Why customer technology will be the new battleground for retail banks

Why customer technology will be the new battleground for retail banks
By Stephen Haighton, Chordiant vice president for the Emea region

Published: January 14 2010 11:14 | Last updated: January 14 2010 11:14

For the traditional retail banking industry, competition is fiercer than ever and one of the biggest battlegrounds is likely to be the retention and acquisition of customers.

So what role does technology have to play in this fast evolving and customer-focused banking environment?

Banks have had a tough time trying to foster confidence and loyalty among their customer base against the backdrop of the recent credit crunch. At the same time, several non-banking players, such as supermarket chain Tesco in the UK, have entered the retail banking market looking to capitalise on growing consumer suspicion of traditional banks.

These new financial market players are pushing customer-centricity as a strong selling proposition for attracting new business. In turn, it seems that customers are ready to trust these non-banking institutions as they feel a more personal relationship with these brands.

At the same time, consumer needs are changing as expectations of service levels rise and more channels of communication become available.

As a result, traditional banks need to spend more time listening to their customer base across multiple channels and ensure they are being engaged in meaningful conversations.

However, the quality and relevance of a good conversation with a customer is often underestimated by financial institutions. This is exacerbated by the fact that the traditional financial institution is often encumbered with inflexible legacy systems which are not built with the customer in mind.

For example, recent research commissioned by Chordiant and conducted by Vanson Bourne found that only 57 per cent of customer representatives questioned in the UK’s high street retail banks have software that helps them suggest what products or services would be appropriate for an individual customer.

Furthermore, nearly half of those interviewed do not have software which supports them in conversations with customers who want to leave the bank.

As banks increasingly seek to place the customer at the heart of their business, they will need to deploy more sophisticated customer experience management (CEM) technology in order to maintain their position and their customer base in the market against new customer-centric banking organisations.

CEM technology enables banks to deliver intelligent conversations based upon analysis of past customer behaviour, as well as current responses and mood. This allows them to engage more effectively with customers, quickly measure how the strategy is working and change at new levels of speed and economy.

The key is to maximise the value of every conversation, consistently across every channel. Users should be able to deliver highly expressive customer experience strategies using models that predict and react to individual customer expectations, propensities and behaviours.

This behavioural segmentation is combined with powerful real-time decision-making and centrally deployed to any channel across the bank.

By implementing this kind of technology, traditional financial institutions are able to put an end to pre-scripted, inconsistent customer interactions based upon static, outdated market segmentation.

Following Next-Best-Action techniques also allows every customer interaction to become unique, appropriate and consistent. The conversation with the customer is continually guided, with actions adapting as the conversation is occurring. Recommendations are determined in real-time, based upon customer responses, mood and instant analysis of customer behaviour.

Financial institutions can also benefit from powerful Visual Command and Control capabilities to simulate different strategies and visualise their impact on customers and business metrics. Once optimised, customer strategies can be deployed at the touch of a button and changed on demand, without IT intervention.

Of course, building one-to-one relationships cannot come at the expense of profitability. Ideally, every decision a bank makes with regard to a customer should cater to that individual’s specific needs but do so in a manner that ensures profitability.

CEM takes the needs of the bank equally as seriously, so that customer offers and propositions, while tailored specifically for that customer, are also designed to support the bank’s own business goals.

The importance of banks employing this type of technology cannot be underestimated. Many of the non-banking players entering the market are already heavily customer focused and, with the absence of legacy systems to contend with, are well placed to invest in CEM solutions.

Therefore, gaining a full understanding of each customer as an individual, including their likely behaviour, and applying that to every interaction is not only critical for differentiation and loyalty, but it may be the key to survival amid increasing competition.

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