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New Retail Strategies e.g. Multi-Channel, CRM, Cards and Their Impact on Technology

March 7, 2007. 2. Retail Market Drivers. Impressive prospects of retail banking and loansEconomic recovery since 2000, and expected to consolidate into the futureImprovement of Romania's political frameworkSustained GDP growth (4.5

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New Retail Strategies e.g. Multi-Channel, CRM, Cards and Their Impact on Technology

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    1. Risk Advisory Services March 7, 2007 1 New Retail Strategies (e.g. Multi-Channel, CRM, Cards) and Their Impact on Technology Presentation for New Banking Technologies Forum Bucharest, Romania

    2. March 7, 2007 2 Retail Market Drivers Impressive prospects of retail banking and loans Economic recovery since 2000, and expected to consolidate into the future Improvement of Romania’s political framework Sustained GDP growth (4.5 – 5% per annum) Decreased inflation where lending to real economy is sustainable Expected growth in wealth of individuals & SME’s Improved debt ratings for Romania (S&P, Fitch, Moody’s, etc) Current corporate banking market is saturated, and the smaller corporate market (downmarket) may be perceived as too risky

    3. March 7, 2007 3 Retail Market Drivers EU accession De-regulation (loans, establishment of banks, etc) Institutionalization (control and regulatory mechanisms) Access to markets (transfer of loans & liabilities) Stable macro-economic environment (long-term business prospects) Increasing sophistication of retail banking clients (need to offer Western-European services and quality) Future private / PPP pension funds and employee-benefit plans

    4. March 7, 2007 4 SWOT Analysis for Banks in Retail Market Strengths Brand name (for established banks) Products Pricing Opportunities Improving market / EU accession De-regulation Retail banking still in early stage Cross-selling Weaknesses Lack of brand name in local market (for new banks) Late entry (for new banks) Limited branches (for new and small to mid-sized banks) Threats Product differentiation not very clear among clients Low barriers to entry Increasing competition Needed investments in technologies and organization Credit Bureau and similar controls not mature enough

    5. March 7, 2007 5 Retail Market Conclusions The time is now but the window of opportunity is small Retail banking is in emerging state Competition is accentuating Major players investing in retail banking services and technology What do customers want? Innovation Mortgages and innovative credit cards and consumer loan products Enhanced, high-yield current and savings accounts Cross and hybrid products offering financial leverage Convenience 24 / 7 availability How to get ahead? Multi-channel management Customer relationship management

    6. March 7, 2007 6 Multi-Channel Objectives Integration of all front-end service offering capabilities Offering consistent, quality banking products and services through various distribution channels Decreasing time-to-market for new, innovative products Cross-selling Integration of all back-end data processing capabilities CRM Decreased transaction cycle times Risk management Regulatory reporting and compliance

    7. March 7, 2007 7 Multi-Channel Architecture

    8. March 7, 2007 8 Multi-Channel Results Sophisticated banking products through various distribution channels (increasing the convenience factor) Cost reduction for banks (it costs more to do a branch transaction than an I-Banking one) Reducing time-to-market for new products Improving quality, consistence and management of banking services Increased customer convenience Easier brand management and promotion Advanced customer relationship management

    9. March 7, 2007 9 CRM Objectives Customer alignment Deliver the right services to the right customer Cater to specific customer needs Offer personalized service and increase the convenience factor Long-term value Ensure customer loyalty and long-term relationship with the bank Improved profitability through lower product development and service costs Consistent and cost-effective customer service Analyze customer habits and “guide” customers to more profitable and longer-term products

    10. March 7, 2007 10 CRM Challenges Achieve greater organic growth Serve emerging customer needs Revitalize and diversify product offerings Improve channel management Ensure 24/7 availability Enable a “full view” of customers while Maintaining compliance with EU Data Protection Act Securing customer information

    11. March 7, 2007 11 Case Study: “The Full View” – Banca ABC Romania S.A.

    12. March 7, 2007 12 Case Study: “The Full View” – Banca ABC Romania S.A.

    13. March 7, 2007 13 Some of the Case Study Conclusions Ion Ionescu has a house, car, a healthy disposable net income, and still room for extra loans as per BNR norms Next time he calls our call center or goes to a branch (i.e. contact), we should give him more information about our consumer loan programs Ion Ionescu spends a lot of money using our credit card We should call and ask him whether he would be interested in activating the bonus and shop / miles / perks options on his card We should inform him, on next contact, on our new “consumer loan on card” product Ion Ionescu uses the Internet banking platform frequently (39%), but uses the ATM’s much more (51%) We should send him a flyer about the possibilities of loan repayments, standing orders and direct debits directly from our Internet Branch, thus increasing his customer convenience We should send him information related to discounts on commissions we offer for using the Internet Branch We should also communicate to him both messages above on next contact Ion Ionescu has a savings potential of EUR 4.900 per month (49% of salary) We should send him information related to our loan products for constructions, and call and ask his feedback within three weeks of sending We should attempt to sell him, on next contact, medium to long-term time deposits or T-Bill placements We should ask him whether he would like to be contacted by a sales representative from our investment / capital management subsidiary

    14. March 7, 2007 14 Implementing CRM Technology integration and multi-channel management is a pre-requisite to be able to adopt the “full view” Robust but agile solution with advanced analysis capabilities needed to support the CRM initiative Policies, procedures and detailed operations manuals for all staff entering into client contact Information integrity, security, availability: IT governance is a must

    15. March 7, 2007 15 Bank-Merchant Partnering Until recently, the partnerships between banks and merchants have been predictive marketing efforts In a way, this was an educated guess based on the analysis of certain market and consumer metrics The main objective has always been to sustain customer loyalty by targeting lower and higher spending needs Lower needs: fuel, supermarket, telecommunications Higher needs: airlines, travel agencies, hotels CRM can help in optimizing the bank-merchant partnership using analyses based on actual customer spending habits and response to new partnerships and products The objectives and the marketing methods do not change with CRM. However, the bank can better align or co-brand itself with strategic partners, measure profitability of partnering arrangements, and also shop among potential partners

    16. March 7, 2007 16 Watch Out!!! EU Data Protection Act Directive 95/46/EC of the European Parliament and of the Council of 24.10.1995 Information to be protected: sensitive and personal data, including, but not limited to the data subject’s: Racial and ethnic origin Political opinions Religious and other similar beliefs Membership of a trade union Physical or mental health or condition Sexual life and orientation Commission or alleged commission of any offence Any proceedings for any offence committed or alleged to have been committed by him/her Disposal and/or court sentences related to such proceedings

    17. March 7, 2007 17 Watch Out!!! EU Data Protection Act Directive 95/46/EC of the European Parliament and of the Council of 24.10.1995 Legal principles – Data shall be: Processed fairly and lawfully; Collected for specified, explicit and legitimate purposes and not further processed in a way incompatible with those purposes; Adequate, relevant and not excessive in relation to the purposes; Accurate and, where necessary, kept up to date; Kept in a form which permits identification of data subjects for no longer than is necessary for the purposes; Processed in accordance with the rights of data subjects; Appropriate technical and organizational measures shall be taken against unauthorized or unlawful processing of sensitive and personal data; Sensitive and personal data shall not be transferred outside of the EU unless the recipient country has similar data protection legislation. The data controller (Bank, Credit Bureau, NBR, etc) is responsible for the application of the above.

    18. Risk Advisory Services March 7, 2007 18 Thank You For Your Time Kemal Özmen Senior Manager Risk Advisory Services Ernst & Young Romania Tel: +40 21 402 4000 e-mail: kemal.ozmen@ro.ey.com

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