ME banks ‘could boost income with better CRM’
Dubai, October 3, 2011
Middle East banks could achieve big hikes in revenue growth and cross-selling through improved CRM (customer relation management) channels, according to a study.
In a recent comparative study of Middle East banks and some of the leading international banks, global management consulting firm Boston Consulting Group (BCG) has learned that for most Middle East banks, less than 5 per cent of new business is driven by CRM.
This is in comparison with a 30-50 per cent increase in new business attributable to CRM for some of the leading international banks.
In addition, Middle East banks stand to double their cross-selling capabilities through improved CRM: currently the cross-selling ratio for Middle East banks lies in the range of 2-3, while some of their leading global counterparts have achieved a range of 4-6, the study said.
“These insights reveal the enormous potential for Middle East banks to improve their revenue growth through holistic and innovative uses of CRM,” said Dr Reinhold Leichtfuss, senior partner & managing director and leader of BCG's Financial Institutions practice in the Middle East.
“As the economic environment is becoming increasingly competitive, regionally and globally, consumers are becoming ever more selective about their consumption choices. Against this backdrop, leading Middle East banks have a great opportunity to outsmart their competitors by taking a lead in the field of CRM,” he added.
Based on project work, BCG surmises that banks could increase their proactive sales by more than 30 per cent though a judicious use of CRM.
The studies showed that bank branches that had used improved CRM methods generated more customer leads per week; that these were of a higher-quality; and, subsequently, these led to a higher proportion of converted leads.
The overall performance of the bank branches in the pilot group also improved over time. In fact, over a three month period, the sales index of the pilot branches increased by more than 30 per cent as compared to the control group. The trend is indicative for most banks.
Looking in particular at the credit card business of banks, BCG believes that there is a clear and direct correlation between CRM and revenue growth. In several projects for leading International banks, credit card penetration, as well as charge volume, nearly doubled in less than three years for banks using improved CRM campaign management for their existing customer bases.
Leichtfuss continued: “These studies help us to quantify the results of enhanced CRM techniques. While the profitability of banks is obviously impacted by a number of different factors, we can safely say that a holistic use of CRM can lead to measurable growth.”
“This is indeed great news for Middle East banks as it points to hidden pockets of revenue growth. At the same time, we have some excellent global models to learn from,” he added.
Pablo Tramazaygues, partner & managing director in BCG's Madrid office, said: "Leading European banks are running more than 300 propensity models each month to generate more high quality leads for their branches and alternative channels. By doing this they have achieved cross-selling ratios of more than four and, in some segments, even six products.”
“While each of these key elements may seem easily achievable, so far, only a few leading international banks have succeeded in using a powerful CRM programme. Part of the success depends on having a holistic, capability-building process, a robust IT platform and, last but not least, strong organizational capabilities,” Leichtfuss said.
“As complex as this endeavor may sound, the establishment of an effective CRM process and system represents one of the sustainable competitive advantages for any financial institution since it entails at least a two to three year period of internal testing and learning; as opposed to product innovations, new branch formats and the like. No other institution can simply ‘copy’ a CRM,” he concluded. – TradeArabia News Service