Spur Retail Bank Performance Improvement with CRM

In today’s increasingly sophisticated and fast-paced global market, retail bank customers conduct their banking via multiple delivery channels, including traditional retail bank branches, in-store branches, ATMs, mobile, online, and call centers. Regardless of the channel or location, bank customers desire a consistent way of doing business, and they require convenient and secure 24-hour access to execute and review transactions for all of their aggregated accounts, without any delays or disruptions. An August 2010 research report from the Aberdeen Group entitled “New-Age Retail Banking: Five Technology Imperatives for Customer-Centricity” (subscription required) reveals that many retail banks are losing revenue opportunities and failing to achieve sustained customer relevance because of poor integrated channel capabilities and inadequate or non-existent CRM systems.

The Aberdeen study surveyed 100 Retail Banking Institutions and classified the respondents into three categories: 1) Best-in-Class (top 20%), 2) Industry Average (middle 50%), and 3) Laggards (bottom 30%).  CRM-focused findings from the report include the following:

• “75% of Laggard banks do not integrate CRM data with enterprise applications.”
• Best-in-Class retail banks “are two-times as likely as Laggard banks to be currently using a CRM application.”
• Best-in-Class retail banks “are 1.7 times as likely as Laggard banks to be currently using BI tools for customer analysis.”
• “73% of Best-in-Class banks compared to 23% of Laggard banks align customer service and sales touchpoints with customer requirements.”

Evidently, Laggard banks struggle at gathering and storing real-time customer data in a central location.  Without a robust, customizable, and scalable CRM platform and a comprehensive 360-degree view of client data at their disposal, sales, service, and underwriting teams across all lines of business and channels at Laggard banks have no chance of providing a uniform banking experience to today’s price-conscious and rate-sensitive customers. Unable to capture historical interactions with customers, service teams of the Laggards suffer as they have no actionable insights to cross-reference to assist with account inquiries. Service reps may even provide inconsistent answers to client inquiries or ask clients to explain with whom and where their last conversation took place. As a result, customers may become so frustrated in the bank’s lack of communication between channels and departments that they feel their money is at risk, and thus they decide to move their assets to a Best-in-Class bank across the street or to an online bank offering a significantly higher interest rate.

Aberdeen also points out that Laggard banks don’t have adequate tracking of client purchasing habits or growth potential analytics so they cannot quickly capitalize on customer cross-sell and up-sell opportunities for deposits, loans, and investments. As Laggard banks miss revenue opportunities, provide inferior service, and fail to develop deep, cohesive client relationships, their overall performance suffers, too. As one would expect, Best-in-Class retail banks have a clear advantage over Laggards in terms of client service and retention, employee turnover, and profitability according to the chart below. There is much opportunity for improvement for the Laggards, as their employee turnover rate is more than twice that of Best-in-Class banks, their year-over-year client retention rate comes in at a very weak -3%, and their year-over-year return on net assets is flat.

Source: Aberdeen Group, July 2010

Retail banks can certainly leverage CRM to attract and retain more profitable clients, increase productivity, manage risk, track and integrate channel communication, and provide an enhanced and consistent customer experience. In particular, Laggard banks looking to gain traction on Best-in-Class banks should consider investing in Microsoft Dynamics CRM. To learn more about how Customer Effective has tailored the Microsoft Dynamics CRM platform for Retail Banks and other segments of the financial services market, please check out www.capitaleffective.com.