Managing loyal customers is critical to the success of any bank – be it Retail or Wholesale. What is equally, if not more, important is the analytics that enable banks to develop and execute a successful Customer strategy. It should come as no surprise to anyone that understanding Customer Profitability, i.e. the value the customer drives for the bank, is the first step taken to build a differentiated customer experience where the most profitable and loyal customers are rewarded with the best possible experience, sometimes at a significant cost to the bank, a luxury that the bank many not be able to afford for all customers.
Banks, especially Retail Banks, are very data-driven and pride themselves in their analytical capabilities as compared to many other verticals. And yet, a complete fully-loaded view of a Customer’s profitability is something that has proven elusive for many banks. The reasons vary from bank to bank. But generally it comes down to a few key issues:
This typically leads to business decisions remaining disconnected with insights. Some early warnings are easily missed out in the process and key insights and trends are unknown to the organization for a long time.
FSIs have been focused on achieving a 360-degree view of their customers from a CRM perspective for more than a decade. Typically this involved gaining visibility into the customer across various product lines. This understanding is essential, but it only goes part way, failing to deliver a comprehensive understanding of the customer in terms of:
To compound these issues, the Financial Sector is witnessing one of the most volatile periods in recent history. It’s not just the traditional issues around ensuring effective margins, cost efficiencies or managing regulatory costs. Increasingly, banks are forced to compete with non-traditional players who are challenging the traditional banking models and offering customers a brand new experience or a totally innovative product. Modern technologies have led to customer demands for an “Always On” product. Customers want the ability to bank “Anytime, Anywhere and on Any Device”. In such a context, timeliness will be critical for ensuring retention of especially the bank’s most profitable customers. Retention is more important than in the decades past. With costs of acquiring new customers ever increasing, margins constantly squeezed through cost of compliance and diminishing fee revenue, retention has taken center stage.
Thankfully, the same modern technologies have provided the banks with many tools to meet these needs and compete effectively in the marketplace. Banks are becoming more data dependant and analytics is moving close to points of interaction with the customer, enabling banks to deliver a highly personalized and differentiated experience. There are external data sources that are enabling banks to understand their customers much better than ever before. Big Data technologies are enabling banks analyze a lot more data, a lot faster than ever before. Banks now have information on customer sentiments about a certain product or a feature within a product or more broadly about the bank itself. They now have a chance to react to these sentiments and contain any potential fallout.
But with all the technology options out there, where do banks start to look for the solution best for them?
With the vastly enhanced information available with the bank and with computing power that can tap into this information, bankers are well positioned to extract insights in a timely fashion. Marketers are well positioned to leverage these insights to better target their customers to offer products that are tailored to the individual customer needs. Mass customization is truly the order of the day. Relationship Banking must incorporate these new dimensions as now more than ever the Customer is truly King!
Join me as I discuss how to truly capitalize on customer relationships to drive more revenue, deliver outstanding service and grow profitability at this year’s Oracle OpenWorld in San Francisco. My session is on Tuesday, September 24th at 10:30am. Do share with me your thoughts and comments on the blog as well.
Kiran Jagannath is the Vice President of FS Analytics at Oracle. He can be reached at kiran.jagannath AT oracle.com.