The answer is what concerns Graham Flower, Head of Customer Management for HSBC. “There’s no competitive advantage in product anymore,” he explains. “The financial services market is very crowded in Europe. We are at a point where any product can be replicated instantaneously.” Business has moved away from a product-centric to channel-centric model. This essentially means we have moved to a customer-centric model: saying that it’s the service that differentiates. Customer management is a relatively new discipline, and Flower is well placed to comment on it. He has been with HSBC since they innovated it there, looking at the information their customers had trusted them with and then using that with the customers to benefit the bank.
Customer management is, in Flower’s own words, using customer information to understand what is important to the customer, and what service they value. “The journey of understanding that segmentation is not about product differentiation, but the end-to-end customer experience,” he says. “It’s much more important to understand what each individual segment of customer is looking for in a bank and to focus on that rather than trying to continue to invent new derivatives of products, which actually might confuse the customer.”
It was said initially that customer management was a technology problem, but slowly the industry has come round to the idea that it is not. Technology enables the consolidation of information to create a single customer view: the challenge has been an organisational one, says Flower. “Most big banks are either highly product centric – so you have lots of product silos – or highly channel centric. For example, the HSBC bank in the UK used to be channel centric so you had lots of senior management looking after branches and various branch groupings. In a multi-channel world that doesn’t work, because the customer chooses to contact us how they want to, when they want to.” Customer management is a discipline that requires his team to act as the corporate memory for the bank and to be able to pull together all those interactions, so the customer gets a joint experience.
While some enterprises are just coming round to the importance and potential of customer management, it is a concept that should be taken more seriously. “Customer management is how we run our business,” asserts Flower. “It’s not an initiative, it’s not something that we’re going to do to see if it works. If I look at the way the UK bank works now, CRM is the plumbing; it’s how we operate. IT is a layer in providing that service. My colleagues in IT get this instantaneously, because they understand that this is what IT can do. IT provides the plumbing and the corporate memory to enable all of the channels and customer contacts to be co-ordinated.”
The usefulness of CRM is dependent on what kind of enterprise you are running. In a silo organisation or a mono-line – just selling credit cards, for example – CRM might not be business critical. But if your strategy is to be customer centric, to know your customer base and to treat customers fairly, then customer management and good CRM are a pre-requisite. A few years ago, Flower says that HSBC would have looked at their customer management as a competitive advantage. But today, due to regulations, financial services are expected to work hard at treating customers fairly. In order to do that, you have to know who that customer is: and acquiring that knowledge is at the very core of effective customer management.
HSBC are currently working on a global initiative – their Global Premier – to join up the various parts of their group so that their customers can receive a seamless experience as they travel around the world. Global Premier customers may have multiple accounts across the world: in Hong Kong and the UK, for example. The bank is integrating complex databases at the backend, so the bank can recognise and deal with the customer wherever the customer might be. This has gone down well with the bank’s customers and is an initiative unique to HSBC: their brand is – after all – the world’s local bank.
A rather different recent activity the bank has undertaken is putting warnings onto their ATMs should customers want to put through a transaction that exceed their limit. As Flower puts it, this is about using the information the bank has to treat the customer fairly.
When speaking about the way HSBC sets out their customer management framework, Flower points to some key points. “The first step is being able to create the single customer view; pulling together the information to be able to understand who your customer is and, you know, what products they have with you and what they want and what they don’t want.
“The second stage is to identify the different groups and their needs. You start to understand the segments in which customers value what. Giving customers things they don’t value costs money and doesn’t improve your customer relations. But once you’ve identified your customers, you can identify their differing needs.
“The next stage is to allocate your resources accordingly, to serve your customers to best effect.
“Stage four is starting to realise that while you want to treat all customers fairly, it does not mean every customer is treated the same – as different customers have different needs. One of the challenges that all big banks have had is treating all customers exactly the same. This is not what the customers wanted, and was not very effective use of resources. Using customer management enables you to treat customers fairly, but differently.
“Finally – and this is the most important stage – is to lock customer management into the core of your values. You reward and recognise your own colleagues in the branches and the core centres. Otherwise, you might have a great system, but nobody wants to use it because they don’t understand how it aligns with the key question, which is: what’s in it for me?”
As Flower says, that is the challenge that all banks face, but it is the one area where you can really create some differentiation. If customer management is something you have been considering, you’d be well advised to start taking it seriously. It could prove to be your enterprise’s best competitive advantage.
Graham Flower FCIB, Head of Customer Management at HSBC
Graham is responsible for the development and implementation of Customer Management best practice across the HSBC Group.
Following roles in Prudential and London & Manchester Assurance he joined Midland Bank and undertook traditional Branch Banking training before taking up responsibilities in Strategic IT Planning and Marketing. He returned to the ‘sharp end’ to manage Service and Sales for the Bank’s Wales Division and then for the UK Bank before taking up his current role in 2000.
Graham is a Computer Science graduate, Chartered Engineer, Fellow of the Chartered Institute of Bankers, Fellow of the Royal Society of the Arts and Chief Examiner for ‘Customer Information Management’ for the Institute of Financial Services.
He is co-author of three books: Management of Information Technology and Managing Information in Financial Services and Customer Information Management.
FST. Security of customer information is a topic that’s hit the news countless times recently. What is HSBC’s take on this?
GF. Right at the heart of the business, we understand that this is not our information: it is our customer’s information that they have entrusted us with. That drives the ethical behaviour of understanding that we have no right to this information.
If a customer has entrusted us with this information then whenever we build anything, or look at ways we can use the information, we always start with that premise: that it’s not ours to do with as we like. Are we protecting it? Are we looking after it? The acid test is for me to imagine sitting in front of any customer of HSBC and explain what I’m doing with their information and not be embarrassed or frightened by talking to them? That for me is fundamental. It goes beyond security; it goes into the very values of the organisation.