Guest post from Laurence Trigwell, Worldwide Financial Services Executive, IBM Business Analytics
Follow Laurence on Twitter @LaurenceTrigwel
The long term after effects of the financial crisis (scarce and expensive capital, increased regulation and constrained economic growth) continue to impact the financial services business model. Commentators estimate bank profitability will reduce by 20 to 40 percent for some business lines and geographies.
Such significant, and arguably, structural adjustments to profitability is causing banks to reconsider their business models and strategies. And, somewhat inevitably, a return to a focus on the customer has become mainstream!
Replacing the product push or what some bank executives have called “revenue at all costs” with a coordinated and aligned response to put the customer first, makes sense. We’ll be diving deeper into this topic at our upcoming videocast on March 20.
However, with scarce resources and squeezed business models the challenge is identifying the must win and retain customers and creating appropriate and actionable responses throughout the firm.
More specifically becoming customer focused means:
· Creating deeper and more granular understanding of the individual customer to anticipate need;
· Incorporating that understanding into line of business strategy and adjusted business models;
· Supporting the creation of functional budgets, plans and targets;
· Embedding those goals, plans and actionable insight in channels and marketing; and,
· Creating deeper levels of client engagement.
On the surface, this sounds like an impossibly large objective for a whole host of reasons: alignment and coordination is challenging, budgets are squeezed, and business and technology resources and capabilities are constrained, among others.
The reality of course, and an increasingly common response from financial service institutions, is to create a suite of programs that develop and mature existing capabilities. For example:
· Finance – creating a more broadly informed, (e.g., risk adjusted) granular (e.g., transaction level) understanding of the factors driving customer profitability
· Marketing – maturing use of existing and new sources of customer intelligence to anticipate individual client requirements and provide more targeted and actionable insights to client channels
Advances in analytics in recent years are playing a critical role. For instance:
· The scale and scope of data that can be analysed has grown exponentially, while associated costs have reduced;
· Analytic platforms have emerged that combine predictive analytics, financial analytics, performance management, risk analytics and business intelligence; and,
· Analytic models (business, financial, predictive) are being owned and developed jointly by the business and technology teams.
In essence it means organisations are now creating alignment and agility around customer preferences at a lower price point. The most innovative are already embracing these new capabilities and unlocking significant benefits.
For instance, TEB’s acquisition of Disbank created a large Turkish financial institution. Creating value from the combined customer base became critical, specifically identifying the next best product for its 1.7 million customers.
Creating and deploying that insight in an actionable way meant relevant offers were delivered to inbound contacts regardless of the channel they came through and avoided overlapping or repeated offers. And, TEB achieved nearly 16 percent offer acceptance rates on specific products in the first month.
Fiserv Inc. a leading financial technology services provider, pools the information assets from a base of more than 2,000 banks to enable its small and medium sized bank clients to build more effective retention, growth and cross-sell strategies.
This has resulted in a 68 percent reduction in attrition among high-value customers, and an 18 percent increase in debit card revenue annually with behavior-based incentives to migrate card customers from low to high value segments.
To learn more about how banks are better leveraging analytics across their business, please join us for the “Analytics in Banking: Using Customer Profitability Analytics to Enhance Financial Performance” videocast on March 20, 2013.