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IT based CRM in Banking
Today, many businesses such as banks, insurance companies, and other service providers
realize the importance of Customer Relationship Management (CRM) and its potential to help
them acquire new customers, retain existing ones and maximize their lifetime value. At this
point, close relationship with customers will require a strong coordination between IT and
marketing departments to provide a long-term retention of selected customers. This paper deals
with the role of Customer Relationship Management in banking sector and the need for
Customer Relationship Management to increase customer value by using some analitycal
methods in CRM applications. CRM is a sound business strategy to identify the banks most
profitable customers and prospects, and devotes time and attention to expanding account
relationships with those customers through individualized marketing, repricing, discretionary
decision making, and customized service-all delivered through the various sales channels that
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the bank uses. Under this case study, a campaign management in a bank is conducted using
data mining tasks such as dependency analysis, cluster profile analysis, concept
description, deviation detection, and data visualization. Crucial business decisions with this
campaign are made by extracting valid, previously unknown and ultimately comprehensible and
actionable knowledge from large databases. The model developed here answers what the
different customer segments are, who more likely to respond to a given offer is, which
customers are the bank likely to lose, who most likely to default on credit cards is, what the risk
associated with this loan applicant is. Finally, a cluster profile analysis is used for revealing the
distinct characteristics of each cluster, and for modeling product propensity, which should be
implemented in order to increase the sales.
2. Customer Relationship Management
In literature, many definitions were given to describe CRM. The main difference among these
definitions is technological and relationship aspects of CRM. Some authors from marketingbackground emphasize technological side of CRM while the others considers IT perspective of
CRM. From marketing aspect, CRM is defined by [Couldwell 1998] as .. a combinat ion of
business process and technology that seeks to understand a companys customers from the
perspective of who they are, what they do, and what they are like. Technological definition of
CRM was given as .. the market place of the future is undergoing a technology-driven
metamorphosis [Peppers and Rogers 1995]. Consequently, IT and marketing departments
must work closely to implement CRM efficiently. Meanwhile, implementation of CRM in banking
sector was considered by [Mihelis et al. 2001]. They focused on the evaluation of the critical
satisfaction dimensions and the determination of customer groups with distinctive preferences
and expectations in the private bank sector. The methodological approach is based on theprinciples of multi-criteria modeling and preference disaggregation modeling used for data
analysis and interpretation. [Yli-Renko et al. 2001] have focused on the management of the
exchange relationships and the implications of such management for the performance and
development of technology-based firms and their customers. Specifically the customer
relationships of new technology-based firms has been studied. [Cook and Hababou, 2001] was
interested in total sales activities, both volume-related and non-volume related. They also
developed a modification of the standard data envelope analysis (DEA) structure using goal
programming concepts that yields both a sales and service measures. [Beckett-Camarata et al.
1998] have noted that managing relationships with their
customers (especially with employees, channel partners and strategic alliance partners) wascritical to the firms long-term success. It was also emphasized that customer relationship
management based on social exchange and equity significantly assists the firm in developing
collaborative, cooperative and profitable long-term relationships. [Yuan and Chang 2001] have
presented a mixed-initiative synthesized learning approach for better understanding of
customers and the provision of clues for improving customer relationships based on different
sources of web customer data. They have also hierarchically segmented data sources into
clusters, automatically labeled the features of the clusters, discovered the characteristics of
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normal, defected and possibly defected clusters of customers, and provided clues for gaining
customer retention. [Peppers 2000] has also presented a framework, which is based on
incorporating e-business activities, channel management, relationship management and back-
office/front-office integration within a customer centric strategy. He has developed four
concepts, namely Enterprise, Channel management, Relationships and Management of the
total enterprise, in the context of a CRM initiative. [Ryals and Knox 2001] have identified thethree main issues that can enable the development of Customer Relationship Management in
the service sector; the organizational issues of
culture and communication, management metrics and cross-functional integrationespecially
between marketing and information technology.
3. CRM Objectives in Banking Sector
The idea of CRM is that it helps businesses use technology and human resources gain insight
into the behavior of customers and the value of those customers. If it works as hoped, abusiness can: provide better customer service, make call centers more efficient, cross sell
products more effectively, help sales staff close deals faster, simplify marketing and sales
processes, discover new customers, and increase customer revenues.It doesn't happen by
simply buying software and installing it. For CRM to be truly effective, an organization must first
decide what kind of customer information it is looking for and it must decide what it intends to do
with that information. For example, many financial institutions keep track of customers' life
stages in order to market appropriate banking products like mortgages or IRAs to them at the
right time to fit their needs. Next, the organization must look into all of the different ways
information about customers comes into a business, where and how this data is stored and how
it is currently used. One company, for instance, may interact with customers in a myriad ofdifferent ways including mail campaigns, Web sites, brick-and-mortar stores, call centers,
mobile sales force staff and marketing and advertising efforts. Solid CRM systems link up each
of these points. This collected data flows between operational systems (like sales and inventory
systems) and analytical systems that can help sort through these records for patterns. Company
analysts can then comb through the data to obtain a holistic view of each customer and pinpoint
areas where better services are needed. In CRM projects, following data should be collected to
run process engine:
1) Responses to campaigns,
2) Shipping and fulfillment dates,
3)Sales and purchase data,
4) Account information,
5) Web registration data,
6) Service and support records,
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7) Demographic data,
8) Web sales data.
4. CRM At ICICI Bank
ICICI Bank has to manage more than 13 million customers. The bank has over 550 branches, anetwork of 2025 ATMs, multiple call centres, Internet banking and mobile banking. Its
customers often use multiple channels, and they are increasingly turning to electronic banking
options. Business from the Internet. ATMs and other electronic channels now comprises more
than 50 per cent of all transactions.
In the process of making its business grow to this level, ICICI Bank has distinguished itself from
other banks through its relationship with customers.
The Teradata solution focuses on a Customer Relationship Management (CRM) platform.
Information from various legacy and transaction systems is fed into a single enterprise called
wide data warehouse. This allows the bank to generate a single view of its customers. Thewarehouse has the capability to integrate data from multiple sources comprising Oracle and flat
files. The Behaviour Explorer enables profiling of customers and querying on various
parameters. These enable the bank staff create suitable campaigns for targeting individual
customers on the basis of their requirements.
The logistics in the system have also led to other benefits like interactive reports, unearthing
cross-selling opportunities as well as finding out about the channel usage undertaken by a
segment. The data access was facilitated through the use of Cognos Power Cubes.
The Benefits of CRM
Customers usage pattern: ICICIs CRM data warehouse integrates data from multiple sources
and enables users to find out about the customers various transactions pertaining to savings
accounts, credit cards, fixed deposits, etc. The warehouse also gives indications regarding the
customers channel usage.
New product development: Analysis at ICICI guide product development and marketing
campaigns through Behaviour Explorer, whereby customer profiling can be undertaken by using
ad hoc queries. The products thus created take into account the customers needs and desires,
enabling the bank to satisfy customers through better personalization and customization of
services.
Central data management: The initial implementation of CRM allowed ICICI to analyse its
customer database, which includes information from eight separate operations systems
including retail banking, bonds, fixed deposits, retail consumer loans, credit cards, custodial
services, online share trading and ATM.
Some Noteworthy CRM Initiatives of ICICI Bank
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Mobile ATMs: Customers of ICICI Bank can access their bank accounts through mobile ATMs.
These ATMs are kept in vans and parked at locations that have a high traffic of bank customers
such as the commercial areas in a city or upmarket residential areas ICICI Bank now provides
standard ATM facilities through ATM vans. This facility has been tried at Mumbai, Chandigarh
and various places in Kerala during specified timings.
Bulk Deposits: The ICICI Banks Bulk Deposit ATMs enable customers to deposit large amounts
at one time. Unlike conventional ATMs, which are able to accept only 30 notes at a time, these
ATMs allow the deposit of huge amounts. The Bulk Deposit ATM is available in Mumbais Vashi
sector branch office of ICICI. The bulk deposit facility can be availed of by select customers who
need to deposit huge amounts of cash. ICICI Bank issues a special card called the `Deposit
Only Card to facilitate this service. This card allows for deposit transactions only. The service
is further facilitated by the provision of special bags at ATMs in which a customer can put his
money. After the deposit slip is filled, the bag can be inserted in the ATM. The transaction slip
is then generated by the ATM as an acknowledgement of the deposit. ICICI Bank also has cash
pick-up service for business customers under the business banking segment.
ATMs for the visually challenged: ICICI Bank has launched ATMs with special voice-guided
systems, which guide a visually challenged person to access ATMs without any help. The jack
on the terminal enables headphones to be connected to it and voice commands enable the
customer to transact business. Customers may choose a suitable language to get voice
commands. After the language selection is done, the customer is guided to ensure that the
ATM card is inserted in the right slot and thereafter, guidance is provided for entering the PIN by
using the keypad. A raised button is provided on number 5 to enable users to identify the
numbers easily through touch. The slot for cash collection has such raised `pips that enable
easy identification through touch.
Other Services through ATMs: Apart from the usual transactions involving the bank, some otherservices can also be availed of by ICICI Bank customers. These include:
Prepaid mobile recharge
Buying and renewing Internet packs (such as those of TATA Indicom Internet service provider
and Sify).
Making donations for Tirupati Tirumala Devasthanams, Nathdwara temple and Shri Mata
Vaishnodevi shrine.
Mutual fund transactions, and
Bill payments
Mobile phone as a Virtual Wallet: The mobile phone has been transformed into a virtual wallet
a new innovation in mobile commerce. On September 19, 2005, Airtel, ICICI Bank and VISA
announced the launch of mChq a revolutionary new service which is a credit card using the
mobile phone. This is the first mobile-to-mobile payment option which enables Airtel customers
and ICICI Bank Visa cardholders to pay for their purchases with their Airtel Mobile phones. The
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service has eliminated the need for carrying physical cash for making a purchase and also the
problems associated with the point of sale (POS) terminal since the mobile phone services as a
secure POS and a payment mechanism.
Social Events: ICICI Bank organized the largest domestic invitational amateur golf event for
HN1 (high-net-worth individuals) customers. This nation-wide golf tournament had over one
lakh high-net-worth clients of ICICI Banks private banking division participating in the event.
Mobile Banking Benefits: Mobile banking enables the customer to avail of many facilities by just
sending an SMS. These facilities, which are currently offered free of cost, are as follows:
Locating ATM
Locating branch
Locating drop box
Alert facilities like salary credit, account debit/credit, cheque bounce, etc., and
Queries on banking, cards and demat account