Financial Services Makeover Needs CRM

Record earnings, mass layoffs. If you had to summarize the last four years in financial services history, there’s your start.

Of course, you’d also want to detail the collapse of Lehman Brothers, the sine wave of the S&P 500, as well as nationalization, forced recapitalization and the furious pace of financial services technology change, from mobile banking on iPhones and Android smartphones to the simple act of photographing a check to deposit it.

Business-wise, these changes have driven banks and asset management firms to look beyond customer volumes as a way to improve their bottom line. Bank of America (BoA), Citibank and UBS have all announced plans to become smaller; they want to reduce risk.

What does all of this mean in customer relationship management (CRM) program terms? It means that financial services firms have shifted from a growth-first focus, to a focus on prioritizing business efficiency and customer efficiency. Accordingly, they need better ways of identifying and attracting the right customers, while avoiding the wrong ones.

Financial Services Succeeds Via Innovation

What’s especially interesting with the financial services industry is that it’s always been an early adopter of technology, and has also been heavily influenced by the technology industry. That’s because financial firms are essentially a service industry. They lack the hard assets of a manufacturing concern. Instead, they differentiate themselves based on innovation.

With the focus on having fewer, but better, customers, the principle innovation we’ve seen practiced by financial services firms has been to create a deeper profile of each customer. These profiles help financial services firms recommend certain products or product changes to prize customers. Likewise, they can literally fire customers if they don’t meet desired criteria or charge them for the privilege of working with the bank. Case in point: the recently floated (and retracted) strategy from BoA not one of our customers to hit less desirable customers with a $5 per month fee to use their debit card for ATM withdrawals.

Such ideas show that banks’ hands are being forced by the flat yield curve for U.S. Treasury bonds. In a nutshell, banks typically make money by using the money people invest with it to invest in U.S. Treasury bonds. Back in 2006, the 10-year bond return was 4%, versus the current 2% 10-year return and 1.5% one-year return. With the spread between short-term and long-term rates so flat, it’s impossible for banks to make money, thus they have to raise fees.

Asset Managers Seek Long-Term Differentiation

As with banks, asset managers are under substantial pressure too, because funds overall aren’t performing well. Even at the best of times, the average asset manager only has a hit rate of 50% (meaning that they make the right decision about half the time, in which case chance would work just as well). Some do much better, but in today’s down market, it’s even tougher to beat the competition.

Accordingly, one well-known asset management firm with which Cloud Sherpas is working has been redoubling its focus on customer intimacy. With the whole world turning on its head every six months, the company has taken a proactive approach by ensuring its customers understand the insights that the asset management firm is delivering, including extensive, proprietary information on market moves. By doing so, the firm is giving its customers a long-term vision about how they can weather, better than everyone else, today’s volatile market.

Banks Must Cultivate Better Customers

Other recent Cloud Sherpas financial services projects also illustrate the industry’s “must cultivate better customers” imperative. Examples include:

  • Mobile CRM: For a large British bank, we’ve been helping to mobilize a CRM solution, giving bankers rapid access to complete customer details so they can more rapidly court customers with profitable proposals.

  • Customer profitability: Backed by data analytics, customer analytics and business intelligence systems, a European bank now computes each customer’s profitability. The goal is to enable salespeople to know the best customer to be targeting, with which services, at any given moment. Likewise, its service department can ensure these customers stay happy and loyal.

  • Twitter customer service: Banks have been leading the charge to deliver customer service via social networks. For example, BoA (again, not a customer) now fields customer inquires via Facebook and Twitter.

As these projects illustrate, the best way to succeed in today’s turbulent financial services market is to ensure your salespeople have the right tools to identify, target and sign the most desirable customers. Also deliver savvier customer service not least via social networks to keep customers happy. In other words, the solution to succeeding at the financial services CRM game is simple, at least in theory: Reduce risk and increase profits by finding the best customers. Then make sure you keep them.


Cloud Sherpas is one of the world’s leading cloud services brokerages and helps businesses adopt, manage and enhance their CRM investment by identifying desired business goalsfinding the right tools and technology for the job, and delivering rapid implementations that remain focused on achieving the desired business capabilities.

Adam Honig
Adam Honig 125 Posts

Adam Honig is a leader in CRM vision, strategy and operations, and he helps companies worldwide achieve business objectives through his CRM experience and expertise. Adam helped build, grow and manage numerous successful technology firms, including CRM consulting firm Innoveer Solutions (now part of Cloud Sherpas), Internet consulting firm C-bridge Internet Solutions and middleware software development firm Open Environment Corporation.