Retail banks across Europe and the world are increasingly reviewing their planned IT investments in light of the economic slowdown. CRM is one of the few areas that is likely to flourish. However, it needs a proven ROI, and it needs to demonstrate that it can deliver a competitive advantage.
Retail banks’ investment in CRM will reach $3 billion in 2004, according to a Datamonitor report.
In a new report, CRM technology in retail banking, Datamonitor (LSE:DTM.L) stresses that customer relationship management (CRM) is one of the key areas in which banks will have to continue investing. The report also predicts that European retail banks’ spend on CRM will grow from $2.4 billion in 2001 to $3 billion in 2004.
CRM in retail banking has already moved into a new phase. Too many customer relationships only break even – or worse, produce a loss. Now banks are shifting the main focus from operational CRM, which allows them to establish a consistent interaction environment with customers, towards analytical CRM, which enables an improved understanding of individual customers’ needs. However the critical issue for ROI is integrating operational and analytical capabilities. This makes analytical information actionable through the operational environment.
Integrated CRM solutions should allow banks to design their customer relationships on an individual basis to balance customer profitability with customer loyalty. Hence banks can provide value added services for more profitable customers and more basic products and services for customers the banks believe are lifetime loss-makers. Examples of personalization can be rate variations, channel availability and surcharges.
As a result, integrated CRM solutions may allow retail banks to move from a customer volume to a customer value focus – a shift in paradigm and a fundamental change in the banking industry. In keeping with this, CRM in retail banking will move into a new phase focusing on delivering long term competitive advantage, cutting structural costs through channel integration and establishing a single operational customer database and delivery application platform.
The downturn is clearly putting IT budgets under pressure but, provided an ROI can be demonstrated, it is clear that growth in CRM spend will be strong over the next few years, although there is likely to be a year on year decline in 2002.