Customer knows best

FST speaks with SAP’s Julian Johnson about the development of CRM strategies in retail banking.

FST. How have the sub-prime mortgage crisis and global credit crunch affected the CRM strategies of retail banks?
JJ. Retail banks must be much more agile in introducing new products that accommodate their needs and the needs of their customers in the context of the current environment. This can mean new pricing structures, credit assessment practices and new product structures. Historically it has taken banks about two years to introduce new products , that’s just not quick enough to meet today’s market challenges.

Second ly, banks must be agile , recognising that there are likely to be increasing regulatory requirements and expectations for social responsibility in their lending practices. They must prove that their products are structured to help consumers easily understand what they are buying and proactively help consumers manage their overall debt and interest exposure.

FST. What role does IT play in help ing banks to address th ese issues?
JJ. Technology gives banks the tools they need to analyse their customers and capital structure so that they can more effectively create innovative products, get the right products to the right customers and maximise profitability. Technology can also help banks guide their staff through new products and customer-facing processes to minimise the deployment risk of new offerings and maximise opportunities for cross selling and up selling.  

By provid ing critical check points to ensure that a bank’s products are being sold according to local, national, and even international standards , IT can help banks show consumers the true cost of a mortgage or car loan , for example, and it can route customers who cannot meet their credit card balances to the most appropriate personnel for their particular situations.

FST. In what ways are banks moving forward to install such technology?
JJ. The market changes of the past year have pushed existing systems to the limits of their capacity and flexibility. In addition to new capital challenges, there are challenges related to operational risk, mergers and acquisitions that banks must address. Meanwhile, they must accommodate fast-changing requirements for product innovation, pricing and structure in an increasingly fickle marketplace. In this environment, a growing number of retail banks see that they need consolidated front and back office architecture to remain competitive.

FST. What does such architecture look like with respect to CRM?
JJ. For the most part, retail banks have focused CRM best practices in areas such as sales and marketing and used technology primarily to deliver products through various isolated channels. While there has been broader adoption of CRM principles in areas such as wealth management and corporate banking , the retail sector has not traditionally embraced best practices in areas such as customer retention, revenue growth, new product introduction, or sales incentives. That seems to be changing, as today’s market demands force banks to think about a customer’s complete portfolio and give initiatives such as cross selling, up-selling and sales through service greater priorities.

Instituting such initiatives has become more feasible with the introduction of technology such as service oriented architecture (SOA). Instead of undergoing a total front office transformation , banks can use SOA to change their front offices channel -by –channel , product -by -product.

FST. Do retail banks tend to focus first on transforming front office processes before proceeding with the back office?
JJ. The credit crunch has shown that banks need better back office support to enhance financial and risk transparency as well as better front office support to accelerate the introduction of new products, fulfil customer needs more completely and address a dynamic regulatory environment. There’s no question that all banks desire the complete harmonisation of their front and back offices – where SOA links every product, process and customer to a single, highly flexible, multi-channel CRM application.

The question is: How do you achieve this landscape? You can start with the front office and achieve end-to-end or you can start in the back office and enjoy immediate benefits from product consolidation and innovation. Either approach has its benefits. Eventually, however, everyone will move toward a fully integrated CRM system.

Julian Johnson, SVP Industry Business Solutions, Global Field Operations for SAP is responsible for SAP’s go to market across all industries globally. Joining SAP EMEA in 2005 as VP of CRM Solutions, Johnson successfully led the CRM business in EMEA before being appointed Senior Vice President of Line of Business Banking EMEA in 2007.