Customer centricity in banking moving to the forefront

By Tom Groenfeldt

Customer centricity is moving from a banking industry buzzword to reality as bankers turn to important new technologies, such as big data and real-time customer analytics, to improve the customer experience.

A 2013 survey by Bloomberg Businessweek Research Services (BBRS) of banking executives around the world found that well over 70 percent thought that customer centricity is very important. Improving the customer experience by looking at their products and processes from the customer’s point of view and need is considered an important strategy to reduce churn, increase revenues and otherwise impact both the top and bottom lines.

The reason it is important is clear: A recent Accenture report said banks could lose 35 percent of their revenue by 2020 and up to 25 percent of US banks could simply disappear. Customer loyalty is often only as real as the convenience of a local branch. Close the branch and the customer could move to other banks with a close-by branch or to a virtual financial provider with no branch overhead at all.

However, much of bankers’ energy, not to mention IT budgets, has been directed at meeting new regulatory requirements. As compliance projects are completed, bankers now have the time and resources to improve customer experience through more targeted, personalized service.

“Now they are launching initiatives with customer dashboards and portals where consumers can get a more customized experience online,” says Christine Barry, research director at Aité Group, a financial services analytical firm.

Not easy to achieve

Customer centricity is not easy to achieve on the aging, inflexible legacy systems that many banks have. Only 55 percent of the bankers surveyed said they can analyze their current customer activities such as deposits, withdrawals and payments. Far fewer are able to analyze their customers’ social media sentiments. Note that this ability can yield important information about personal preferences and life events that have financial impacts, and channel preferences.

Bankers know it is easier to sell new products and services to existing customers than to find a new customer, but they have been slow to act on the knowledge. The BBRS survey found that only 29 percent of banks could analyze customer wallet share, one of the key measures of a firm’s relationships with its customers.

Some banks show what can be done with data. PNC is using the bank’s own customer information, plus outside data on online purchasing and investments, along with social media to define segments for its customers and prospects. Then it goes to social media “publishers” to buy appropriate exposures for the segments in a digital-first marketing strategy.  It knows that a 24-year old recent college grad and a 35-year old mother of three may both interested in vacations, but different types of vacations. And it knows they are apt to log on to entertainment or travel sites at different times of the day. Having developed short videos for each segment, PNC can reach them with an informal, humorous approach at the right time on the right social media site and then track the results. For more information, click on this link: http://www.forbes.com/sites/tomgroenfeldt/2013/11/25/pnc-goes-digital-first-in-marketing-to-the-tech-savvy/

Better targets

Cleveland-Based KeyBank is using transaction and other data to provide targeted offers and advice. It also uses data to staff branches more efficiently and figure out where new locations would be successful as more customers shift to online and mobile. Just changing staffing and hours at its branches saved $35 million in one year. For more information, please visit: http://www.forbes.com/sites/tomgroenfeldt/2013/06/03/keybank-moves-to-data-driven-decision-making/

Commonwealth Bank of Australia monitors social media 24 hours a day for service issues affecting its own customers. It also watches for complaints about competitors. It is quick to send a message to unhappy customers of its Australian rivals suggesting they move their accounts to CBA.

Achieving this sort of customer centricity requires managing the huge volumes and varying types of data needed to understand customers across their banking, social media, mobile apps and the Web. Yet 40 percent of the bankers surveyed said the huge volumes of data were the leading obstacle to customer centricity.

Another perennial IT problem in banking is the lack of real time capabilities. Many banks are operating on systems built for batch processing. Data is spread throughout silos in most banks, often with different file structures and operating systems. Data warehouses can standardize the information but at the cost of latency which is unacceptable in today’s real-time business world.

The most widely used core banking systems are 30 to 50 years old and were built around products rather than customers. Newer architectures place the customer at the center and can access all the customer’s available information and deliver it across any channel. This enables banks to make personalized offers through tellers, on ATM screens, online and through mobile devices.

Commonwealth Bank of Australia monitors social media 24 hours a day for service issues affecting its own customers. It also watches for complaints about competitors. It is quick to send a message to unhappy customers of its Australian rivals suggesting they move their accounts to CBA.

Achieving this sort of customer centricity requires managing the huge volumes and varying types of data needed to understand customers across their banking, social media, mobile apps and the Web. Yet 40 percent of the bankers surveyed said the huge volumes of data were the leading obstacle to customer centricity.

Another perennial IT problem in banking is the lack of real time capabilities. Many banks are operating on systems built for batch processing. Data is spread throughout silos in most banks, often with different file structures and operating systems. Data warehouses can standardize the information but at the cost of latency which is unacceptable in today’s real-time business world.

The most widely used core banking systems are 30 to 50 years old and were built around products rather than customers. Newer architectures place the customer at the center and can access all the customer’s available information and deliver it across any channel. This enables banks to make personalized offers through tellers, on ATM screens, online and through mobile devices.

About Tom Groenfeldt

I write - mostly about finance and technology, sometimes about art, occasionally about politics and the intersection of politics and economics. My work appears on Forbes.com and International Finance Magazine. The Financial Brand ranked me 20 on a list of the top 25 global influencers in financial services and Jay Palter included me in his list of 250 fintech influencers to follow in 2016 http://bit.ly/1SSRXC6
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