Customer Relationship Management as the means for empowering the Dynamic Banker

Customer Relationship Management (CRM) is a broad approach for creating, maintaining and expanding customer relationships. CRM is the business strategy that aims to understand, anticipate, manage and personalize the needs of an organization’s current and potential customers.

At the heart of a perfect strategy is the creation of mutual value for all parties involved in the business process. It is about creating a sustainable competitive advantage by being the best at understanding, communicating, and delivering and developing existing customer relationships in addition to creating and keeping new customers. The concept of Product Life Cycle is giving way to the concept of Customer Life Cycle focusing on the development of products and services that anticipate the future need of the existing customers and creating additional services that extend existing customer relationships beyond transactions.

CRM is a process and it involves re-structuring or re-engineering business processes of the organization, re-aligning customer service channels and building a caring culture within the organization. More importantly, to adopt CRM successfully organizations must transform the business keeping customer at the focal point – creating a customer centric business. This requires a paradigm shift in the organization. These changes need to be brought in rapidly but it is important to understand the speed of change and how well the business is equipped to comprehend, internalize and implement the changes. Information Systems, Processes and People play a key role in this transition process.

CRM in banking industry is entirely different from other sectors, because banking industry purely relates to financial services, which needs to create the trust among the people. Establishing customer care support during and off official hours, making timely information about interest payments, maturity of time deposit, issuing credit and debit cum ATM card, creating awareness regarding online and e-banking, adopting mobile request etc., are required to keep regular relationship with customers. Perhaps the most important aspect in a relationship management exercise is to understand the customer and the specific individual preferences. This can be achieved through a well thought through and carefully designed data gathering and profiling process, such as a CRM. The importance of the role of CRM in the present competitive business environment is further highlighted in the following.

During the past two decades, the environment within which the banks operate has changed rapidly due to many reasons. Globalization, technology revolution, fast developing communication modes and financial liberalization have facilitated this change, intensifying the competition in the banking industry. As a result, the array of financial products and services have been broadened. Many efficient delivery and processing channels, innovative products and services have been developed, enhancing easy access to finance through the above modes. Introduction of Automated Teller Machines (ATMs), Electronic Fund transfers at the Point of Sale (EFTPOS), Electronic Banking facilities such as Internet Banking and Telephone Banking, Debit card, Credit card and Traveler’s cards are a few notable features, which increased wide accessibility of banking services in the industry. These rapid changes in the environment compelled the banks to compete with each other in the market. Unique products and services and effective Customer Relationship Management processes helped the banks to differentiate themselves from the competitors and gain a competitive edge in the market.

In addition to the above changes in the banking environment, the customer aspect too has changed during the recent past. The volume of banking customers have increased over the last two decades, with a wide range of tastes and preferences, for the above innovative products and services. Customers have become more knowledgeable, sophisticated, and assertive. They have become highly demanding, majority of them are less loyal, and more inclined to switch to a competitor at the slightest dissatisfaction with the regular banker. Customers in the modern banking environment expect flexibility in hours of operation, greater convenience, customization in products and services, user friendly IT facilities, transparency in transactions, wider accessibility, control and secured operations, personalized, friendly service etc. The number of financial institutions too have increased in the environment, competing to attract new customers fiercely. With the increased number of banks to choose from, customers now demand better quality, more customized products and services from their banks. In this customer-centric business environment, attracting and retaining the customers in the long-run has become a key challenge for the banks. This has led to a shift in the business focus in the modern banking environment from ‘transactional marketing’ to ‘relationship marketing’. As a result, the customer is at the centre of all business activities. Banks have position their staff to attend to the needs of the customers in a highly customized and responsive manner, introducing Relationship Managers, each designated as the prime contact for an assigned group of customers. They act proactively and offer customized products and services in a timely manner. The CRM processes help the financial institutions to manage their customers efficiently and effectively in this regard. The objective of banks introducing CRM is to build and maintain profitable customer relationships by delivering superior customer value and satisfaction, in order to enhance customer loyalty and retention.

CRM should not be used as the means of data gathering with the view of segmenting and targeting customers for potential promotions of financial services and instruments. This is just one aspect of a CRM process. But the greater value is derived from the ability to transform customer data into valuable insights and using it to understand customer behavior patterns and preference. This will lead to focused marketing efforts and introduction of service augmentations to meet customer specific needs. The challenge we face today is that most of the data required for this process is not readily available in one place. Even if the data is available we often don’t have the right set of tools and mind-set to draw insights from this data. Often the task of drawing business insights by analyzing the data is performed by a person who may have very little interaction with the customer. The customer facing staff on the other hand, may not have full visibility of the analysis results or a comprehensive view of the customer. This situation impairs the ability to provide a higher quality personalized service and the opportunity to upsell or cross sell financial products.

CRM applications that are integrated with the core-banking systems can bridge the information gap and provide the higher level functionality, analysis and insights that a dynamic banker would need in providing superior quality customer service. A fully integrated CRM system can provide many benefits to a bank, to gain a competitive edge in the modern banking environment. It will help the banks to gain insights for; 

* Predicting what customers need and want on a more personalized level.

* Understanding how much should be invested at the individual customer level.

* Understanding how to cost-effectively allocate marketing, sales and service resources.

* Accurate understanding of a customer’s net worth and overall exposure

* Measuring the effectiveness of resource allocation decisions.

* Driving intelligent decision-making across channels and contact points.

Aligning value delivered to customers with value generated from customer relationships.

As they look to the future, financial services companies will find themselves grappling with how to build on their CRM capabilities to accommodate an ongoing increase in the standard of excellence in customer management. Today’s customers don’t sit still, let alone tomorrow’s. As resources are stretched to new limits, the costs to attract and retain customers will continue to rise and banks will be forced to rethink how they can leverage the investments in CRM capabilities and infrastructure. What should financial services organizations be doing to address this challenge?

The Institute of Bankers has taken an initiative to address this concern and will be organizing a seminar on 11th November 2010 together with the Microsoft Sri Lanka, to address how CRM can be used by the present day Dynamic Banker to provide a superior customer service, while enhancing the capability to cross-sell financial services / products to the customer. This seminar will be exclusively for the members of the Institute of Bankers of Sri Lanka (IBSL) and the Association of Professional Bankers – Sri Lanka. Further, it will be part of the Continues Professional Development (CPD) program of the IBSL for its AIB and FIB holders. The objective of this seminar will be to highlight the need for a CRM process in banking and introduce to the audience the broader benefits that can be derived from adopting a CRM process.