Competition from nonbanks is forcing banks to upgrade their customer relationship technology, according to a report from Cap Gemini Ernst & Young.

Top bank managers must get involved in this effort, particularly since the Internet, wireless, and other customer channels have made customer relationship management more complex, the report argues.

Loosely defined, customer relationship management is the practice of increasing per-customer profitability through product and service offers tailored to each client’s data.

But it is also “not a well-defined term — it means different things to different people — so it’s very important to have a blueprint for what CRM is,” said Michael Rice, director of financial services consulting for the Americas at Cap Gemini.

“It is critical to have a good business case with the right analytical rigor, and it is key for senior executives to sponsor the initiatives to ensure that it is getting a lot of attention,” Mr. Rice said.

While customer relationship management has traditionally been reserved for the retail side of the business, advances in technology can help banks get more out of their corporate clientele, Mr. Rice said. Even among institutional customers, “touch-points” are proliferating, and “CRM spans the entire organization,” he said.

Bankers serving corporate clients have assumed their clients are “high-touch and low-tech,” Mr. Rice said, but this is less true now that clients are growing more comfortable with technology and self-service banking.

Private banking customers, who have similarly been stereotyped, are also more eager to use remote channels and to bank in a more self-directed way. As with corporate clients, private banking customers still want the option of turning to a relationship manager for weightier decisions, Mr. Rice said.

He said banks need to spell out how customer relationship management will be handled in all interaction mediums: branches, automated teller machines, call centers, personal computers, and wireless devices such as personal digital assistants and Internet-enabled cellular phones.

It’s predicted that wireless devices will become important medium for banks. Forrester Research, of Cambridge, Mass., says 4% of those who bank online use personal digital assistants, and predicts that by 2005 about 45% Web banking consumers will be using Web-enabled cell phones.

Mr. Rice said these channels will help transaction volume rise and, in turn, pose workflow complications.

“The upside is that the more touchpoints, the better opportunity to brand,” he said.

He said banks’ immediate challenge in wireless CRM will be the same as it was for previous channels: integration with technology already in place.

Beyond the initial systems hurdle, however, banks will have to provide channel-relevant customer communication. Sean P. O’Malley, associate principal in charge of financial services at the New York consulting company IFsec, said people will use wireless devices in different environments, and they will not have the time or the inclination to pore through detailed information.

Financial services companies will have to come up with an alternative delivery format “distinguished from the Web-based format,” Mr. O’Malley said.

Privacy will also be crucial to relationship management in wireless banking, he said. That means protecting customers’ phone numbers and sparing them a telemarketing deluge.

“The customer is king, and institutions are fighting to retain and attract new clients,” Mr. O’Malley said. “They can’t afford to do something that will alienate them.”

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