emea retail banking study 2005 core banking and customer management of retail banks in europe,...

EMEA Retail Banking Study 2005 Core Banking and Customer Management of Retail Banks in Europe, Middle East and Africa (EMEA)

Kay PatzwaldSAP Business Consulting

Market & Competition

Cross border Banking Services in the EU increase competition.

Foreign Banks, competitors from other sectors and specialised institutions increase the competition.

New Technologies enable increasing communication, automation and analysis options.

Differentiation at product and service level becomes more and more difficult.

Increased transparency with regard to cost/benefit and decreasing loyalty of customers.

Motivation

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Goals of the Study

Status Quo evaluation of the Banking Industry in EMEA with regard to the performance of the core banking systems and the resulting ability to realise the Customer Management approach.

Identify the trends in Core Banking and Customer Management within the next three years.

Characteristics

Scope: Retail Banks in Europe, Middle East and Africa (EMEA)

Target Group: Vice President LevelSales / Marketing / CRM / IT

Medium: Web Questionnaire with 33 questions

Timeframe: Ongoing since Q4 2003

Partner: University of Mannheim / EFMA, Paris

Framework

Strategy

Information Technology & Application Systems

People & Organisation

Acquisition Advisory Processing ServiceProduct &

Service Development

Multi-Channel Customer Management

Business Intelligence & Controlling

Topography of the Study

Each block represents a set of questions in the questionnaire.

Countries and Customer Base

Source: E

ME

A R

etail Banking S

tudy 2005

13%

18%

37%

27%

5%

< 500' 500' < 1 Mio. 1 < 5 Mio. 5-10 Mio. > 10 Mio.

N = 42

Country Number of Banks

Belarus 4Belgium 4Croatia 1France 2Georgia 1Germany 3Hungary 2Ireland 1Italy 4Jordan 1Kazakhstan 1Netherlands 1Poland 1Portugal 2Romania 2Russia 1Serbia 2Slovenia 2South Africa 3Spain 1Sweden 2Switzerland 1UK 3

Current and Future Ranking

Significant differences with regard to the overall score.

Overall Score per Bank [%]

Number of Banks

420%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41

Source: E

ME

A R

etail Banking S

tudy 2005

N = 42Status Quo Expectation (+3 years)

Growth is the Primary Business Strategy

Key Finding I

Primary Business Strategy

What is your bank's primary business strategy?

Source: E

ME

A R

etail Banking S

tudy 2005

Most banks focus on a growth strategy - mainly achieved by cross selling to existing customers.

85%

15%9%

41%

50%

35%

50%

15%

0% 0%

Primarilydriven bygrowth

strategy

Externalgrowth bymerger &

acquisition

Newcustomer

acquisition

Cross-sellingproducts &services to

existingcustomers

Primarilydriven by

cost cuttingstrategy

Incrementalprocess

improvement

Broaderlarge-scalebusiness

process re-engineering

Head countreductions

Outsourcing/shared

services

Elimination ofunprofitablecustomers

Growth strategy Cost cutting strategy

Primary Strategy: N = 41 Growth Strategy: N = 35Cost Cut. Strat.: N = 6

Cross-Selling Ratio in Retail Banking

Typically how many of your products do your customers use?

Source: E

ME

A R

etail Banking S

tudy 2005

The cross-selling ratio is expected to increase significantly within the next three years.

18%

35%

20%

10%

17%

3%

15%

32%

12%

38%

< 2 2 - 2.5 2.6 - 3 3.1 - 3.5 > 3.5

N = 40Status Quo Expectation (+3 Years)

Cost/Income Ratio

What is the current cost/income ratio of the bank?

23%

31%

26%

10% 10%

< 50 % 51 - 60 % 61 - 70 % 71 - 80 % > 80 %

N = 39

What is the expected improve of the cost/income ratio?

N = 39

8%

10%

31%

38%

13%

0%

1 <= 3 %

3 <= 5 %

5 - 10 %

> 10 %

Source: E

ME

A R

etail Banking S

tudy 2005

51% of the banks intend to improve their cost/income ratio by more than 5 percentage points.

Data Management remains a future challenge with a high impact on Customer Management success.

Key Finding II

Customer Information Plan (CIP)

Do you have a comprehensive and accessible Customer Information Plan covering information value; acquisition priorities; information management and usage?

20%

54%

24%

2%2%

15%

59%

24%

None Partial Substantial Complete


Source: E

ME

A R

etail Banking S

tudy 2005

The customer information plan is a basic instrument for further Customer Management activities.

Customer Data Capture

How capable are your IT systems in the collection, storageand effective retrieval of customer data?

Source: E

ME

A R

etail Banking S

tudy 2005

86% expect significant improvements of customer data capture capabilities.

5%

14%

50%

21%

10%

0% 0%

14%

41%45%

Little or no capability Capability being developed Some capability only Full capability but mixedusage

Full capability usedconsistently


Customer Data Analysis

To what degree do you analyze or mine customer data?

Source: E

ME

A R

etail Banking S

tudy 2005

Regular Data Mining will become a common instrument for customer data analysis.

29%

21%

36%

14%

2%

12%

29%

57%

Ad-hoc basic analysis Regular, structured basic analysis Regular basic analysis with ad-hoc data mining

Regular & consistent process ofdata mining


Leveraging IT on Inbound Contacts

To what extent do front line staff have Information Technology support to initiate appropriate sales opportunities versus simply responding to customer requests?

Source: E

ME

A R

etail Banking S

tudy 2005

10%

15%

51%

24%

0%0%

7% 7%

37%

49%

Little or no capability Capability being developed Some capability only Full capability but mixedusage

Full capability usedconsistently


The expectation is to better exploit the sales potential of inbound contacts within the next three years.

Product/Service Expertise

To what extent do your front line employees have the automated tools to provide personalised service or advice across all Retail Banking products?

Source: E

ME

A R

etail Banking S

tudy 2005

Virtually all banks will set up automated front-line support.

7%

12%

21%

53%

7%

0%

5%

0%

50%

45%

Not at all Insufficient automation Inconsistent automation Partially automated Fully automated


Real Time becomes a standard for processing and delivery.

Key Finding III

Campaign Development Timescale

How long does it take to deliver a major (TIME CRITICAL)direct marketing campaign?

17%

44%

24%

15%

7%

12%

27%

54%

> 12 weeks 8-12 weeks 4-8 weeks < 4 weeks

N = 41 Curr.N = 40 Exp.

Status Quo Expectation (+3 Years)

Source: E

ME

A R

etail Banking S

tudy 2005

Banks are targeting a more than 50% reduction in their direct marketing campaign development timescale within the next three years.

Timeliness in Delivering Account Products

What is your ability to deliver current & deposit or savings account products from the time of initial customer inquiry to account initiation?

Source: E

ME

A R

etail Banking S

tudy 2005

Real time account initiation will be the future standard.

14%

3%

19%

43%

21%

2% 0%3%

26%

69%

Varies significantly bychannel

Over 5 days in all cases 2-3 days on average Within 24 hoursirrespective of channel

Immediately (real time) inmulti-channels


Handling Customer Enquiries

What proportion of customer enquiries, transactions and complaints do your call centre / banking help desk handle & close at first contact?

Source: E

ME

A R

etail Banking S

tudy 2005

Banks expect significant improvements in closing enquiries at first contact.

7%

18%23%

35%

17%

0%

7%

18%

25%

50%

None or hardly any < 25% 25<50% 50-80% > 80%


Real Time Customer View

To what degree can customers access a real time, channel independent view of their portfolio?

Source: E

ME

A R

etail Banking S

tudy 2005

55% of the banks aim to achieve real time customer view for all products/services in all channels.

7%

29%

21%

33%

10%

0%

9%

17%19%

55%

No integrated accountstatus visible

Some products/services insome channels

All products/services insome channels

Some products/services inall channels

Yes - for allproducts/services in all

channels


Customer Information Updating

How promptly is customer data or information updated across all channels?

Source: E

ME

A R

etail Banking S

tudy 2005

Real time updating of customer information will become the future standard.

19%

31%

14%

19%17%

0%

5%

12%

43%40%

Greater than 1 day forsome channels

24 hours on average Within hours - all channels Real time - most channels Real time - all channels


Banks tend to adopt standard software for their Core Banking IT.

Key Finding IV

Strategic Value of IT

What is the strategic value added by your current IT systems?

Source: E

ME

A R

etail Banking S

tudy 2005

One third of the banks are currently limited to deliver their strategic promises due to weaknesses of current IT-Systems.

7%

29%

52%

12%

0% 0%

69%

31%

Strategic disadvantage Constrains our ability to deliver onour strategic promise

Sufficiently supports our businessstrategy

Strategic competitive advantage


IT Investment

What percentage of your overall Retail Banking costs do you spend on information technology (ongoing & investments)?

Source: E

ME

A R

etail Banking S

tudy 2005

Virtually no bank will invest less than 6% of the overall Retail Banking costs.

15%

27%

35%

23%

3%

41%38%

18%

0-5% 6-10% 11-15% >15%


IT Landscape

How would you characterise your current infrastructure for Core Banking?

Source: E

ME

A R

etail Banking S

tudy 2005

Banks intend to adopt a higher proportion of standard software in the coming three years.

7%

38%

48%

7%

0%0%

17%

52%

29%

2%

Completely developed in-house

Predominantly developedin-house

Mixed in-housedevelopment & standard

software

Predominantly standardsoftware

Completely standardsoftware


Key Findings EMEA

Cross selling is the most important initiative to achieve the growth objectives for most of the banks.

Customer data planning, availability and analysis remain future challenges with a high impact on Customer Management success.

Real Time processing or delivery will become the standard for many processes.

Weaknesses of current IT-systems limit one third of the banks to deliver their strategic promises today. But in the future one third aims to achieve strategic competitive advantages by means of IT.

Banks are moving away from in-house development.

Status Quo (Average) Expectation (Average)

N = 42

0,20

0,40

0,000,00

0,20

0,40

0,60

0,80

1,00Strategy


Product & Service Development

Acquisition

AdvisoryProcessing

Service


Information Technology & ApplicationSystems

Overall Results per Section

EasternEurope

Strategy



Acquisition

AdvisoryProcessing

Service



20%

40%

60%

80%

100%

0%

EMEA EMEA N = 42

N = 17Eastern Europe Eastern Europe

Status Quo Expectation (+3 years)

Overall Results per Section EMEA vs. Eastern Europe

Source: E

ME

A R

etail Banking S

tudy 2005

Primary Business Strategy (Eastern Europe)

What is your bank's primary business strategy?

Source: E

ME

A R

etail Banking S

tudy 2005

Growth strategy based on new customer acquisition predominant.

88%

12%14%

64%

22%

50% 50%

0% 0% 0%

Primarilydriven bygrowthstrategy

Externalgrowth bymerger &

acquisition

Newcustomer

acquisition

Cross-sellingproducts &services to

existingcustomers

Primarilydriven by cost

cuttingstrategy

Incrementalprocess

improvement

Broaderlarge-scalebusiness

process re-engineering

Head countreductions

Outsourcing/shared

services

Elimination ofunprofitablecustomers

Growth strategy Cost cutting strategy

N = 16

6%

23%

59%

12%

0%

7%

38%

48%

7%

0%




software



IT Landscape (Status Quo)

Source: E

ME

A R

etail Banking S

tudy 2005

Eastern Europe does apply a higher proportion of standard software for Core Banking today.

N = 17N = 42

Eastern Europe EMEA

Eastern Europe EMEA


0%

6%

41%

47%

6%

0%

17%

52%

29%

2%




software



IT Landscape (Expectation)

The trend towards standard software in core banking for the future is stronger too.

Source: E

ME

A R

etail Banking S

tudy 2005


N = 17N = 42

Eastern Europe EMEA

Eastern Europe EMEA


23%

0%

12%

47%

18%

14%

3%

19%

43%

21%




Timeliness in Delivering Account Products (Status Quo)

Source: E

ME

A R

etail Banking S

tudy 2005

Eastern European banks are close to the real time capabilities of the EMEA sample.

N = 17

Eastern Europe EMEA

Eastern Europe EMEA

6%

0%

6%

12%

76%

2% 0%3%

26%

69%




Timeliness in Delivering Account Products (Expectation)

Source: E

ME

A R

etail Banking S

tudy 2005

The expected real time capabilities are even higher for Eastern European banks.


N = 17

Eastern Europe EMEA

Eastern Europe EMEA

18% 18%

29%

35%

0%

10%

15%

51%

24%

0%


Source: E

ME

A R

etail Banking S

tudy 2005

The automated support for customer service employees is less developed in Eastern Europe today.


Leveraging IT on Inbound Contacts (Status Quo)

N = 17N = 41

Eastern Europe EMEA

Eastern Europe EMEA

Within three years there are equal capabilities expected.

0%

12%

0%

41%

47%

0%

7% 7%

37%

49%


Source: E

ME

A R

etail Banking S

tudy 2005


Leveraging IT on Inbound Contacts (Expectation)

N = 17N = 41

Eastern Europe EMEA

Eastern Europe EMEA

18%

29% 29%

12% 12%7%

18%23%

35%

17%


Handling Customer Enquiries (Status Quo)

Source: E

ME

A R

etail Banking S

tudy 2005

Eastern Europe is behind EMEA with regard to the customer enquiries closed at first contact.

N = 17

Eastern Europe EMEA

Eastern Europe EMEA


0%

13%

29% 29% 29%

0%

7%

18%

25%

50%


Handling Customer Enquiries (Expectation)

Source: E

ME

A R

etail Banking S

tudy 2005


The planned improvements for customer enquiries are less significant in comparison to whole EMEA.

N = 17

Eastern Europe EMEA

Eastern Europe EMEA

Key Findings Eastern Europe (compared to EMEA)

Primary business strategy is growth too. But realisation is intended by means of acquisition of new customers mainly.

Stronger focus on automation to exploit in-bound contacts.

Real time processing and delivery is a strong focus too.

The trend towards standard software is slightly stronger.

Consideration for Actions

Use a Customer Information Plan as strategic instrument to plan the required adjustments technically and organisationally

Successful Customer Management requires a combination of statistical knowledge (e.g. live cycle dependent models) and a deep level of customer individual data (e.g. moments of truth).

You can only show improvements in what you can measure.

Enhance traditional measures e.g. product profitability by the customer value analysis.

Comprehensive and realistic analysis of the current situation to develop realistic targets.

Include all aspects into the improvement process i.e. strategy, processes, organisational aspects and IT.

Status Quo Expectation (+3 years)

The self assessment seems partly unrealistic (Service) and not all aspects are considered (Strategy).

Source: E

ME

A R

etail Banking S

tudy 2003

0,00%

20,00%

40,00%

60,00%

80,00%

100,00%Strategy



Acquisition

AdvisoryProcessing

Service



Real Case - Profile

Number of Banks

Source: E

ME

A R

etail Banking S

tudy 2003

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Expectation 72,5%

Status Quo 51,4%

Real Case – Overall Ranking

N = 23Status Quo Expectation (+3 years)

Overall Score per Bank [%]

The bank is currently below average and will loose further ground although significant improvements in some areas are expected.

Thanks for Your Attention

HTTPS://webserver2.psychologie.uni-mannheim.de/befragungen/EMEA/Banking/Study/

Kay PatzwaldSenior Business ConsultantSAP Business Consulting EMEA

SAP Deutschland AG & Co. KG Neurottstraße 15a69190 Walldorf

T +49-6227-7-47052M +49-160-90822957E [email protected]

emea retail banking study 2005 core banking and customer management of retail banks in europe,...

Documents

banking industry

core banking systems

banca intesa0

banca roma0

banca lombarda0

customer management

customer basesource

raiffeisen romania0