Earlier in this decade many thought online banking would kill off branch banking.
Statistically speaking, the reports of branch banking's death have been greatly exaggerated. Across the United States, the number of branches has increased to 70,000 from 55,000 over the last 10 years.
Instead of ending demand for branch services, the market has transformed what happens in today's branch environment. According to research by Celent Communications, only 45% of branch activities are transaction-related (for example, deposits, withdrawals, transfers). Instead, today's bank branches spend more time on sales and service.
In their efforts to increase efficiencies and reduce costs, leading banks have encouraged this shift with self-service kiosks inside the branch and by expanding the functionality of ATMs. As a result, banks have reduced the number of employees needed per branch by approximately 20%.
Now that we have improved efficiencies at the branch level, we must look to the bigger question of how to generate more revenue and build market share there.
Banks lose customers because of poor service. Beyond the growing costs of marketing and customer acquisition, the real loss is in the fact that customer profitability increases as the relationship matures.
Unfortunately, most companies lose up to 10% of their customers each year. Of course some of this is natural attrition due to death, a move, or other life occurrences. But most of these customers leave because of dissatisfaction.
Despite all of the industry's successes in improving efficiencies, cutting costs by 10% has the same profit impact of increasing retention by 2%. Clearly, customer retention is where we must focus our efforts.
And more than just retaining customers, we must start truly succeeding in cross-sell. The key to our future success lies in deepening these relationships.
When introduced over 10 years ago, customer relationship management systems were touted as the answer for expanding relationships and building loyalty. This led many banks to invest heavily.
This supposed cross-sell panacea has fallen short, however. Most banks lack the systems and integration they would need to use the information collected effectively. As a result, they have yet to realize a return on the investment.
In truth, expectations of what CRM systems could accomplish were unrealistic, primarily because the technology doesn't live where client activity does - around transactions.
Most CRM systems focus on customer interactions, either outbound or inbound requests made by the client. However, cross-sell opportunities are most prevalent and profitable when they occur naturally, on the basis of life occurrences or as a result of customer-initiated transactions.
If we can implement cross-sell processes in response to how customers engage us, our efforts will be more appropriate, better received, and, therefore, more lucrative. Seeing the value of existing CRM investments becomes a question of aligning transactions and business processes to turn our gathering of information into action.
The banking industry will see returns from CRM investments when it links data gathering with business process and information technologies such as those found in enterprise content management (ECM) tools, of which my company is one provider.
Today's CRM systems often rely on employees to identify opportunities and initiate actions based on self-defined reports. This has kept the focus on sales and marketing instead of on day-to-day operations. Linking transactions to CRM and, as a result, launching processes can help banks connect the dots for branch employees.
One way to think about this is to consider what actions happen when your bank receives specific requests. For example, you receive a call from a customer or escrow company looking for a mortgage payoff amount. What business processes does this trigger?
Of course, you must fulfill the request itself - but this is only one side of the equation. If customers are paying off a mortgage, are they refinancing somewhere else? What does your bank need to do to keep that business? Or have they decided to sell the property and invest the proceeds? If so, how can you assist them with investment alternatives, capital-gains issues, or financial planning?
By launching a separate business process that engages customers to learn more about their needs, your systems can help you open the door to stronger relationships with them.
In this example, by integrating CRM, a business rules engine, and process management, two work items would be automatically launched by the request:
- The payoff amount would be communicated to the requester.
- Simultaneously, the branch manager or service representative responsible for the mortgageholder's account would be notified to call, say the request was being processed, and show how the bank could help meet related needs.
This kind of real-time business analysis and response to customer realities makes cross-selling offers more appropriate and builds the customer's relationship with the branch and the bank. It focuses human and financial resources on maximizing existing customer relationships instead of ceaseless investments in mailing and marketing to recruit new customers.Another opportunity for linking CRM and business processes is in the area of "life events." Reaching retirement age, establishing an account for a child, or adding a spouse or significant other to their accounts should signal branch managers or service representatives to talk with the customer about financial needs and plans.
Taking advantage of these critical events enables the bank to show its commitment to customers, expands revenue opportunities, strengthens customer loyalty, and may generate referrals. In combining the powers of process and information we earn the right to cross-sell to our customers.
By enhancing CRM with business rules and process management, we can turn our branches into the sales and service engines that will propel retail banking to new heights.
