Customer intelligence key to maximising bank profits

A new report* by the independent technology analyst states that banks have been saddled with multiple, often overlapping systems providing glimpses of insight into their customers. In addition, as research** by Ovum's parent company Datamonitor has revealed, many consumers have lost trust in their banks and are more willing since the credit crunch to shop around for financial products.

Ovum believes banks must actively embrace service improvement activities; whether through improved targeting of the "right" customers, greater emphasis on providing a better integrated experience by synchronising contact channels, or recommending appropriate financial products without taking an obvious 'hard sell' approach.

Aiming for greater customer understanding

"All these improvements aim at greater customer understanding which will ultimately translate into improved trust and maximised profits", said Jaroslaw Knapik, senior analyst at Ovum and report co-author.

"Banks must attract new customers who will stay active not for a few months, but for years. Additionally, providers must reassess their approach to retaining existing customers; they must not simply retain but further monetise existing customers through gaining a better understanding how to more effectively cross-sell and up-sell their products and services."

The Ovum report states that the growth of multichannel propositions presents banks with the opportunity to gain a more complete understanding of core customers. The challenge is to integrate all transaction information, web analytics and marketing data, so that data from various channels can be correctly analysed and interpreted. To achieve this, banks must aggregate all customer data and event details from all systems in one place.

However, it is not just the bank that requires information. It should be a two way process that actively engages customers, allowing them to submit feedback, ask questions or request product information through these same channels.

"Banks should be confident that customer data is complete, accurate and up-to-date", said Knapik. "Getting there requires banks to treat customer data as a strategic asset that is managed as a shared resource."

Ovum sees Customer Intelligence (CI)*** as the next logical step in the development of the customer-centric bank, as it expands on the promise of Customer Relationship Management (CRM) by aggregating data beyond the customer interactions that are managed by most CRM implementations, providing deeper insight into the behaviour and experiences of a bank's customer base.

Ovum expects spending by retail banks on multichannel integration and customer information systems (MI/CIS) to grow at a CAGR of 4.6% between 2009 and 2014, with the market size increasing from US$4.9 billion (about R35.6 billion) globally to US$6.1 billion (about R44.3 billion) over the period. Spend on MI/CIS is expected to grow at faster rates than most other business areas. Only technology spending on online banking (5.5% CAGR 2009/14) and management information systems (5.1%) is expected to grow at a faster rate.****

Notes

* The report is entitled: Maximising Profitability through Increased Customer Intelligence in Retail Banking. ** The findings are contained in Datamonitor's Financial Services Consumer Insight Survey. *** Customer Intelligence (CI) is the process of gathering and analysing information regarding customers, their details and activities in order to build deeper and more effective relationships and improve strategic decision making. **** Ovum sizes and forecasts technology projections in its technology spending model. The data provided is extracted from 'Retail Banking Technology Spending Through 2014: Business Function Segmentation', published in June 2010. MI/CIS is used for providing business users in the front office with customer data. Users are mainly sales, marketing and service departments, which use MI/CIS for medium- and long-term customer product targeting. Depending on the complexity of the system, MI/CIS can be used to profile customers, or segment them into addressable groups.