Reduction in churn. Customer churn is a problem. Not only does it reduce revenues and profits for financial institutions but also raises costs in operations and customer acquisition, including the costs associated with onboarding new customers and opening and closing products. In 2014 alone, 1.2 million bank customers switched a current account to a different bank in the UK, leading to revenue redistribution of at least €325 million per year. We estimate the total loss in bank revenues due to churn is between €4 billion and €6 billion per year across Europe.

CRM changes this dynamic. Based on our findings and work with clients, between 30 percent and 50 percent of lost customers would have never left their bank had they received superior customer service. (Note: die-hard price-sensitive customers cannot be stopped from switching.) Based on our calculations, less customer churn means anywhere from €1 billion to €3 billion in additional bank revenues per year.

Pricing. Pricing decisions based on individual exceptions and special conditions hurt revenue growth and profitability. While the strategy behind different prices for different customers is time-tested and proven, too many of today’s deals are based on gut instinct and salespeople who make deals too quickly for customers who neither ask for nor expect to get deals.

Next-level CRM adds structure to the pricing process, allowing for monitoring and review of decisions based on facts rather than feelings. A bank that prices appropriately can generate between €10 billion and €14 billion per year in revenues, with about two-thirds of incremental revenues coming from commission income. This is the case even though about two thirds of current retail banking income is from interest income.

New customer acquisition. Acquiring customers can be a costly proposition, often in double-digit millions of euros spent on marketing products across traditional channels. Smarter, less expensive strategies use social media channels and compile user data to launch targeted campaigns—allowing for low-cost customer acquisition while generating substantial revenues.

Fintechs, with little to no marketing expenses, are paving the way to triple-digit growth. In fact, one firm added 60,000 new clients in one quarter alone (see sidebar: The Digital Upstarts: Friend or Foe?).

The digital upstarts: friend or foe?

Armed with CRM excellence, revenue pools can be grown and defended against digital entrants. A focus on three areas will have a direct impact on the top line.

Smart platform uplift. Investment in IT, bolstered by a two-speed IT strategy, is the ticket to a business-oriented, agile organization. Leverage technology progress and the power of platform development with fintechs to reduce the gap from the past.
Culture transformation. As Philip Kotler puts it, “The sales department isn’t the whole company, but the whole company better be the sales department.” Because traditional branch banks and their employees are used to providing services rather than selling products, a cultural transformation may be required. Without the right culture, the best systems and processes will fail or, at best, they will be ineffective.
Partner ecosystems. Reap the benefits of customer satisfaction through value-enriched services. Opportunities in community building, e-learning, and AI-based customer self-service allow for more customer retention with less manual effort. API-based integration with fintechs not only allows for leveraging customer data but also provides more tailored offerings. This is a must for future success.

Fintechs, if managed intelligently and without giving up the customer interface, can serve incumbents across the entire customer life cycle.

Using CRM for new customer acquisitions can generate between €3 billion and €4 billion in revenues annually to the market. Indeed, over the past six years, the number of retail bank customer relationships has grown by 1.2 percent. Best practices include hook pricing, and consequential up-selling and cross-selling to turn profitable customers over time (ING is a good example of this).

Cross-selling. Depending on a bank’s business model (pure product versus advisory services) the average retail bank sells between two and three products per customer. Leading retail banks sell five or more products per customer. What do the leaders do that average retail banks fail to do? They leverage their data—using segmentation, timing, tailored offerings, and technology— and deploy CRM technology, such as next-best product and peer-to-peer comparisons, to support the sales force and build online sales. A data-focused CRM bank can increase its share of wallet and overall size of wallet anywhere from €8 billion to €11 billion per year.³

Upselling. Selling bank products can be likened to selling toothpaste—there are a vast number of brands, flavors, and textures but few real product and price-point areas of differentiation. The toothpaste peddler ends up selling the cheapest product, and in many cases so does the banker. In fact, in banking, there are instances in which 90 percent or more of a four-tiered portfolio is sold within the lowest tier.

Banks that use CRM to identify customers with more purchasing power and a willingness to pay could be worth an additional €5 billion to €7 billion in incremental revenue per year. This, of course, requires the knowledge and skill to communicate the value of more premium offerings first to your sales force and then to the customer.

Next-level CRM: a digital defense

Understanding your customer relationships is only one part of the fundamental defense against banking’s digital upstarts. How to use organizational data is another. Only recently have banks begun to see fintechs as potential business partners in harnessing data rather than threats. The use of open standards in banking is the future. Start-ups such as Mondo and solarisBank, which offer interfaces to fintech start-ups and other companies, will either pose an existential threat to incumbent banks that refuse to change, or a partnership opportunity to banks that change their systems and cultures in order to use customer data more strategically.

Next-level performance banks: Built state-of-the-art infrastructure; efficient and effective customer relationship management; availability of hardware and communications, application landscape, and data integration

EMEA banks:

Partial best-in-class infrastructure
Sales force desktops integrated with workflow management tools; not fully integrated across platforms
KPI dashboards in place but no real-time performance updates
CRM solution not adapted for mobile
Basic ticketing process in place with manual tracking; no self-service options

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