it based crm in banking

8/4/2019 IT Based CRM in Banking

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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

it based crm in banking

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