 Anders Maehre Financial Services Technology Analyst Datamonitor krao@datamonitor.com |
Despite increasing focus on ROI and cost control, retail banks need to continue investing in CRM to build competitive advantage and to reap the benefits of previous investments. Integrated CRM solutions will enable the banking industry to change its focus away from customer volume to customer value-building using individual customer understanding to build actual personalized relationships. CRM success however depends on more than mere technology. Impact of economic slowdown In the current macro-economic climate, banks are focusing ever more on cost and revenue potential. IT projects are increasingly justified by return prospects and cost-cutting potential. Over the last few years many IT projects have been neither revenue generators nor indeed cost cutters, but have been given priority on the grounds of maintaining competitive equality. In the banking sector this has been especially true in the distribution channel space. Banks have tended to favor short wins in terms of simpler CRM application implementations or bringing new channels to market with little regard for building efficient architectures and long-term optimum systems. As cost pressures mount and clearer ROI becomes more important. However, given the current macro-economic climate and renewed focus on cost control over the last 12 months, channel integration and operational CRM projects in theory should provide much sought after structural cost-cutting and substantial revenue-generation possibilities. Market outlook Retail banks across Europe and the world are increasingly reviewing their planned IT investments in light of the economic slowdown. The key issue for banks in the months and years ahead will be to invest smart, in the areas that can create sustainable competitive advantage and that has a proven return on investment (ROI). In a new report just published, CRM technology in retail banking, independent market analysts Datamonitor have stressed that CRM is one of the key areas that banks are going to have to continue investing in. The report also predicts that spend on CRM by European retail banks will grow from $2.4bn in 2001 to $3bn in 2004. Of this the vendor addressable market will be $1.5bn in 2001 growing to $1.9bn in 2004. This represents a growth of over three times the overall retail banking IT market. The key issue from banking CRM point of view is to make the customer pay. Too many customer relationships only breaking even or, are in fact, loss making. Integrated CRM solutions can potentially enable retail banks to move from a customer volume to a customer value focus, a shift in paradigm and a fundamental change in the banking industry. Integrated CRM solutions theoretically put banks in a position to design their customer relationships on an individual basis to balance customer profitability with customer loyalty. Hence banks can provide value added services for more profitable customers and more basic products and services for customer the banks believe are lifetime loss-makers. According to Datamonitor, there is already a shift in retail banks CRM focus - from operational, which allows them to establish a consistent interaction environment with customers, to analytical CRM, which enables improved understanding of individual customers' needs. However the critical issue for ROI is the integration of both operational and analytical capabilities. This makes analytical information actionable through the operational environment. Technology is but a part of the puzzle Despite the ubiquitous nature of CRM and its hypothetical advantages, a number of different statistics exist on the topic of CRM failures, typically suggesting that a majority of CRM projects fail to deliver on expectations. This is also the case in retail banks and throughout the financial services arena. Datamonitor believes these "failures" in part stem from poorly quantified expectations, a pure technology focus and a lack of strategic vision and senior management support. It is vital for CRM success that it is seen and treated as a strategic investment decision and process. It must be seen in its context of the retail bank's stage of development and its limitations and ramifications must be understood with this in mind. Viewing CRM as a strategic decision or an ethos and not a series of smaller technology implementation projects will promote the kind of enterprise-involving attitude required to deliver on the high expectations that CRM is commonly associated with. To understand that CRM is first and foremost a strategy is the first step towards reaping the benefits discussed above. Whereas operational excellence cannot be achieved through an application alone, a corporate change initiative embracing all business functions may be able to deliver on this promise. Most importantly, though, CRM is a mentality and a philosophy of how to approach, satisfy and retain the individual customer, not a magic application that changes bad customer service and procedures into customer satisfaction. | ||||||||
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