Developing a Better Understanding of the X Factor – the Customer

The study was conducted by SAP with the University of Mannheim, Germany, and published by the European Financial Management and Marketing Association (EFMA). Participants included bank managers from private banks in European countries of the EFMA, in the Middle East, and in Africa. A total of 42 banks in 21 countries completed an online questionnaire, more than two-thirds of them large banks with more than a million customers.
The study’s goal was to develop a view of current benchmarks and strategic planning for the next three years in the areas of customer management and core banking. The discovery of gaps and opportunities for improvement were to supplement the goals of the study.
The study produced two paramount results. First, the strategic direction of banks unexpectedly looks toward a growth strategy rather than toward cost savings. To increase profit, only 13% of the banks look toward reducing costs, and 87% wish to invest in additional growth. “These clear results are a surprise,” says Kay Patzwald, project director at SAP. “Given the debate on costs of the past few years, 87% is an unexpectedly large portion.” Second, to achieve their growth targets, banks force the setup and extension of effective customer relationship management, which greatly depends upon technological and organizational performance. More than a third of the banks in the study admit to significant constrictions in performance in terms of customer needs. This deficit should be made up in the next few years.

Strategically Oriented to Cross-Selling and Customer Acquisition

Half of the almost 90% of banks that count on growth are building upon cross-selling measures – bundling and selling supplemental products to existing customers. Two-fifths expect additional growth from business with new customers. Some 47% of the banks already have a cross-selling rate of more than 2.5 products per customers, and 82% of the banks want to reach this rate within the next three years.
Primarily for goals related to growth, the trend is moving in the direction of data mining and business intelligence. Although only 14% of the banks questioned already use data mining, that figure will quadruple to 57% in the next few years. Segmenting the customer base for marketing campaigns can lead more easily to success. Only 40% of the banks use segmentation as part of their business strategy right now, but the figure will rise to 91% in the next three years. Another trend is the implementation of customer information plans (CIP) that define what customer data is needed, why it is needed, how it is weighted, how it is captured, and how it is used. Currently only half of the banks questioned have a CIP, although 8 out of 10 banks plan to implement such a procedure.
Whether it’s sales strategies, orders, complaints, statements, or other questions, the moment of truth arrives with every customer contact. That’s why successful customer management is the key factor for a better understanding of what is frequently still something of an unknown factor – customers – so that banks can understand their attitudes and behavior and tailor product offers to them. The quantity of data is not enough – the data made available to banks must be of high quality.

High-Performance Organizations

Time also plays an important role here. Using real-time data for customer service is one of the major goals of the banks that participated in the study. Right now, only 17% of banks can process and close spontaneous customer requests directly on the telephone. This figure should grow to 80% and in the future will be an important key figure for the industry. In addition to technology, this ability requires organizational changes. Banks not only need access to information, but also qualification, authorization, and clear responsibilities for employees so that the employees can respond to spontaneous customer requests to the satisfaction of the customers.
The ability to make data available and to use it in real time is one of the most important challenges for banks. This ability applies not only to standard processes like transfers, but also to individual customer service. If a customer makes a deposit at an ATM and then contacts customer service for information on investment opportunities, banks can provide the desired advice only in the rarest of cases. The situation is similar when a new customer wishes to open an account. Today, 43% of banks can provide customers with a new account within 24 hours; only 21% can do so in real time, although 69% of the banks want to reach this goal within the next three years. And it’s even more difficult when processing a request for a credit card. Most banks need two to three business days to process the request today. Only 7% can now have real-time processes, and only 20% consider it realistic to implement such processes within the next three years.
The ability of banks to perform will decide their future. In day-to-day business, cross-selling, and acquiring new customers, banks with a comprehensive view of customers and their data will have an advantage. “We still have to close the gap that exists for real-time data,” says Patzwald. “Doing so affects more than the technical side. It requires a rethinking and restructuring of the organization and the corporate culture.”

Technological Support from Integrated IT Systems

Because of an infrastructure that has grown in various directions over many years, today’s IT landscapes at banks are similar to a patchwork quilt made up of various systems. Given the banks’ goal of growth, IT departments must now take the enormous quantities of data distributed across various systems and applications, bundle it, and make it centrally available for customer management. However, 36% of the managers surveyed regard their IT systems as inadequate to reach the desired strategic goals. All of the banks surveyed are striving for adequate systems within in three years. That means that all IT applications must be better tailored for future requirements and offer a higher level of standardization and automation so that they can react more flexibly to customer demands.
The individual changes that IT must undertake are another result of the survey. Half of the banks want to use a combination of standard software and in-house developments when considering a make-or-buy decision. One-third plans exclusive use of industry-specific, standard software. Banks are devoting their attention to the topics of business intelligence, data mining, and, increasingly, to services-oriented architectures so that they can come out on top in the midst of competition that raises the bar for everyone. The bottom line, however, is that IT investments alone are insufficient. “Only a combination of strategy, supporting IT enhancements, and cultural and organizational change will let banks reach the strategic goals that the study indicates they have set for themselves,” says Patzwald.

Petra Winkler