added offerings available in the market

Resolutions

• Manage customer experience

• Develop deep customer insight

• Create and align multiple channels

• Develop differentiated pricing

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CRM – Trend 1Manage Customer Experience & Lifecycle

• Customer feedback is increasingly used to improve service operations and processes to enhance user experience

• As switching costs decrease, managing expectations has become critical to providing optimal customer experience across all touch points

• Growing importance for client advocacy has resulted in making the organizations customer-centric, provide innovative products and channels and increase the enterprise relevance to customers

• In retail industry for example, a great emphasis is placed on look, feel, layout and convenience of customer distribution channels (web, kiosk, physical locations, etc.) while also emphasizing customer acquisition and retention

• Banks are identifying new ways such as segmentation, better product mix, distinct brand image and improved service to enhance customer experience

• Product-differentiation has become key; Certain banks are creating differentiated value proposition by offering product simplicity, no-frills-based accounts, attractive interest rates to manage high levels of customer experience

• Certain banks have started targeting mass affluent customers by providing them with differentiated services, channel flexibility, sense of exclusivity, specialized call-routing with minimal wait time, a rich online experience, targeted sales force, etc. to empower them and enrich their experience

• Increased use of relationship banking (empowerment, decentralized decision making, performance linked rewards, etc.) , simple processes (quality, increased client interaction, enabling technology platforms) and specialization (knowledgeable, advise, value added services, etc.) are increasingly used in banking industry

It's pretty clear that there's a strong correlation between the customer experience and growth. "Customer service is the best revenue strategy we have,“Wachovia CEO Ken Thompson; FinanceTech, Sept 2007

…financial institutions that excel in one-to-one customer experiences will be able to reduce customer attrition and see their asset growth outpace the competition by 30 percent -- representing more than $360 billion in assets Towers Group's Research, 2007

A 3-D Customer Experience Framework

CustomerExperience

Business Best Practices Banking Best Practices

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Quality of Interactions – characterized by quality of agent service, self service functions, retail experience etc,

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Level of Consistency – characterized by level to which processes, transactions, data provided is consistent across all channels to promote customer trust, increase adoption and advocacy

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Differentiation – characterized by the extent to which customers are segmented and transactions, offers, loyalty programs, etc. are personalized and targeted

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CRM – Trend 1Manage Customer Experience & Lifecycle

• Key customer experience levers include: Providing quality information and data that

is consistent across channels Move from a product-centric to a customer-

centric organization Focus on service quality, irrespective of

channel used by customer Embrace portfolio- and segmentation-

based customer handling and management processes

• Provide for best-in-class operational environment (call centers) for inbound calls, to support sales, service and marketing; empower customer-facing agents in the care channel to provide optimal experience

• Customer of One - Enable segmentation-based service; provide baseline & differentiated treatments along with targeted offer and loyalty management processes

• Simple and cross-channel consistent sales, service and marketing processes and transactions. Flexibility and agility in modifying processes to provide desired customer experience

• A metrics and measurement framework to monitor and modify processes to meet customer expectations

• Customer segmentation is key – selective approach to customers is important for the model to increase profitability

Desired Capabilities

People• Focus on agent quality, training and

measurement processes to provide best-in-class customer service on in-bound calls

• Embrace a customer-centric culture in the organization and make optimal customer experience a key performance metric

Process• Commonize processes across

channels; make transactions easy and consistent across channels

• Develop skill-based agent pools, with call routing strategies designed to provide customer-specific call handling experience

Technology• Deploy call routing techniques that

will route a call to the right skilled agent with minimal wait time; deploy robust call routing infrastructure and processes; Segmentation-based call routing and handling optimized call wait time

• Decisioning engines, predictive analytics and dynamic sales tools are all necessary to provide the right offers to the right customers at the right time through a specific interaction channel

Enablers

• Quality and consistent transaction experience that is channel-agnostic

• Increased levels of satisfaction from interactions; common processes for transactions makes the interactions easy to transact and manage

• A positive perception of enterprise, leading to long-term relationship that can translate to benefits due to loyalty & offer programs

Customer Benefit

Benefits to the Bank

Revenue Generation

Profit Enhancement

Customer Experience

Cross-sell / Up-sell

Customer-Centric

Customer Satisfaction

Primary Secondary

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CRM – Trend 2Develop Deep Customer Insight

• CRM integrated solution provides 360o view of customers

• Increased customer acquisitions and retention through segmentation with predictive analytics

• Develop customer segmentation models to implement effective cross-sell and up-sell marketing programs

• Enhance customer information with 3rd party information such as demographics, lifestyle and psychographic data

• Leverage customer profiling to increase multi-channel and multi-wave campaign opportunities

• CRM solutions present distinct presentation, business logic and database layers for alternative customer segments

Business Best Practices

• Capital One orchestrates the timing, frequency and tone of the messages that individual customers receive based on their respective cluster segments

• HSBC offers personal experiences to each customer based on differences in demographics, online experience and extent to which they use online banking

• Groupe Credit du Nord (French regional banks) uses customer propensity scores to define selling recommendations for its customer consultants which resulted in doubled profitability for some targets

• Dreyfus Corporation (Mellon Financial Corporation) data mines its household database to develop customer attrition models/scores that reduced attrition from 22% to around 7% annually

Banking Best Practices

Leverage text mining to deliver useful

intelligence from unstructured data such as blogs, e-mails, focus groups, graphics and

call center notes

“ Banks are service providers and should know more about what their customers require and how they interact...we can mine the data and use the insights to develop new products…we want to partner with customers on their financial life journey ”

- Eric Sandosham, Citibank Singapore

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CRM – Trend 2Develop Deep Customer Insight

• Create “knowledge foundation” about each customer for cross-sell and up-sell targeted marketing opportunities

• Leverage text mining to deliver useful intelligence from unstructured data such as blogs, e-mails, call center notes, video, graphics, etc.

• Provide information and data that allows customers to be segmented by channel and product preferences

• Quantify Customer Lifetime Value (CLV) and leverage for product and service differentiation

• Understand varying Family Life Stage for all customers to provide appropriate product portfolio

• Provide differentiated market offerings and service treatments based on segmentation schemas

• Increase customer loyalty management via targeted marketing processes

• Facilitates personalization of channel communications

• Develop effective customer models and scores for determining customer sensitivity to target marketing promotions and product mixes

Desired Capabilities

People• Data mining professionals to develop

customer segmentation, cross-sell, up-sell and retention models

• Significant IT and statistical personnel to capture, process and analyze customer structured and unstructured information

Process• Consistently capture all customer

interaction activities and unstructured data into customer-centric data repository

• Analyze customer behavior to understand cross/up-sell and attrition processes

Technology• Predictive analytics and campaign

management environment leveraged to exploit alternative customer segments for targeted marketing

• Enterprise Customer Information File (CIF) and Data Repository to consolidate all views of the customer

• Automated segmentation-based call routing and preferences for servicing

• Dynamic analysis, reporting and visualization tools to understand customer drivers

Enablers

• Customer will receive only targeted marketing collateral/communications relevant to product interest

• Customer will receive the appropriate level of service support vis-à-vis CLV

• Customer will be provided multiple and flexible channel options per need

• Integrated view of customer supports changing life stage needs

Customer Benefit

Benefits to the Bank

Customer Experience

Revenue Generation

Customer Segmentation

Profit Enhancement

Cross-sell / Up-sell

Customer Retention

Primary Secondary

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CRM – Trend 3Create and Align Multiple Channels

• In a typical multi-channel approach, customers still value the ‘physical channel’; brick & mortar branches are found to be critical for all customer profiles for engaging customers and maintaining customer relationships

• A channel strategy is found to depend on multiple factors: demographics, channel preferences, age, education, income levels, job type, etc.

• Channel Functionality is key – e.g. complex functionality on low-cost web channel is found to decrease customer adoption and increase calls to call centers

• Low-cost online channels are embraced for their superior cost structures that enable aggressive pricing, specially in highly fragmented markets with high cost levels

• Businesses have embraced multi-channel customer service management to align services with the right channels, coordinating efforts across channels to reduce costs and use integrated reporting to manage service quality, performance and compliance

Business Best Practices

• Banking customers utilize a multi-channel approach for transactional needs; they are found to combine a branch visit with the use of internet or call center

• Geography-specific channel strategy is critical since channel preferences vary across countries based on social and cultural factors. For example: German customers prefer email, UK customers prefer telephone channel while Spaniards and Italians favor retail branch

• Highly educated customers with higher incomes are found to engage multiple channels; wealthy customers use internet and phone more than branches

• Branch is critical and still relevant - Human touch affects channel attitude

• Adoption of Innovative channels is shifting from basic transactions and low value products to high value products; Best of breed practices such as customer-driven account selection, seamless application process, CardLab (Capital One) are seen as differentiating factors for optimal self service channel experience

• For new entrants, Online banking has become the core of their multi-channel strategy; it has become key to online customer acquisition and loyalty management

Banking Best Practices

A 30-year trend shows that ATMs and internet will overtake branches as the primary transaction channels in future

- Forrester Retail Banking Study, 2008

BCG Retail Banking Study, Nov 2007

Channel Growth Rates (2001-05, Online vs, Retail) show the shift to online banking away from branches

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CRM – Trend 3Create and Align Multiple Channels

• Multi-Channel integration is key – success factors include a holistic, integrated enterprise CRM approach and technology platforms

• Common processes to drive multiple channels; online, branches, ATM network, customer care, etc. and Cross-channel data synchronization and availability are key to providing customers with accurate, relevant data, irrespective of their channel preference

• Branches needs to focus more on enriching customer relationship and customer experience while developing new branch models such as co-branded, segment/ product focused, in-store, etc.

• Critical areas to focus on channel strategy are channel development, channel promotion, channel integration and channel profitability

• Incorporate Governance structure into channel strategy to define service models for each channel; target specific customers, for specific transactions to specific channels based on customer data, preferences, value and other attributes

Desired Capabilities

People• Agents and branch personnel promote a

multi-channel strategy irrespective of customer’s preferences

• Specialization of human resources (specially in branch environment) is key to provide personal ‘touch’ while reducing administrative tasks and enhancing ‘transaction’ oriented tasks

Process• Branch evolution is key; physical branch

plays key role in customer relationship. Branches need to focus on sales and advisory activities while increasing commercial effectiveness and reducing cost base

• Coordination and mutual channel support processes are key to providing a seamless service and build customer trust in channels

Technology• Set up data replication/synchronization

capabilities for consistent data across channels; Utilize SOA and standards based architecture to provide the necessary agility

• Enterprise strategy around integration of data, backend systems, front-office tools

Enablers

• Real-time, accurate account information that is consistent across all channels, promoting channel ‘trust’ and increase customer adoption & advocacy

• Multi-channel follow-thru for transactions

• Increase in the ease of doing business

• Decreased need for churn and potential for a long-term relationship

Customer Benefit

Benefits to the Bank

Customer-Centric

Customer Experience

Data Consistency

Process Consistency

Cross-sell / Up-sell

Targeted Marketing

Primary Secondary

Many firms are still unable to share customer data across products, business units or customer channels, depriving institutions of a single view of the customer, making it difficult to field customer queries on multiple products and often obscuring potential selling opportunities…PricewaterhouseCoopers, Building the customer-centric Financial Institution, 2006

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CRM – Trend 4Develop Differentiated Pricing

• Differentiated pricing has significant leverage on profitability so much that even a small improvement can yield large profit increase

• Develop pricing programs based on profitability, lifetime value analysis and customer segmentation for price optimization

• Engage broad base of management in pricing programs and address related data, process, technology, organization and human capital changes necessary to support pricing effort

• Benchmark, monitor and communicate the results of pricing program through out the organization

Business Best Practices

• Banks develop effective relationship based pricing strategies with dynamic capability providing customers worth their while to do business with them

• Banks have implement differentiated pricing schemes tailored to specific customer segments and their needs

• Banks provide customers to have various pricing options -product level, segment level, product bundle, channel level

• Banks provide single integrated billing across LOBs for customers with flexible billing cycles

• Banks are deploying profit based pricing for price optimization to help set end customer price

Banking Best Practices “Expectation from pricing technology is too high (Gartner hype Cycle),

which gives higher benefit for early movers opting Dynamic Pricing tool“

(Source: Gartner)

Benefit Rating for Pricing Tool: High

“A paradigm shift is taking place in the banking industry. In addition to modifying the business approach taken by banks, relationship pricing will cause competitive turmoil” - Celent

“Dynamic and relationship-driven pricing will be key bank marketing strategies through 2011, starting in commercial, cash management and high-net-worth environments and inexorably spreading across all lines of business where regulations permit it” - Gartner

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CRM – Trend 4Develop Differentiated Pricing

• Design pricing based on risk, customer segmentation and total relationship value

• Provide 360 degree view of pricing relationship and transparence in fees and charges with single consolidated bill

• Flexible product bundling – Break product silos and price based on relationship parameters

• Cross Product Discounting – Provide discounts on products depending on volume and usage of products in customer portfolio

• Multiple parameter pricing – Allow multiple-parameter pricing, time sensitive pricing or volume based pricing

• Redefine products and evaluate customer relationship to increase product and customer depth

• Integrate pricing and billing systems external systems like core banking, payment systems, collection systems, Brokerage systems.

• Increase and manage fee income end to end by moving to a centralized infrastructure

• Maximizes total expected revenue from differentiated pricing by reducing revenue leakages

Desired Capabilities

People• Enable product development team in

defining enterprise wide relationship based pricing rules

• Provide single customer value statement for products and services across bank’s LOBs

Process• Operational efficiency through

streamlining pricing and billing practice across geographies and lines of business

• Customer service – serve corporate clients better with a single view, single statement and a global price list

Technology• Develop pricing tool with ability to

co-exit with legacy infrastructure• Easy integration of the pricing tool

with back end host systems and front end branch automation systems

Enablers

• Volume benefits and cross product benefits

• Transparency in pricing & billing and clarity on fee schedules

• Personalized products and services

• Product packaging and bundled offerings

Customer Benefit

Benefits to the Bank

Customer Retention

Customer Acquisition

Product Differentiation

Customer Satisfaction

Profit Enhancement

Customer Experience

Primary Secondary

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Agenda

4 Future of CRM in Banking Industry

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Key Drivers of future of CRM in Banking Industry

Key Market Forecasts for IT Spends in Financial Sector

Despite the economic gloom, spending by North American banks on IT will continue to grow in 2009, up 1.7% on 2008 to hit $50.3 billion,

Growth RateFastest growth in Asia-Pacific, with IT spending increasing at a CAGR of 4.1% from 2008 to 2010. Growth will continue to rise in this region, and total spending in Asia-Pacific is expected to reach US$90.3 billion in 2010.

Latin America and Africa are expected to grow at a relatively modest rate (3.1%). Spending in this region will grow to US$21.2 billion in 2010.

Global IT spending by the financial services industry as a whole will slip 1.3% in 2009 to $353.3 billion.

Global IT Spending

• Firms in Europe and North America account for 37.7% and 33.5%, respectively, of the global IT investments by financial services institutions. Firms in Asia-Pacific account for 23.3%, and Latin America and Africa account for the remaining 5.6%.

• Necessary Maintenance Spending • Outlay on integration work in the wake of numerous mergers• Small and midsize banks looking to gain market share through IT initiatives• Need of increased customer focus, satisfaction and retention strategies

Key IT Triggers in

Banks

Geographic Spread

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CRM Trend: SaaS for Banking

Opportunities

• SaaS adoption is growing at

double-digit rates North

American and European

enterprises.

• Forrester reports SaaS adoption

by large enterprises at 16%, up

33%from the previous year’s

12%.

• North American companies are

the heaviest users of SaaS, with

double the utilization rate of

European firms.

• When interest in SaaS adoption

for finance and insurance at

14%.

• Of those using a SaaS solution,

nearly 38% use for collaboration,

36% for CRM, and 35% for order

management.

Challenges

• Customers not convinced with TCO of an ongoing software rental model

• Buyers believe that SaaS is more expensive in the long run

• Customer Concerns on integration and customization capabilities.

• Data Security Issues

• Complex Pricing Models and Contract Agreements.

• Ambiguous SaaS solutions management model.

Benefits to Banks

• Reduce infrastructure and

service costs without sacrificing

quality

• Achieve a better and rapid return

on investment

• Faster deployment and lower

upfront costs

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CRM Trend: Mobile Banking

Opportunities

• 35% of online banking households will be using mobile banking by 2010, up from less than 1% today.

• Upwards of 70% of bank center call volume is projected to come from mobile phones.

• Mobile banking will eventually allow users to make payments at the physical point of sale.

• "Mobile contactless payments” will make up 10% of the contactless market by 2010.

• Mobile banking today is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device.

*Source : Gartner Report

Challenges

• Interoperability: Lack of common Technology standards for mobile banking. Many protocols are being used for mobile banking- HTML,WAP, SOAP, XML

• Security: Security of financial transactions, executed remotely and transmitted over the air, need to be addressed jointly by mobile application developers, wireless network service providers and the banks' IT units.

• Scalability & Reliability: Scale-up the mobile banking infrastructure to growing customer base. Systems such as Mobile Transaction Platform enables quick and secure mobile banking service.

• Application distribution: To check the upgrades and download Over The Air updates

• Personalization: To support personalization

Customer Benefits

For Bank’s Customers • 24/7 bank services

anywhere• Easy service enrolment• Variety of financial and

information services• Timely notification of due

credit payments• Monitor your fund activities• Save your time and efforts

For Banks • Attract and retain customers• Increase your operations

security• Boost your sales• Decrease the customer

service load• Cost-effective solution• Flexible service and pricing

setup• Pre-integration and quick

implementation• High performance

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CRM Trend: Social CRM for Banking

Opportunities

Customer Insight • Unites Online and Offline

Customer Experiences and Comprehensive Customer Insight

Salesforce Adoption • Familiar interfaces and models,

Tagging to associate clients with key words and pre-existing relationships

Social Customers Behaviour• Remain customers 50% longer

than non-community users. • Spend 54% more than non-

community users. (EBay) • Report good experiences in

forums twice as often as they do via calls or mail. (Jupiter)

Current Practices

• Independent banking blogs are showing the potential to become substantial money making publications in their own right.

• Corporate Blogs : Employees of several banks are now using blogs to brainstorm internally and interact with customers.

• Deutsche Bank is to introduce new social computing tools.

• Financial services firms with aggressive marketing programs likely to use social media tools in customer-facing situations

• Community sites are becoming popular both for relationship building and as hubs for innovative financial services.

• Many good independent blogs on banking issues now being published on the Web.

Customer Benefits

For Community Users • Social Media tools like

blogs, forums, podcasts, wikis and social communities give consumers a global soapbox

• Power to make or break reputations, enhance or damage brands, create winners and losers in the marketplace with lightning speed

For Banks • Fast Response and

Reaction to Customer Opinions

• Deep and Rich Customer Insight

• Customer-Led Innovation • Increased Customer

Retention• Customer Acquisition

Thank You

“The contents of this document are proprietary and confidential to Infosys Technologies Ltd. and may not be disclosed in whole or in part at any time, to any third party without the prior written consent of Infosys Technologies Ltd.”

“© 2009 Infosys Technologies Ltd. All rights reserved. Copyright in the whole and any part of this document belongs to Infosys Technologies Ltd. This work may not be used, sold, transferred, adapted, abridged, copied or reproduced in whole or in part, in any manner or form, or in any media, without the prior written consent of Infosys Technologies Ltd.”

Appendix

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Key Players in the CRM Market

Forrester WaveTM: Enterprise CRM Suites

• Oracle’s Siebel CRM• Oracle CRM• Oracle’s PeopleSoft CRM• mySAP CRM• Amdocs Clarify• Chordiant Cx• Infor Global Epiphany• Onyx CRM• Pegasystems

Enterprise CRM Vendors

• Microsoft Dynamics CRM• Oracle’s Siebel on Demand• Salesforce.com• Pivotal• RightNow• Sage CRM

Mid-market CRM Vendors

AnalyticsSASTeradata

Master Data ManagementIBM WCCOracle Siebel UCMSiperian

Marketing AutomationUnica

Speciality CRM Tools