9 June 2009

For banks, collecting and analysing data about both their customers and their business is critical to survival. Lindsay James looks at the challenge of using this information effectively to compete in an ever-changing market.

Today’s banks operate in a complex, competitive and highly regulated environment, with low margins and high customer expectations. But, with the amount of mergers currently taking place as a result of the financial crisis, reliably translating strategic business decisions into concrete actions that lead to measurable results is seemingly impossible.

Much of the data banks need to make strategic decisions that can improve their performance and increase their profitability is stored in silos managed by disparate and disconnected technology systems. “The recent surge of acquisitions and mergers in the banking industry means that legacy systems have been replaced by a number of new, disparate systems, which can lead to a lack of consolidated customer information across banks’ business units, branches, or channels,” says Max Fatouretchi, Microsoft’s Dynamics industry manager for Microsoft Business Solutions. “This can prevent banks from understanding their customers’ needs and values. Not knowing how customers interact with a company is a liability: it decreases the ability to retain the best customers, deploy effective sales strategies and minimise risk through preventative outreach.

“There are also an increasing number of compliance issues to be considered such as MiFID (Markets in Financial Instruments Directive). The European Union law mandates an entirely new approach to accessing, processing, and reviewing customer information. This means that banks face challenges in giving their employees the timely and comprehensive information they need to continue delivering top-notch customer service. To ensure they deliver this service and comply with this regulation, banks need a fast, accurate, and complete way of handling customer information.”

Even banks that have sophisticated business intelligence and performance management solutions often don’t use them effectively, or the technology is so costly and complex that only a few executives and managers are allowed to use it. As a result, many banks fail to get the information they need to make informed decisions and to plan for success, and even when they do, that information is often incomplete or out of date.

“Business intelligence is often a black box back-office function used for supporting only a few executives,” says Victor Dossey, industry technology strategist for Microsoft’s Worldwide Banking team. “This is far from good enough in today’s fiercely competitive market – to be effective in the new age employees across the bank need to be able to leverage the information that is out there so that everyone in the organisation can be accountable and have access to the data that is important to them.”

Empowering the employee
Key to enabling better access to information is a unified customer relationship management (CRM) platform that can integrate all data from disparate sources to provide bank employees with the most relevant, timely and accurate information for this role, while simultaneously tracking sales processes and required workflow activities.

Microsoft Dynamics CRM is one such technology, as Fatouretchi explains: “Microsoft Dynamics CRM provides holistic client information by pulling it from disparate data sources and then delivering it to users through intuitive prospecting and CRM tools that are natural extensions of Microsoft Office system applications. By giving customer-facing advisors and representatives access to the right information at the right time, Microsoft Dynamics CRM provides greater client insight, improves customer service, and helps firms attract and retain profitable clients.”

Giving employees access to the right information is transforming the way banks do their business, says Marcelo Marquez, industry solution manager for Microsoft’s worldwide banking team: “At the moment we’re seeing a big shift in banking from a service culture to a sales culture. This does not mean that banks won’t be focusing on servicing customers, but we are seeing more often than not that a branch manager’s income is built on results. To succeed they need to know how well their business is doing, how their results compare with those of their peers and how well they are succeeding in areas of market opportunity.

“This kind of information is very different from the information branch managers had from core banking systems, where reports only told them what happened days or even weeks before. Today’s technology, such as Microsoft Dynamics CRM, can give branch managers and employees throughout the branch access to up-to-the-minute information that will tell them what they need to be doing more or less of, in a way that is easy to understand. Microsoft’s way of expressing information is so visual that managers can do their job by exception.”

Great expectations
Once armed with information, bank employees can use it to meet the increasing demands and high expectations of customers, creating a better, more profitable dialogue with them.

“There are three major things that have changed customers’ expectations over recent years,” says Fatouretchi. “First of all the economic downturn has led to a lack of trust between customers and financial institutions. “In these times when confidence is shaken, delivering consistent, high-quality experiences across all channels is more important than ever.”

Secondly, the proliferation of products on the market has had a huge impact with regard to customer choice, as Fatouretchi explains: “Ten years ago banks targeted communities with 30-50 products, but now over 200 products are on offer. This means that customers expect to work with a bank that knows exactly what products they have and what they will need in the future, according to their own individual needs.”

Finally, customers expect to have access to their personal information through different channels at all times. “For example, if a customer opens an account or ISA in person at a branch, they want all parts of the business to be aware of who they are and the accounts they hold, as well as previous concerns or issues, so that if they call up the bank with a problem they don’t have to explain their entire banking history to a call centre agent or to restart the case from scratch,” adds Fatouretchi.

Microsoft Dynamics CRM provides financial institutions with the tools to understand customer needs and preferences, making it easier for them to deliver consistent experiences across all touch points to regain customer trust and improve customer satisfaction. Streamlining and automating processes – even those that cross departments and channels – helps create a 360-degree business and customer view to improve the customer experience while decreasing overall operation costs.

Getting the data right
Contact data is the bedrock of good CRM, and maintaining the accuracy and relevance of data is paramount to successful and profitable customer relationships. “If the contact data contained in a CRM system is not accurate and up-to-date, this could have major cost implications to a business,” says Terry Hiles, managing director at data management company Capscan. “For example, a bank or financial services company sends out its brochure twice a year en-masse to its entire database of 50,000 existing and past customers. Each catalogue costs £1.25 to print and a further 69 pence per item to mail out. If, for example, ten per cent of the data has decayed, the cost to the organisation will be in the region of £19,400 for creative and postage alone, rising to £97,000 if half of the data has deteriorated.

“In an average year, 13 per cent of the UK population will move home, 600,000 people will die, 300,000 will marry or have civil ceremonies (so it is likely that almost 50 per cent of these will change their surname), 200,000 will emigrate and approximately half a million people will move to the UK. When faced with these statistics it is not surprising that a customer database that is not adequately maintained will decay at the conservative rate of 20 per cent, and possibly as high as 30 per cent each year. Within just five years such a database will contain no valid or usable information.”

Capscan has recently developed an address management plug-in for Microsoft’s CRM solution – Matchcode for Microsoft Dynamics CRM. The software enables sales and marketing teams to improve customer analysis and achieve a comprehensive view of the customer base through the accurate capture and validation of UK contact data.

In these times when confidence is shaken, delivering consistent, high-quality experiences across all channels is more important than ever

Max Fatouretchi, Microsoft “Using Matchcode for Microsoft Dynamics CRM speeds up the sales cycle, reduces costs associated with incorrect contact data and complements an organisation’s data quality management strategy, by ensuring the customer database contains only high-quality contact data, validated against the Royal Mail’s Postcode Address File,” says Hiles. “Matchcode for Microsoft Dynamics CRM also improves customer communication and brand image through correctly addressed and delivered items. A single customer view can also be achieved, by ensuring the accuracy and consistency of data formatting stored across the whole organisation.”

Enabling competitive differentiation
Banks strive to differentiate themselves by establishing deep, trusted relationships with customers to improve their image, regain customer trust, and retain profitable customers. Transforming data into knowledge will be critical for banks looking to differentiate themselves and gain competitive advantage.

“Data derived from CRM systems can give you a complete view of customers, showing all of their communication and transactions by telephone, e-mail, and Web,” says Hiles. “Better performance insight can lead to a more thorough understanding of customers and how they interact with the business. For example, it can show their patterns in buying and their lifetime value, as well as reveal insights into customer acquisition process, enabling you to refine and improve on them. Further, transforming the data into useful information enables more informed business decisions, helping to improve customer service and product offerings. All these elements can enhance the value chain of a business, leading to competitive differentiation and advantage.”

“Competitive differentiation is easily achieved when you have the right information at your fingertips,” says Marquez. “Banks have a wealth of information about their customers; if you are a regular user of your credit card, they have information on every transaction. Banks can build a profile of you which details how often you go to restaurants, what department stores you go to, and much more. They can then use this information to target relevant products to customers, rather than taking a blanket approach like in recent years.”

So, it seems obvious that competitive differentiation is key to success in the current market, with business intelligence and CRM technology being the key enabler. “The current downturn was caused largely by financial companies and consumers taking on too much leverage,” concludes Hiles. “Paradoxically, I believe CRM technology could come to the rescue with a leverage of a different kind, to give businesses the customer intelligence needed to make better decisions and to streamline processes. I think more banks will turn to CRM technology in a search for more effective ways to attract and retain corporate clients. With fewer customers and employees, the primary aim of most banks now is to make every pound and every person count.”


This article first appeared in the Summer 2009 edition of Finance on Windows.

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