Importance of CRM Systems in Modern Retail Banking

"Central banks don't have divine wisdom. They try to do the best analysis they can and must be prepared to stand or fall by the quality of that analysis.” This quote from Mary Kay Ash, founder of Mary Kay cosmetics shows the key to the wisdom of banks – analysis. Like central banks, retail banks today recognize they must identify, attract and retain profitable customers. The question is how to do this.

Banks, historically, have taken a non-holistic approach to customer management and customer service, offering products and services which satisfied the banks rather than the customer’s needs. Retail banks today recognize that this can no longer be the case. They must be able to react to the individual customers requirements for flexible, customized services and products that can be accessed through multiple channels. In other words, they must be competitive in a competitive market.

Historic entrenchment, however, has made banks reluctant to enter into the banking CRM world which would allow front line branch personnel the ability to manage the customer with a holistic product package. Knowing the customers’ needs at the initial point of contact allows for the ability to up-sell as well as cross-sell a full range of financial products and services.

Within the past decade the move from physical branch to e-branch has been significant. No longer is your banker behind the teller’s window or behind the desk in the office. Your banker may be your mobile phone, home computer or any other electronic device – faceless and nameless. Generally, over one-half of a retail banks’ customers use some form of e-banking. It is not unusual for a customer, once an account is opened, to never have to visit the branch again. This begs the question: How do you increase the ROI on the “electronic customer?” How can you cross-sell or up-sell to an unseen customer?

Though, a bank's senior decision makers fully understand the branch process and the necessity for it, they have somewhat less understanding of their electronic customer base. It is this gap in knowledge that in many cases causes a reluctance to institute a CRM system. There are concerns about expenses associated with the system, the ease at which the system can be accessed by front line personnel and the relinquishing of authority to the front lines. Even more frightening to the entrenched bank establishment is the relinquishing of choice to the customer themselves.

How then, can a CRM system assist these retail establishments in increasing their ROI? CRM success in retail banking depends on measurable ROI over a short period. Expenditures and prospective earning over an established period of time must be defined. With this information the return from a CRM system can be measured.

One significant issue for physical retail banking is the shifting peak periods–the need to reallocate idle or untapped branch resources during peak periods will have a positive impact on ROI. An integrated CRM system can help to shift these resources through equal access to customer information. The concept of the process driven workflow in a retail bank needs a CRM system which can:
  • Capture customer data at the point of entry into the banking system – the branch. Ensure that all customer information and history are accessible – allowing the branch to foster the corporate identity of the organization. 
  • Provide quality information on each customer interaction that can then be accessed by senior management in timely reports which allow more refined analysis than previously available. 
  • Enable bank marketing to easily identify customer contacts by market segment and target correspondence to those customers most likely to acquiesce to the product or service offering. 
  • Ensure that the customers experience within the system is consistent across all channels.
The Banking CRM system also integrates the electronic customer identity into the organization. No longer is the face-to-face bank contact required to cross-sell or up-sell products. New product introductions, based on the current electronic customer profile, can be offered though the e-marketing channels.

Managing the customer is what CRM is all about – it allows the banking establishment to look at the full basket of products offered by the institution and based on customer profiles offer the most profitable product to the most profitable customer.