May - July 06 / Vol 01 / Issue 06

Interview Customer Relationship

Gerd Schenkel Management
Paul Newton 2nd Generation Expert’s View Point
National Australia Bank of CRM
 May - July 06 / Vol 01/ Issue 06
Contents
4 Voice from the Desk

5 Cover Story
The 2nd Generation of CRM

8 Inside Talk
Maximising Customer Relationship
Paul Newton & Gerd Schenkel
National Australia Bank

12 Kaleidoscope
Unlocking Value of CRM in Banking

18 Industry Round Table

CRM in Banking
Expert’s View Point

22 Tech Watch
Predictive Analytics

26 Hallmark

28 First Look
Customer Relationship Management;
A Databased Approach
A Book Review

FinacleConnect is a quarterly journal on banking technology published by Infosys Technologies Limited, featuring research from Gartner.
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 CRM: Leveraging
Relationships
The customer is the king, so goes the popular adage, experience with their early CRM strategy. “For the banking
describing very aptly the attitude of most progressive banks industry where there is a wealth of information about
today as they try to woo customers and meet their demands, customers, CRM is vital for success. It enables banks to
be it for new products, personalized service or providing a meet customer requirements by demonstrating that we
single view of financial information across relationships. understand the individuals’ needs and can bring relevance to
Customer Relationship Management (CRM), as the name our marketing messages. This is essential if we are to ensure
itself implies, is a powerful ally in these efforts. Not only business growth,” notes Paul Newton, head of customer
does it help banks gain better insight into customer behaviour knowledge and analytical marketing at National Australia
and craft appropriate strategies to meet each customer’s Bank in the UK. The FinacleConnect Industry Roundtable
unique requirements, it also enables banks to interact with brings together a panel of experts from banks around the
customers in a consistent manner across delivery channels world to discuss the latest trends in CRM in banking and
and products. All this obviously leads to higher customer how banks are using CRM to deepen their relationship with
satisfaction. However, while banks have long appreciated customers. “We consider CRM to be a business strategy
the benefits of CRM, it is only now that they have than anything else - not just technology, not just analytics,
understood how best to leverage CRM strategies and not just an impressive story of how customer focused you
technologies to achieve better stickiness and garner a greater are,” says Radi Badidi, Vice President Marketing Intelligence/
share of the customers wallet. CRM at ABN AMRO Bank.

This issue of FinacleConnect evaluates recent developments No doubt, CRM is a strategy whose time has finally come
in the field of CRM. The cover story explores how CRM and we hope you enjoy discussing the pertinent points
strategies today call for the right confluence of culture, raised in this edition of FinacleConnect. It is our effort to
process and technology, while in TechWatch we look at the debate issues of immediate relevance to the banking industry
role of predictive analytics in unlocking the power of and we look forward to your feedback.
customer relationship management solutions.
Till next time!
In this issue, we also bring forth unique insights from National
Australia Bank (NAB), a pioneer in the field of CRM. NAB
first deployed a CRM solution way back in 1988 and is Merwin Fernandes
Vice President and Business Head - Finacle
among the few banks worldwide that had a positive Infosys Technologies Ltd.

4
Customers and customer relationships lie at the very core of the notes in his report, ‘A Fresh Start to Customer Centricity – The
business of banking. It is therefore not surprising that CRM (cus- Journey to Crowning the Customer King’, that, in its early days,
tomer relationship management) solutions promising banks the abil- CRM tried to attack and solve all company-wide issues related to
ity to manage customer relationships were instantly popular when managing customer relationships, and some banks even viewed CRM
they were launched over a decade back. The mid-1990s saw several as an end-all solution for poor bank performance. “While this all-
banks going in for large scale deployments of CRM technology. encompassing enterprise view had grand intentions, the associated
Unfortunately, a majority of these initiatives turned out to be costly, technology, people, and business complexities were often too much to
complex enterprise-wide projects with lengthy implementation time handle. In addition to taking on an enterprise focus, CRM was touted
and banks did not get adequate returns from their massive invest- as a technology issue and vendors were quick to offer technology-
ments. So much so, that by the early part of this century, CRM had focused solutions geared at building and managing customer relation-
gained a bad name in the banking industry with most banks washing ships,” states Jegher.
their hands off anything to do with CRM technology. In those early days, neither banks nor the vendors realized that CRM
Looking back, experts suggest that where banks floundered was firstly goes much beyond technology. The organizational structure and pro-
having too many expectations from the CRM solution and secondly cesses at the bank need to change to adequately support a CRM
not having the right internal processes that could complement the solution. As expected, without these process and culture enhance-
CRM system. Jacob Jegher, senior analyst at research firm Celent, ments in place, the ambitious enterprise-wide CRM programs fell flat.

5
 Despite these flawed CRM as a philosophy and adopt a strategy for
experiences with CRM managing customer relationships that effectively
in the past, banks are addresses three key areas, people, processes and
realising that they can- technology.
not afford to ignore the
It is important to understand that customer cen-
philosophy behind
tricity touches all facets of a bank, not merely
CRM – that the cus-
the IT department. It is the business and sales
tomer lies at the very
people at the bank who interact with customers
heart of their business
on a regular basis and they need to be able to
activities.
gather data about customers and implement CRM
Given the competitive strategies. A CRM program will never be suc-
nature of the banking cessful without their complete commitment and
business with its intricate diverse demands to- participation. Hence, banks need to focus on cre-
day, nurturing and deepening customer relation- ating a customer-centric culture right from the
ships is integral to any bank’s success. After all, administrative staff to the senior executives.
satisfied customers are loyal customers, their re- While this is often easier said than done, cus-
tention rate is much higher and so is their overall tomer centricity can be achieved through a strong
profitability for the bank. As it happens, CRM top management focus, comprehensive commu-
offers the most holistic route for banks to en- nication and training programs that teach their
hance customer relationships. A powerful CRM employees how to use CRM applications, the

“
solution provides a complete perspective of a benefits of doing so along with appropriate in-
customer’s relationship with the bank across mul- centive policies. At National Australia Bank, one
Banks need to embrace tiple channels like e-mail, telephone, IVR, branch, of the few banks that have consistently invested
web chat and accross multiple products ensur- in CRM for over a decade, and often regarded as
CRM as a philosophy ing that every bank employee is better informed a case study of successful CRM, training and
to deal effectively with customers and their needs. development is regarded as a very important el-
and adopt a strategy It enables banks to understand their customer's ement of the bank’s overall CRM strategy.
expectations and preferences better and offer the
for managing customer potential to deliver higher levels of personalized
Along with gaining the commitment of bank staff,
banks need to simultaneously re-engineer their
service amd more effectively implement cross-
relationships that processes so that they enable, not obstruct, the
selling and up-selling strategies. By doing so,
smooth flow of customer information through-
effectively addresses banks can enhance customer retention, profit-
out the organisation. It calls for breaking down
ability and loyalty and get an increased “share of
of product silos and sharing of data across busi-
three key areas, people, wallet” from their customers. Further, in the
ness units. “Banks need to determine the pro-
face of the recent spate of Know Your Customer
cesses they want to work on as well as those
processes and

”
(KYC) regulations, CRM systems provide the
that will be affected as a consequence of embark-
optimum solution to the need for unified cus-
ing on customer relationship strategy projects.
technology. tomer data, information and intelligence.
In addition, they have to be set up to manage
The second wave of CRM - New approach this transformation and ensure that it stays within
pre-determined parameters,” says Jegher.
While their first brush with CRM might have
been tainted with failure, several banks are now Finally, banks need to invest in the right technol-
beginning to rethink their overall approach to ogy solution to complement its people and busi-
CRM. They realise that CRM is a continuous ness process transformation. Notably, there has
process - it is a journey, not a destination. To be been a remarkable shift in the perception about
successful in this arena, banks need to embrace CRM technology over the past decade. While ear-

6
12
lier, the focus was on large-scale enterprise-wide imple-
mentations, banks are moving away from monolithic solu-
tions and are increasingly looking at componentized, modu-
lar solutions that can complement their incremental ap-
proach. With this, there is a growing appreciation of CRM
solutions that are specialized and well integrated into other
banking applications such as the core banking system, thus
enabling quick time - to - market.

In terms of deepening customer relationships and creating

a differentiating customer experience, specialized banking
CRM solutions provide several benefits. In addition to
the sales, marketing and service capabilities inherent in a
generic CRM solution, these specialized solutions offer
banking specific features like a CIF tailored to the banking
enviornment, ready- to- deploy banking templates and
requests, origination integrated with sales and service and
comprehensive support for call centre agents. Further,
banks can easily gain the long sought after 360-degree
view of customers real-time. This includes a customer’s
entire relationship details such as multiple product hold-
ings, sales opportunities, marketing campaigns, support
and service incidents and the history of all interactions
with the bank.

Conclusion
Although the history of CRM in banking is dotted with
failures, there are a few pioneering banks that succeeded
in creating successful CRM programs, such as, Royal Bank
of Canada, National Australia Bank, Lloyds TSB and US
Bank. These examples only serve to highlight the need to
create an enriching confluence of people, process and tech-
nology. Kathleen Khirallah, Director at research firm,
TowerGroup, who has long tracked the CRM initiatives
of these banks says that they have taken a very long term
view of CRM at the onset itself. Along with focusing on
customer data and technology, they also understood the
need to change the culture within the bank.

This knowledge is now permeating down the rest of the

industry. Buoyed by developments in technology that
has made CRM deployment much simpler than before,
banks are all set to ride the second wave of CRMƒ

Merwin Fernandes
Vice President and Business Head - Finacle
Infosys Technologies Ltd.

7
8
 Rekha Menon, Research and Controbuting Edi- quality of interrogation and targeting methods
tor at FinacleConnect, talks about the bank’s has improved considerably. In addition, technol-
CRM strategy to Gerd Schenkel - general man- ogy solutions have become more comprehensive.
ager, customer strategy and cross-marketing at For example, in a call center environment, intel-
NAB Australia, and to Paul Newton - head of ligence that was once used to support only out-
customer knowledge and analytical marketing at bound calling is now being used to improve ser-
NAB UK. Schenkel’s role at the NAB encom- vice and sales effectiveness for inbound oppor-
passes customer strategy development and tunity where the rewards are potentially much
implementation, market research, CRM & Na- greater for both customer and the bank.
tional Leads, as well as cross-marketing for the
Q What is National Australia Bank's strategy
Australian Region. Prior to joining NAB, Schenkel with regard to CRM and CRM technology?
was the director of strategy and business devel-
A Gerd Schenkel: CRM has been part of our strat-
opment for Citigroup in Australia. Newton, on
egy for the past 15 years. We were among the
the other hand, manages the customer knowl-
first few banks to focus strongly on CRM across
edge and analytical marketing team at NAB in
all businesses. Back in 1988, we designed the
the UK. He has over 10 years experience in fi-
first formal system to support relationship bank-
nancial services industry and is an expert on ana-
ing and a year later we developed a relationship
lytical marketing, customer knowledge and cus-
management and customer profitability system.
tomer relationship management.
Initially we had an in-house developed CRM
Q What is the importance of CRM for banks?
solution, but later adopted a state-of-the-art best-
A Paul Newton: CRM is a very broad term. Es- of-breed approach. Currently our technology in-
sentially, it is a key enabler demonstrating that frastructure consists of a global data warehouse;
banks understand their customers. For the bank- a dedicated CRM database; a data mart for ana-
ing industry, where there is a wealth of informa- lytical and predictive modeling; and a campaign
tion about customers, CRM is vital for success. management system that determines the infor-
It enables banks to meet customer requirements mation and delivery channel through which to
by demonstrating that we understand the indi- communicate with our customers. Solutions like
viduals’ needs and can bring relevance to our our award-winning National Leads system have
marketing messages. This is essential if we are to been very effective in helping us generate per-
ensure business growth sonalized and relevant leads for the bank’s rela-
Q How has CRM in the banking industry tionship managers and customers.
evolved in recent years? Around 18 months back, there was large scale
A Paul Newton: Overall there is an enhanced de- organizational change at NAB. The bank moved
gree of maturity in bank’s understanding of from a functional structure to a regional struc-
CRM. For example, there is a realization of the ture where our operations were split into three
increasing diversity of customer touch points regions, Australia, UK and New Zealand. Under
and the complexity involved in gathering data. this new structure, we are collaborating on our
Banks, therefore realize that there is a need to CRM work between the different regions so as
have proactive interaction with customers. The to share the knowledge and experience gained
technology too has evolved. There is increas- over the years as well as leverage the
ingly a move towards real-time solutions. The infrastructural investment across the group.

9
 Q What challenges did NAB encounter while and other marketing programs doubled. And we
implementing contemporary CRM technology? are starting to see much higher levels of cus-
A tomer satisfaction.
Gerd Schenkel: There have been a number of
changes at NAB, starting from changes in the Q What in your opinion is the key factor banks
organization structure to expansion of delivery should consider to leverage the power of CRM
channels. Our CRM infrastructure had to evolve technology to the fullest?
with these changes and robustly cope with and A Gerd Schenkel: The CRM solution needs to
take advantage of new interfaces and the increase support the bank’s needs. For instance, in retail
in the amount and richness of data. Currently banking there are a large number of customers in
our system looks at around 1 billion items of a banker’s portfolio while in business banking,
data every night including every customer’s past there are fewer customers but with larger bal-
year transaction history. ances and often with more complex requirements.
Q What benefits has NAB achieved through its The CRM system has to be used differently for
CRM strategy? both segments. For the solution to be effective, a

A Gerd Schenkel: If a CRM system is deployed bank needs to know how best to use the technol-

correctly, it improves overall productivity of the ogy for different business needs.

sales force by helping them prioritise activities. Paul Newton: It is also important to realise that
Further, rather than simply generating generic CRM is a solution to real business problems.
sales calls, our solution generates very targeted And that it is not just about technology. CRM’s
focused opportunities that show a real under- success lies with the people using the technol-
standing of customer requirements. It may be ogy. I think that was the problem with a number
related to an existing product, a change in the of CRM deployments earlier. Within a bank, staff
service being used or simply some advice. This buy-in into a CRM program is extremely impor-
approach is really appreciated by our customers. tant. Otherwise, either they will not use the

Paul Newton: We believe that we have in place CRM tools, or the quality of the experiential

a solution that puts the NAB, UK at par with and contextual customer data that is collected
the leading competitors in the market. Our plans will not be good enough. At NAB, UK we have
for the next 12/18 months should see us move therefore made sure that investment programmes
ahead. Our TOPs (Tailored Opportunities) in creating CRM technology have also taken ac-
programme helps us to understand our custom- count of the cultural changes we need to achieve
ers’ requirements, identify opportunities and through training, performance measurement and
learn more about the drivers of value for NAB. reporting toolsƒ
We deploy events such as ‘understanding cus-
tomer profit’, ‘the impact on profit of various
actions’, ‘customer appetite for various prod-
ucts and services’, ‘risk profiles’ and ‘life stages’
to tie everything together. The team works across
all customer segments, products and services ir-
respective of channel. Our progress to date is
strong. Last year, in the UK, income generated
downstream from outbound calls, direct mails

16
10
17
 CRM is not an open and shut case. It is an ongoing investigation into changing customer profitability, new reasons for
churn, evolving trends in product lines, new cross sell and up sell offers, channel profitability, process improvement
and usability of the software application. Choosing the right application, implementation and going live are just some
milestones in a bank’s customer centric strategy. However to keep one’s nose ahead in the game, banks need to always
keep an eye on business objectives while taking operational decisions with relevance to CRM.

12
 TABLE 1
From Business Goals to CRM Functionality
Typical contents of Single or Benefits of Single or
There are primarily four goals that banks 360 Degree Customer View 360 Degree View
pursue and the entire customer relation-
ship management initiative needs to be Accounts held by a customer aggregated Channel and bank wide access to identi-
driven by these. across host systems cal, updated information about a customer
eliminates information asymmetry and re-
5 Growth in revenue sultant inefficiencies.

5 Growth in customer base

Sales opportunities being pursued for a Viewing all open opportunities for a cus-
5 Growth in margins customer tomer/prospect allows front office and sales
personnel to give an up to date account of
5 Increased customer satisfaction the progress of the application filed by a
customer/prospect
To work towards any of the four strategic
objectives, it is important to aggregate and Offers targeted at the customer Visibility into offers allows front office staff
consolidate customer data that is distrib- to sell at each customer contact

uted in multiple host systems. The single

view of the customer thus obtained can then
Service requests or complaints filed by the Visibility into service requests and com-
be utilized for focused marketing, sales and customer plaints filed ensure that branch, call center
customer service activities. Table 1 is an and contact center employees can quickly
check status and resolve queries instead of
illustration of the types and benefits of asking around
customer data integration.

Details of the loyalty points aggregated to Front office staff can manage queries and
date by the customer redemption requests on loyalty points.
Table 2.0 in the next section aims to pro-
vide you with a framework for drilling
down from corporate objectives to the
List of notifications on important customer Relationship managers and front office staff
choice of specific CRM modules that can events such as birth day, term deposit ex- can greet customers, alert them that term
enable the business strategy. While the piry, large withdrawals, deposits, etc. deposits are due for renewal, and with their
proactive behaviour contribute to improved
business objectives or goals are the pivots customer satisfaction.
of the table, the ‘X’ axis represents the vari-
ous levers that need to be operated to Customer profile information such as seg- Knowing who they are dealing with allows
achieve the goal. The activities under each mentation, profitability, product holding, employees to tailor their behaviour suit-
length of relationship, household data, etc. ably.
lever are not exhaustive but they are fairly
detailed and represent what ‘CRM centric’
banks do to unlock value from CRM.

13
 TABLE 2

14
15
 TABLE 2 Continued

Conclusion
For more than a decade now CRM software has looked like a magical consolidating, analysts’ predictions are less futuristic and corpora-
potion that bestows immense powers on corporations to grow their tions have been so hurt by the dollars they have burnt that on the
revenue, customer base, margins and that ultimate corporate fantasy: rebound they are asking smarter questions. Is the magic potion at last
customer satisfaction, loyalty and advocacy. CRM applications have revealing its powers? The verdict is not yet out but everyone, from
worn so many hats that it is not hard to realize why the category has vendors to purchasers, appear to have stopped getting sold on the
been so heavy on promise and weak on delivery. But vendors are sales pitch and as the success stories reveal, seem to have started
16
drilling down into details - from overall corporate objectives right up
to choosing the right CRM module. And that appears to be a fairly
sound method to unlock the value in CRMƒ

Sunil Bannur
Senior Consultant, Solution Delivery- Finacle
17
 After a hiatus of nearly half a decade, CRM projects are back in favour again. In our FinacleConnect Virtual Industry Roundtable, we bring
together a panel of industry experts to discuss trends in CRM, and how banks are using CRM to deepen their relationship with customers.

Jose Olalla Hevia Radi Badidi Michael Otto Gopal Sondur

Director of Comercial Development, Vice President Marketing Head of CRM Group Head- Products & Strategy,
Retail Banking Spain and Portugal, Intelligence/CRM Erste Bank, Austria Finacle, Infosys Technologies Ltd.
Banco Bilbao Vizcaya Argentaria ABN AMRO Bank, Netherlands
(BBVA)

The acronym CRM has been around for over half a decade now and CRM is much more than a technological solution. It is a strat-
has often been overused. How would you define CRM (for banks)? egy integrated in the business model of the banks and clearly
Michael Otto, Erste Bank: There are many definitions for CRM and oriented to value generation. CRM is a key element of differen-
all of them are more or less correct. It is important that the client not the tiation that lets the bank develop its customer base and sales
product is in the center. The CRM definition we use is the following, capacity. Today the environment is changing dramatically, and
‘having the right offer for the right client, at the right time via the right so too is banks’ approach to their customers. A well thought
channel’. That is the reason why we tried to improve the following out CRM strategy lets them improve the sales experience of the
processes and support it with systems - customer service and advice, customer; develop the potential value for customers, increase
customer analytics and campaign-management. sales, productivity and efficiency; and create personalized one-
to-one service.
Radi Badidi, ABN AMRO: We consider CRM to be a business strat-
egy than anything else - not just technology, not just analytics, not just Gopal Sondur, Infosys: CRM as we see it is about enterprises
an impressive story of how customer focused you are. collaborating across the customer value chain to develop and
implement solutions that better meet the evolving preferences
All major banks have invested heavily in technology and infrastructure
of individual customer groups. The C in CRM therefore has
over the last 5 to 10 years in this area, but hardly any of them have been
now evolved from ‘Customer’ to “Collaborative”. The core of
successful in actually getting it effective. Neither has the customer felt
CRM requires various entities in a bank to work collaboratively
a real difference nor has it contributed to higher ROI. I would say that
to define and realize a series of business principles which are
optimising every customer contact by effectively creating value for
essential to establish customer-centric organizations. Essentially
both your clients and your business, using customer knowledge, is the
this means collaboration across those entities that deal with
main differentiator compared to non-CRM focused companies.
Acquisition (sales & marketing/distribution), Transactions (ful-
Jose Olalla, BBVA: I would agree with my member panelist, fillment) and Servicing (customer service). This approach is

18
 different from the past where CRM was modeled the customer present to the bank.’
around an ad-hoc set of activities strung together to
How has the understanding of CRM in banking
work across functions. Using the collaborative ap-
changed today as compared to a few years back?
proach, leading banks are today trying to achieve a
state where the customers become less aware of mar- Michael Otto : CRM is not technology, it is business.
keting and selling and feel a constant level of personal- CRM has to improve the "moment of truth" when the
ized, consistent, high quality service. client is with the bank making the contact more efficient
and more satisfactory for the customer. So banks have to
How important is CRM for banks? What benefits
improve not only the technology but also the relation-
can banks hope to achieve through deploying CRM
ship skills of the advisors.
solutions?
Radi Badidi : I think it really depends on the position- Jose Olalla : Few years ago, banks thought about
ing and focus of a bank. If operational excellence is CRM as just a new 'magical' software, and therefore
your key-focus and not customer intimacy, the choices something that should be managed within the technol-
Jose Olalla
you make in terms of investments in CRM will be ogy and systems departments. Now it is a critical part
“CRM is a key of the agenda of business managers. Since banks pursue
completely different. In strategic terms, ABN AMRO
element of high growth strategies, expanding their franchises into
has a strong ambition to create value for our clients
differentiation that growth segments, and are really aware of the winning
(especially the "mid-market" which we define as mass-
lets the bank affluent/private-client consumers and mid-sized busi- concept of the multi-channel and multi-price approach,
develop its cus- nesses) by offering high-quality financial solutions that CRM becomes key and critical.
tomer base and best meet their current needs and long-term goals. Further, today customer centric banking means a new
sales capacity.” Knowing our client and acting on that information in way of thinking. Banks need to focus on relationship
every contact is essential in achieving this. For the banking rather than traditional transaction banking and
Netherlands, it means that we aim to be "personal in realize the importance of SOW - share of wallet. In the
every channel" and we will use CRM to create more and world of margin pressure, being a product specialist is
more clients that consider us to be their primary bank. hard, so banks need to make advice rather than product
Michael Otto : CRM is of course very important. price as the basis of the added value in banking. In this
What banks must achieve is to improve knowledge situation, CRM is key because the value of retail bank-
about the clients, improve active customer contact, ing lies in distribution. Knowing your client is the first
improve the satisfaction of the clients and improve the requirement of a retailer. It protects your business,
return per client. helps penetrate growth markets and prevents
Jose Olalla : There are two main points that describe disintermediation by other players.
the significant jump regarding CRM, customer demand How has the technology matured in this time and
for sophistication and multi-channel approach and ori- what is the impact on banks today?
Michael Otto entation. Consequently there are four steps that banks
Jose Olalla : Technology was the nucleus of CRM
“CRM has to should take to benefit from CRM, change their com-
strategies few years ago. The technology was new, so-
mercial product vision to a customer centric vision,
improve the phisticated and very difficult to manage. Now it is evolv-
effectively integrate different channels, ensure data qual-
"moment of truth" ing to a commodity piece within CRM strategies.
ity and deploy complex marketing strategies.
when the client is Michael Otto : The integration of different systems
Gopal Sondur : CRM is fundamental to building a
with the bank such as customer data and product data has improved
customer-centric organization. With the growth of fee-
making the contact dramatically. It is possible now to have the 360 degree
based income and increasing focus on advisory ser-
more efficient and vices, the role of CRM in banks is now more critical
view on the client. Now we have to improve the usage
more satisfactory of all the systems we have designed and concentrate on
and pivotal than ever before. The benefits that banks
for the customer.” standardisation.
hope to achieve through deploying CRM solutions will
be to arrive at satisfactory, measurable answers to ques- Radi Badidi : Having active multi-channel customers is
tions such as ‘how profitable is the customer’, ‘which not in "the future" anymore, it is a fact of life today.
products/services does the customer require; when, Investing in multi-channel capabilities is not a choice
where and through which channel’ and ‘what risks does anymore, it's a must. "Realtime" has been a buzzword

19
 for some time now, but is very sparsely implemented. How will the CRM landscape in the banking in-
The benefits of realtime are there, but the costs are high dustry develop in the coming days?
to attain these benefits. Huge amounts of data are being
Michael Otto : First, as our customers use different
gathered by banks, the intelligent deployment in cus-
channels to go to their bank such as the branch, self
tomer related processes is where a lot of banks are
service machines, the service center or the internet, CRM
struggling.
goes multi-channel. Second, in addition to cross selling,
Gopal Sondur : The technology solutions available to the processes of client retention and improvements in
banks will continue to improve with a noticeable shift
client loyalty are getting more important.
towards integrated, broad technology solutions designed
Radi Badidi : In the coming years there will be more
to ease enterprise integration requirements.
focus on the demand side of customers, they will have
What are the key aspects that banks need to con-
various channels at their disposal and have more choice
sider while deploying CRM solutions to achieve a
then ever to purchase their products and services with
Radi Badidi positive ROI?
a growing variety of general banks and niche players.
“As the customer is Radi Badidi : Whether CRM only adds to costs or
As the customer is more in control, we will want to be
more in control, we generates revenues is not a technogical but a commercial
"actively ready" in all channels when the customer con-
will want to be issue. If, for example marketing and sales do not adopt
tacts us, based on what we know and anticipate of this
"actively ready" in the CRM challenge, CRM will not succeed. It requires
client. This requires different marketing skills and new
all channels when intense training, a real dialogue between marketing, tech-
ways of managing your sales. The second trend will
nology departments and all channels, it requires commit-
the customer probably be that CRM will contribute more to brand-
ment to document customer needs whenever possible
contacts us” ing. Not just ROI on every contact will be leading, but
and a proactive approach towards using customer intel-
ligence on a continuous basis. the way we want to be perceived as a brand will be-
come more important. Now, a lot of effort is put on
Michael Otto : Business requirements and targets have
being there at customers' moments-of-truth. In the fu-
to be defined, technology has to make the solution, not
ture, all customer contacts will be moments-of-truth as
the other way round. CRM does not solve all the prob-
all these contacts tell the customers who we are and
lems a bank has, so first analyze the problems, and the
what we want to be - CRM will help us enable this.
possible impact of CRM, then prioritize. Secondly,
banks need to understand that they need to make a Gopal Sondur : Although the potential benefits of a
beginning. Start small, but start. Later they can learn CRM strategy focused on corporate banking were high,
and improve. Finally, it is very important to communi- firms have been slow to adopt due to the greater com-
cate, train and measure all activities. plexity of the relationships and number of touch-points.
With the advent of more powerful technologies and
Gopal Sondur : Banks that have achieved positive
ROI have focused on 4 fundamental tenets. First, they greater experience in customer relationship management
Gopal Sondur
have focused on the creation of an overarching, cus- solutions, we see leading banks concentrating on rela-
“The C in CRM tionships with corporate customers in the coming days.
tomer-centric business strategy, streamlined operations,
therefore has now The other area we expect to see development is channel
superior analytics and integrated collaborative chan-
evolved from ‘Cus- integration. Due to lack of channel data and the disper-
nels. Second, these banks have adopted a transforma-
tomer’ to “Collabora- sion of channel responsibilities throughout the organiza-
tional approach to ensure that all sources of value are
tive”. The core of identified and appropriately measured. Third, they have tion, most financial institutions develop channel strate-
CRM requires various developed a value-based CRM ROI model that is aligned gies and manage their channels poorly and in an uncoor-
entities in a bank to with the bank’s strategic objectives. And finally, based dinated fashion. This leads to sub-optimal resource allo-
work collaboratively on appetite and readiness for change, these banks evalu- cation and poor customer management. Leading banks
to define and realize ated numerous implementation options before making have realized this problem and are addressing this ag-
a series of business a final decision. They ensured that each option con- gressively. The whole area of integrated channel man-
principles... sisted of time-phased decompositions of an overall agement which is tightly coupled with CRM will rap-
approach where benefits of earlier activities funded the idly evolve to higher levels of sophisticationƒ
later ones.

20
 Predictive Banking :
One to One Intimacy
on a Global Scale

Financial products have grown beyond simple savings and de-

posit offerings to sophisticated financial instruments, stock trad-
ing, investment funds and insurance.

At the same time technological advances have allowed automation

of banking processes in the back and front office, as well as self-
service customer access through ATMs and Internet banking.

In spite of these developments, banking has become commoditized

during this period of change. Many banks offer the same access
and delivery channels, products and services to the market. In this
process, customer relationships have lost the “personal touch”
despite the breadth of “touch points” available to customers from
the traditional branch to “mobile” phone banking.

How to differentiate? How to be a “one to one” personal bank

while also being a global player? Why should a customer choose
one bank over another? How can individual relationships be main-
tained, satisfied, and grown profitably over time?

Can today’s predictive analytics unlock the power of Cus-

tomer Relationship Management Solutions to provide true
“one to one” personal banking on a global scale?

Yes, predictive analytics is the key for banks to unlock valuable

insight from their oceans of data about their customers and make
better decisions for themselves and their customers. It also en-
ables to leverage and increase ROI from substantial investments
already made in operational, data warehouse and business intelli-
gence systems.

Operational systems collect all information about customer trans-

Predictive
actions. CRM systems collect information about complaints, ser-
vice requests, inquiries, customer profile, customer surveys and
sales related customer interactions. Data warehouses rationalize

Analytics data from all these systems and Business Intelligence solutions
provide enterprise reporting and dashboards for executive man-
agement. These systems provide the data used by predictive

22
 Predictive Analytics: CRM ROI multiple awards from the industry, independent ana-
lysts and marketing associations for their leading work
in and application of CRM analytics.
R OI
ive ƒ Wells-Fargo uses predictive analytics to successfully
u lat
C um focus on the breadth of customer relationships, mea-
sured in part by the number of Wells-Fargo accounts
ROI (%)

Predictive
Break Even Analytics
owned by each customer
CRM, EDW,
Business
Intelligence ƒ Banks use predictive analytics in real-time for credit
Operational
Banking risk solutions for credit cards. At the time of charge,
Systems
transactions are “scored” for credit risk and are either
Time (Years) approved or declined, thereby substantially reducing
Source: Jack Noonan, CEO SPSS, 2002
credit card fraud.
Figure 1. Operational banking, CRM, Enterprise Data Warehousing and Business
Intelligence systems provide the foundation data and communication infra- It has become clear that predictive analytics brings
structure for Predictive Analytics. in competitive advantage in banking and analytics
can be the core technology helping banks move from
analytics to provide insight and specific recom- product centric to customer centric operations.
mendations to truly implement a “one-to-one” ap- With all these success stories, why haven’t predictive
proach to customer relationships.
analytics been applied more broadly to personalize bank-
In the last decade, the most advanced banks have used ing operations? Partly, data was not available or col-
traditional predictive analytics to improve targeting for a lected for analysis. Also, traditional predictive analytic
few of their largest marketing campaigns. Though tradi- technology is too slow and labor-intensive to be useful
tional predictive analytics require too much time and for most business problems. Finally, executives have not
expertise to be used on all marketing campaigns, it has fully understood and, therefore, not championed CRM
ben used increasingly and stories of success proliferate. business strategy.

Early predictive CRM success stories involve large sta- For a CRM strategy to succeed it must involve cultural
tistical staffs and expensive specialty warehouses to and business changes and it needs to be a business
develop and maintain predictive models. strategy and not a technology solution. Treacy and
ƒ Capital One conducts more than 30,000 experiments Wiersema, in their widely accepted Discipline of Mar-
a year, with different interest rates, incentives, di- ket Leaders, point out that leading businesses have one
rect-mail packaging, and other variables. Its goal is to of three primary competitive advantages that are identi-
maximize the likelihood that potential customers will fied and leveraged.
sign up for credit cards and that they will be able to
• Operational excellence
pay back Capital One.
• Product leadership
ƒ At Royal Bank of Canada, increasing customer value
through predictive offer management is combined with • Customer intimacy
pricing strategies based on predictions of customer I suggest that 1 and 2 are required disciplines and some
risk and value over time. differentiation can be achieved, but the concentration on
ƒ National Australia Bank is well known to use predic- customer centricity and intimacy will define the bank and
tive modeling in marketing campaigns and has won achieve loyalty to boost growth and increase shareholder

23
 value as a high performance organization. cost-effective way.

Customer intimacy is a CRM strategy that requires ex-

ecutive commitment and operational focus. Products must
The components and models can easily be embed-
be developed for each market segment and offered to
ded in current business and software processes for
individuals based on their personal profile and history.
bank operations, risk management and marketing.
Performance must be measured in terms of customer
satisfaction, acquisition, retention and profitability. Predictive analytics help experts to be at least ten times

Employees should know what to offer to satisfy their more productive, solving more business problems and

customer’s needs and help them plan for their financial building “predictive modeling factories”, while busi-

future, creating a lasting and trusting relationship. Today’s ness managers can use predictive applications to gain

new class of predictive analytics can make all of this insight, predict results, monitor progress and make bet-

possible, unlocking the power to provide true “one to ter decisions in everyday operations.

one” personal banking on a global scale. This new breed of automated and advanced predictive

Why is this possible now? and descriptive analytical tools are suited for today’s
fast paced business and can be embedded in enterprise
Consulting companies and software vendors are auto-
applications. Customer intelligence can now be de-
mating specific predictive solutions and providing broad
livered to the right customer at the time he is actu-
statistical toolsets to empower experts to build sophis-
ally interacting with the bank, through the delivery
ticated predictive solutions. KXEN Inc. (headquartered
channel of choice with consistent advice based on
in San Francisco, California USA with research and de-
predictions derived from enterprise data.
velopment based in Paris, France) has developed a new
approach to predictive automation. Based upon recent Banks are embracing these new advanced predictive and

advances in Structured Risk Minimization Mathemati- descriptive analytics to enhance the ROI on existing in-

cal theory (see sidebar),

KXEN’s Analytic Integrated Predictive Banking
Framework automates
Customer
many of the most diffi- Touch points

cult processes in predic-

ATM Web Mobile Phone Branch Call Center Email Mail

tive analytics, reducing Inbound

Inbound
Outbound
Outbound

the risk of error and Detect Prevent Recommend Cross-sell Optimize

Fraud Churn Product Up-sell Campaign

omission, and dramati- Models

cally scaling up the Transaction Offer

Offer

number of models that

may be built and used. Models
Channel
Optimization
Customer
Satisfaction
Risk
Analysis
Lifestyle
Life-stage
Lifetime
Valuation
Customer
Segments

Modeling is very fast,

making it possible to Enterprise Data
Warehouse Banking Systems

model business ques-

tions previously not
practical, in a timely and External Data

Figure 2. At each customer touch point, predictive models provide recommended actions, offers,
and responses based upon each customer’s unique history and predicted activity with the bank.

24
 vestments in Core Banking Systems, Marketing, Finan- flow predictions, investments, anti-money-laundering,
cial Systems, Anti Money Laundering Systems, Anti Fraud identity theft and other business areas supported by
Systems, to assist in Basel II and Sarbanes Oxley Com- data. Insight from predictive modeling can help execu-
pliance, Audit Systems, Business Intelligence Systems, tives identify winning strategies, core metrics, and key
Analytical Data Warehousing Systems and particularly performance indicators, as well as be alerted to anoma-
Customer Relationship Management Systems. lies and competitive and consumer trends.

Software vendors are beginning to use, embed or From marketing optimization to executive dashboards,
integrate these robust predictive components in spe- predictive analytics can unlock the power of informa-
cific banking applications. tion within corporate data for better execution of CRM
strategy and beyond!ƒ
Predictive Banking:

Today, banks can use predictive technology for every

Milovan Puz
business decision supported by data. Analytic frame-
Managing Director, Australia / New Zealand
work enables banks to uncover opportunities, explore
KXEN Inc.
trends and make predictions in minutes or hours instead
of days or weeks. By adding such a framework to their Statistical Learning Theory:
existing applications, banks can dramatically scale up
their predictive analytics to automate enterprise-wide
decisions. Major banks are already scaling up predictive
Vladimir Vapnik is the father of Statisti-
analytics for CRM and credit risk analysis.
cal Learning Theory, which is the foun-
Banks are also expanding their use of predictive analytics dation of KXEN components. With the
into pricing, human resources, asset management, cash- concept of the VC (Vapnik-
Chervonenkis) dimension, Vapnik intro-
duced a new paradigm for data model-
ing. Instead of having to make assump-
tions on the underlying data distribu-
tion, this theory leaves data as it is, and
allows modeling without having to limit
the number of attributes. The resulting
algorithms produce robust and high qual-
ity models in a fraction of the time it
takes with traditional tools. Vapnik
showed that many modeling techniques,
such as controlled (e.g. weight decay)
neural networks, are part of this theory.
In a sense, he is the first to have proven
in a mathematical way “why” neural net-
works provide high quality predictions
Figure 3. The value of predictive analytics for the enterprise increases directly when properly tuned.
with the number of models developed and deployed. Automation and embedding of
models in applications and business processes increases the number of models that
can be used effectively.

25
 Fiscal 2006 revenues of $ 2.15 Billion. YoY growth of 35%
Infosys Technologies Limited announced financial results for its fourth quarter ended March 31, 2006. Revenues for the quarter
aggregated $593 million, up 30.0% from $455 million for the quarter ended March 31, 2005. Net income was $152 million ($ 127
million for the quarter ended December 31, 2005). Thirty eight new clients and 5170 new employees were added during the
quarter.

Nandan Nilekani features in TIME 100: The People Who Shape Our World
The Time 100 is now a much anticipated annual issue, and in its third year presents the list of 100 most influential people in the
world today. Nandan Nilekani, Chief Executive Officer, President and Managing Director, Infosys has been featured in the
category of ‘Builders &Titans’. He was sought out because of his unique ability not simply to program software but also to
explain how that program fits into the emerging trends in computing, how those trends will transform the computing business
and how that transformation will affect global politics and economics.

Finacle – The Universal Banking Solution from Infosys

Recent Wins
ƒ Banco Continental de Panama (BCP), a leading univer- will replace the bank’s legacy core banking systems in Panama
sal bank from Panama ranked among top 1000 banks globally and other Central American countries. The bank will also de-
by The Banker, has selected Finacle universal banking solu- ploy Finacle CRM, e-banking and alert solutions.
tion to power its operations across Central America. Finacle

Finacle Conclave
The inaugural Finacle Conclave, the client forum of Finacle was held in Goa from
March 20-22, 2006. Close to 100 delegates from 27 countries, including global banking
leaders, leading analysts and renowned experts from the banking sector attended the
conclave. Finacle Conclave 2006 began on March 20 with an address by Mr. Ricardo
Semler, President, Semco S/A and author of famous books ‘Maverick’ & ‘The 7 Day
Weekend’. Mr. N R Narayana Murthy, Chairman and Chief Mentor, Infosys Technologies,
who was the keynote speaker, outlined the critical role of the transformation mindset that differentiates the winning organizations
from others. Mr. K V Kamath, Managing Director and CEO, ICICI Bank, another keynote speaker, set out the ground rules for
doing banking for the masses. Outlining his bank's new growth horizon, he said that the bank is now focusing on rural banking as
a key growth driver and there is need for new business model and distribution strategy to reach the un-banked world. In a debate
on retail banking growth drivers, Mr. Octavio Marenzi, CEO and founder of Celent Communications predicted that retail banking
will increasingly continue to be the key driver of growth for banks in coming years. Mr. William Conner, Lead Analyst, Financial
Services Technology, Datamonitor, outlined that majority of upper tier banks are expecting SOA to impact their business in the next
three years and see web services as having the most significant impact.
Spread over 3 days and hosted at the idyllic Intercontinental Grand Resort in Goa, the Conclave provided the perfect backdrop to
debate and discuss how banks worldwide are innovating to maximize opportunities to drive growth and efficiency while minimizing
risks of business transformation.

26
37
27
 BOOK
REVIEW

V.Kumar, invest on the most profitable

Werner J.Reinartz customers at the most
appropriate time and in the
most effective way,” states
Customer Relationship Management the book.
A Databased Approach
To leverage the full potential
It is widely accepted today that the failure of several
of their CRM strategies,
CRM implementations in the 1990s was due to
Kumar and Reinartz advise
organisations focusing on technology to the exclusion
firms to adopt new metrics,
of strategic elements such as organisational culture and
implement new techniques
staff commitment. In Customer Relationship
and undergo organisational
Management – A Databased Approach, the authors
reorientation. For instance, a
Kumar and Reinartz explain that CRM as it was
powerful marketing metric
practiced earlier was based on an IT view of the world.
highlighted in the book is
Too often, the introduction of CRM was viewed as a
customer value, which the
technological project and a temporary activity, with
authors define as the economic value of the customer relationship to the
many managers believing that CRM equalled software
firm, expressed on the basis of contribution margin or net profit. A firm can
or technology. Fortunately, these misconceptions are
both measure and optimise its marketing efforts by incorporating the concept
no longer evident. Firms realise that technology is a
of customer value at the core of its decision making process, they explain.
tool, an enabler to help them deepen their customer
relationships. Pointing out recent trends such as micro Customer Relationship Management – A Databased Approach is an in-
segmentation of customer databases and depth treatise on CRM, right from defining CRM and designing and
synchronisation of customer information across all implementing a CRM strategy, to explaining concepts of database
channels, Kumar and Reinartz say that organisations management and data mining. Along with reviewing traditional CRM
now need to focus CRM initiatives on creating practices, the book illustrates new metrics like past customer value and
profitable customer relationships. customer lifetime value. The book goes on to analyse the implementation
of CRM strategies through loyalty programs, marketing campaigns and
The basic premise of the book, Customer Relationship channel management projects. Despite the often rigorous analysis, the
Management – A Databased Approach, is that a simple, lucid style of the text ensures that the book will appeal to both
customer-centric philosophy lies at the heart of a beginners and experts. Further, throughout the book, the authors use
successful CRM program. According to the authors, real-life examples that cut across industries to back up all their theoretical
the product should no longer be the key focus. Rather, observations. This adds credibility and depth to their analysis.
each customer should be treated as an asset and as the
source of wealth generation. The goal of strategic CRM In the introduction, the authors state that the goal of this book is to be a
is therefore to shape the interactions between the firm useful learning companion to teachers, students and practitioners of CRM.
and its customers in a way that maximises the lifetime Customer Relationship Management – A Databased Approach, certainly
value of each customer to the firm. “The ability to achieves these goals and much moreƒ
know exactly who is going to buy what product and
when, and the resources and communication strategy Rekha Menon
needed to make it happen, will no doubt be on the top Research and Contributing Editor
of the wish list of CEOs. This ability will help the firm FinacleConnect

28