Impact of CRM in Banking Industry

 | April 08,2010 05:53 pm IST

In the Post liberalization the banking industry was adopting push strategy in selling their products and the importance is not given in serving the customers. But in progressive liberalization, the Narashima committee has implemented sea-changes in the banking reform in 1991.


With sustained pressure on their interest spread, banks have been increasingly foraying into a host of diversified activities so as to safeguard their bottom.


Banking Industry revolves around three basic features being:

1. Intangibility: Unlike a product which can be seen and benefits derived accordingly, the banking industry thrives practically on the quality of the services rendered. The experience of the customer determines the growth of the business.


2. Variability: The present day customer is impatient and is highly demanding and dos not compromise on the quality of the service rendered, as he expects that high cost equals high quality and vice versa.


3. Satisfiers: Unlike the manufacturing industry that wholly depends on the tangibility and extrinsic factors, the service industry is totally dependent on the intrinsic and extrinsic factors, which have a close earring on the core benefits.


It is obvious from these features that the customer is the fulcrum for the banking industry and any initiative adopted for its growth is to be aimed at, for and through the customer. And the banks to be competitive it build up a strong CRM by convergence model in the financial industry and financial liberalization.


CRM about a business strategy , which drives changes in the banking and work processes, enabled by information technology. Banking institution must initially develop a strategy to understand and anticipate the need of the current and potential customer base.


Benefits of Using CRM in Banking Industry

  1. Provide better customer balance
  2. Increase customer revival
  3. Discover new customers
  4. Helps sales staff close deals faster
  5. Making banking operation more efficient
  6. Simplify marketing and sales process 


CRM Strategies Adopted in Banking Sector

One-Stop Financial Supermarket

Right service is offered to right customers. Faced with growing complexity in financial products ,more and more customers are expressing a needed for a "trusted financial advisor" to help manage their financial affairs.

As the primary financial services provides to most consumers, banks are particularly well positioned to capitalize on this needed, which promotes a greater receptivity to the one stop shopping concept.


The ATM can be accessed around the clock and safety is also more. The number of customer transaction is increased and it is used at any place. There are no of credit cards offering variety of services according to their nature and it help them to raise easy credit facilities and proof to disputes in legal case.


Master card is a card of master money card. Some banks issue one some the other. Banks are replacing plain old ATM to this card which help the customer to use even in restaurants and gas stations.

Smart cards are a card with chip technology contains all the information about its holders. Smart card replaces and does the work of all the cards. High memory, portability and reliability make the smart cards more useful for the customers.


The stock exchanges dealing are done through Demat and Remat A/C. In the developing countries like India the customer's awareness towards this product is in growing stage. Ancillary services like e-broking. e-shopping and on-line ticket booking are also enjoyed by few customers.


Increasing the Number of Delivery Channels to the Customers

Banks have realized that shifting customer access to lower cost channels can help in bring down the operating cost. These channels are used not only to improve service but also to divert traffic from branches. It is a fact that the cost of the transactions over the delivery channel is lower than doing the transactions through branches. The ATM and Net Banking Services enable Non-Stop Banking -Convenience Banking -24 hrs access to cash -365 days of the year without any additional cost burden to the customer.


The Real Time Gross Settlement (RTGS) Scheme is being implemented in a phased a manner after which the collection of cheques will be smooth and quicker. The CBS (Core Banking Solution) implementation will lead to instant collection of outstation cheques without delay. Customer to the Branch is moved to Customer to the Bank in major cities and it has reduced time to non-entity. The use of Plastic money has increased in sky rocketed pace as a result of which the transaction have become easier and speedier without actual use of cash. The concept of Virtual Banking has also gained ground.



Customer Value Management

CRM solutions if implemented and integrated correctly can help significantly in improving customer satisfaction levels with accrued benefits. Data warehousing can help in providing better transaction experiences for customer over different transaction channels. The data mining helps banks analyze and measure customer transaction patterns and behaviors'.


This can help a lot in improving service levels and finding new business opportunities. The main thrust of CRM is to develop new products, render value creation, gain market leadership and spread risks and vulnerabilities besides facing competition. Any bank would have a huge customer base that it would not be able to monitor it manually in order to find out various customer behavior trends and patterns.


It is essential to attract, retain and grow customer base with effective management of the information about the customers and enhance the relationship with them. The value proposition however a significant increases in that intangible called customer satisfaction. The increase in customer satisfaction has translated to loyalty those results in higher customer retention and growing franchise value.


Unless the banks understand the needs of the customer, best technology products benefiting the customer cannot be designed. Hence the CRM and technology go hand in hand supplementing each other needs and convenience. Once the customer needs are understood and technology product orientation becomes easy for value creation process.


As the banking industry thrives on the services rendered, it becomes necessary to imbibe the "PQRST" strategy to maintain CRM, where

P: Peace of mind for the customer

Q: Quality of service rendered, which should commensurate to the expectations of the customer

R: Respect to be given to the customer irrespective of his economic background

S: Sincerity in the discharge of duties to the customers, with a personal touch