The advent of smartphones and ease of access to the internet has transformed how consumers interact with businesses daily. The banking and financial services industry (BFSI) is no exception when it comes to shifting consumer behavior and trends. Today, customers demand greater levels of transparency, ease of use, responsiveness, and personalization from banks. Banks are competing head-to-head with Fintechs and non-financial banking organizations of the likes of Google, Amazon, and others. To remain competitive, it has become very important for banks to retain their existing customers. In this scenario, banks would need to go beyond the core banking services and provide a complete banking experience that supports evolving customer needs and the technology landscape.
This is where customer relationship management or CRM comes to the rescue. Overall, CRM improves the customer’s experience by enabling banks to track, assess, analyze customer touchpoints, manage direct transactions, and help in upselling or cross-selling of products. According to Research And Markets, the global CRM software market was valued at $25.5 billion in 2018 and is expected to grow to $36.53 billion through 2022. With a booming industry, we take a look at CRM and its impact on the banking sector.
What is CRM?
Gartner defines CRM as “Customer relationship management (CRM) is a business strategy that optimizes revenue and profitability while promoting customer satisfaction and loyalty. CRM technologies enable strategy, and identify and manage customer relationships, in person or virtually.”
Traditionally, CRM was used to improve the sales and marketing efforts of an organization. But as we delve deeper into digital commerce, CRM applications are focusing on delivering better customer experience and service across channels. CRM in banking is similar to other industries, albeit with its unique set of challenges. Namely, organizational readiness, legacy systems, fragmented data sets, quality of data, data security, technology skill-gap, and integration of modern CRM with other banking systems.
Impact of CRM in the banking domain
Overcoming the manual challenges of customer data collection, modern CRMs are helping banks acquire a holistic view of their customers and keep an eye on essential key performance indicators (KPIs) for customer experience. A good customer experience reinforces customer loyalty to the banking organization while driving further customer acquisition and reducing customer churn. The key aspect of CRM for banks is the value creation from the data collected from multiple touchpoints. A relationship-based marketing approach allows banks to enhance customer satisfaction, loyalty, and retention rates.
- Development of a customer-centric business modelThe need for CRM in the banking industry stems from a business shift of developing a customer-centric retention approach, unlike the earlier transaction-centric approach. Evolving customer profiles and needs emphasize on delivering products or services around the dynamic customer. The 360-degree view of the customer streamlines operational, marketing, and sales processes that take into account a customer’s spending/buying history, preferences, complaints, and geolocation.
- Personalize customer relationshipThe holistic view of a customer provides banks with actionable insights for marketers/customer management representatives to identify the pain points of a customer on a personalized level. It would be nearly impossible to manually track and follow every customer when you have millions of customers. With a CRM, employees can create highly customized campaigns or communications that are relevant to the customer, reinforce brand integrity, and relay targeted communication around rate changes, new products, rewards/bonuses, and deliver products based on key life events of the customer.
- Delivering digital-first engagementsDigital transformation has pushed banks to develop digital-first banking experiences for customers. Research from IDG states that 44 percent of companies have already moved to a digital-first approach for customer experience. These digital-first banking services are powering the future of financial services wherein customers no longer have to rely on a physical banking location for transactions. Banking CRMs are helping banks to embrace and better deliver their digital initiatives to the customer. For example, ICICI Bank launched its Facebook banking app, Pockets, that allows customers to carry out banking transactions (funds transfer, bill payments, accessing account information, “split & share” and other non-financial transactions) directly on the social media platform.
- Create effective marketing initiativesCRM metrics are crucial for generating reports that highlight customer behavior – from engagement channels to purchase behavior. A report by Gartner highlights that more than 40 percent of all data analytics projects will relate to the customer experience by 2020. These data points help the marketing team strengthen their marketing efforts through proper customer segmentation and develop targeted strategies that improve engagement and retention rates.
- Increase employee productivityMost CRM software comes with a clean dashboard that provides deep insights into customer data on a single screen. Employees no longer need to spend hours of their time assimilating and organizing data as the CRM takes care of it. Menial and repetitive tasks are automated allowing employees to focus on the bigger picture of customer satisfaction. The automated system also lets the bank handle more customer accounts and attain operational efficiency.
Modern bank CRM systems improve collaboration between departments regarding customer issues, sales opportunities, and referrals. For example, Yes Bank developed YCCRM (Yes Bank Collaborative CRM) an in-house CRM platform that enables the sharing of relevant customer information to concerned departments to design new products/services for high-value customers.
In this digital-age, CRM is no longer an option for banks, but a necessity. A CRM effectively allow banks to connect with their customer and build long-lasting relationships that go beyond financial transactions. A well-aligned CRM strategy would significantly improve the bank’s bottom line while increasing customer engagement. For effective implementation of the CRM system, an organizational change is required wherein every department understands the importance of customer service and its impact on the organization.