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New CRM technologies bring cost savings and faster customer service in financial industry

What types of new CRM features should financial institutions like banks, mortgage firms, brokerages, and others be investing in, and what issues do financial services firms need to consider before investing in new CRM products?

While they may not be at the forefront of the latest wave of technology, banks and other financial services firms are not so stodgy when it comes to embracing new customer-facing tools.

The financial services industry has moved into online banking and webforms for submitting applications, to taking a cautious look at social CRM channels, like blogs and forums.

For example, ING Direct, a Wilmington, Del.-based bank which has over 85 million private, corporate and institutional clients in more than 50 countries has its own Facebook page. Lloyds TSB Commercial Finance has added self-service features like "Get an Instant Quote" and "Get in Touch" buttons to ask service to call them back.

While things like Facebook, Twitter, member forums and chat may be new venues for traditionally conservative businesses like banks and insurance firms, it is one that customers clearly seem to want.

A survey of corporate banking customers by Finextra and Pegasystems this year found that 57% of respondents were willing to pay higher fees for an automated website that would allow them to access and manage all of their accounts.

The survey also found that 62% of corporate customers would consider moving to a different bank to get better customer service. For both corporate and consumer bank customers, fast answers to problems and the ability to take care of issues quickly and effectively are all important, even ranking above cost for many customers.

CRM automation saves money

While financial firms have been slower than some other industries -- notably retail -- to invest in new CRM technologies, they are realizing that automating some of the simpler customer service functions is one way to make customer service faster and more convenient for customers while potentially saving money. It's also cheaper to provide, an especially important factor for servicing lower-end customers who may not have a lot of business with a bank but are still are valuable customers. Web-based self-service tools such as online applications, FAQs about products, webcasts on financial planning or investing, or even answering questions over Twitter are cost-effective for the provider and usually a fast and reliable way to get the consumer what he needs.

Jeanne Capachin, research vice president with IDC Financial Insights said that while financial services companies have been conservative about investing in new CRM technologies, they are now taking a hard look at things like social CRM and self-service capabilities.

 "A lot of financial institutions in the 1990s made big investments, such as for Siebel CRM, or did some internal development. Now they're looking at the results they got and combing around again for more," she said.

With the growth of hosted or software as a service (SaaS) CRM, it has become easier and less expensive to add capabilities. Capachin noted that SaaS CRM has been popular with financial institutions because of the lower cost and flexibility for services that don't require heavy-duty transactional flows going back and forth, or ones that involve hosting the customer financial database at a third-party location. 

Banks judged by their service

Most retail stores, restaurants, hotels, auto manufacturers, software companies and other consumer industries are judged more for the quality of their products than for their services, although customer service is also considered an important competitive differentiating factor for many. But service is much more important for financial institutions. 

While the variety of financial products and the rates charged are important to customers, the quality of the customer service can make or break a bank's relationship with those customers. Services are the primary factor in how customers judge them, followed by products and pricing, according to the Finextra/Pegasystems survey. In the same survey, 46% of the customers said they would be willing to pay higher fees if they could get more consistent service across different channels and departments.

Public CRM is risky for a bank's brand and customers' privacy

However, places like, Kontain, Twitter, etc. aren't high on the list of ways that financial institutions typically want to service customers. One reason for their reluctance is the potential risk to their brand image. After all, banks are not coffee shop chains, or clothing stores selling $5 and $50 items. They are entrusted with someone’s life savings, college fund or corporate accounts, so they have to be careful about their tone and how they present themselves on social forums.

“They’re doing it, but moving cautiously," said Chris Fletcher, research director at Stamford, Conn.-based Gartner Inc. "They want to make sure they’re using social to their advantage. On one hand they want to get closer to their customers and find avenues besides mass advertising to extend their brand and increase awareness of their products. At the same time, when you create a social platform, in some ways you cede control of that social community to the consumer. You’ve got to be careful about things like confidentiality and behavior. What if they start discussing competitors?"

Marc DeCastro, research manager for consumer banking at IDC noted that banks have to be extra careful about how any social endeavor affects their brand image.

“A company like Best Buy is used to having customers leave feedback, and it’s usually about TV sets or some other product. But with a bank, feedback is typically different,” DeCastro said. “With banks, [the feedback] is usually about customer service, and it’s usually posted by people who are upset.”

Another issue is confidentiality. Financial companies can't have public conversations about customer accounts on public forums. So, any attempt to service customers over Twitter or other public places must include a process for moving the exchange quickly to a private channel, typically, phone or email.

That may be why financial institutions have been slower to build their own online communities. Both the potential risk of revealing sensitive information and the fact that while customers may be inclined to send an SOS over Twitter, they are less inclined to participate regularly in forums, at least not those on their banks’ or financial providers’ websites.

So, movement in the financial industry toward the community aspect of social CRM is quite slow.

“I haven’t seen any banks with real communities online, and for the most part customers don’t expect communities,” Forrester’s Kate Leggett said. “Banks will put out a lot of FAQs and do large knowledge management projects, which is a cheaper way to serve customers. Every time they email you or interact with you in real time, it’s expensive. So, banks want to be pushing information, instructions and forms out on the Web.”

"Savvy companies use the tools to respond to queries from customers -- but they quickly move to a private, secured channel,” said Jeremiah Owyang, a partner in the San Mateo, Calif.-based Altimeter Group. Owyang noted that the successful financial services companies he’s observed tend to follow other best practices, including:

•         Using social tools for listening, not just talking

•         Focusing more often on lifestyle and work style rather than having specific discussions about financial solutions

•         Training employees to know the boundaries of what can and can’t be said

Owyang cites Wells Fargo, which has developed the lifestyle blogs Guided by History. Here customers can learn about earthquake preparedness and the history of the great earthquake in San Francisco.

The site also includes other aspects of the Wells Fargo history, and there’s a lot more, such as an “Ask the Expert” submission form, free prequalification forms for home mortgage loans, IRA comparisons for retirees and online investment services. There are also forms for opening various types of accounts and home mortgage rates, a “Your Child's Future” investment learning center, savings comparison charts, mortgage payment calculators, foreign draft orders, information on wealth management services, and a "401K Rollover Center." So, the "CRM" of Wells Fargo's site ranges from online forms to historical pictures and stories to earthquake tips.

“Why is this important to Wells Fargo? The same people in the household that care about saving money are the same who care about earthquake preparedness,” Owyang said.

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