CGE&Y special report confirms it – the customer is always right
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Financial institutions that see the world through the eyes of the customer will succeed, by offering a superior customer experience that continually meets changing needs.

Paths to Differentiation, the Cap Gemini Ernst & Young special report on the financial services industry, shows how developments such as open finance, aggregation, a renaissance of the branch or agency, and the slowing growth of Internet transactions means that the customer is setting the agenda and determining who succeeds and fails.

Open Finance
Offering customers a choice empowers them, yet, until now, many traditional industry players have ignored this approach. The delivery of an open finance model, where the customer is offered a choice of best-of-breed products and services rather than only those from one producer, will be pivotal in building closer relationships and deeper loyalty with customers.

New market entrants have already recognised this trend and institutions are fearful of how this new competition will impact sales of their own-brand products. While 63% of those participating claim to offer complementary products and services, less than 25% offer competing products or services.

Aggregation, a service that displays all of a customer’s accounts and lets them execute all of their financial transactions on one site, further empowers the customer and has also brought on many new competitors. In fact, 73% of the report respondents cite independent aggregators as their new competition as traditional organisations are reluctant to move in that direction.

Need to Balance Virtual and Physical Presences
This year’s report also recognises that, in an age of such advanced technological development, face to face communication is still the best way to generate new sales. E-commerce channels were expected to replace the traditional methods of communication and transactions however, poor online experiences mean that 60% of total sales are still expected to come through branches or agencies in 2004.

It is clear that customers have not taken to the Internet as rapidly as predicted or desired and industry executives have realised that they must increase rather than decrease branch footfall in order to grow sales. This has led to the cancellation of branch closure programmes and many financial institutions are borrowing retail concepts in order to provide customers with a superior branch experience.

e-Commerce Predicted Savings Reduced
As customers exercise their right to choose the way they communicate with their financial services institutions, it is clear that e-commerce is not the communication method of choice for all customers. Nor has it transformed the financial services industry as radically as initially forecasted.

Predicted cost savings as a result of e-commerce initiatives have failed to materialise as organizations struggle to provide an online experience. For the second year running predicted cost savings have halved over the previous year. Over half of those questioned said that implementation of the required infrastructure took far longer than expected as many financial institutions had not fully understood how customers would use e-commerce as part of their overall relationship.

Over 40% of respondents cited failure to migrate customers to online channels as a key reason for not achieving the desired reduction in operating cost. Now it appears that ‘e-initiatives’ are being treated as just another strategic option and are no longer being waived through by the board. Indeed, over 25% of respondents said that other non e-commerce initiatives had now taken priority within their companies.

CRM Still a Priority
Does this mean that the financial services industry is now embracing CRM? Or is CRM simply another bandwagon?

According to the report, 45% of respondents list increasing customer profitability as their top CRM goal indicating an understanding of the real, bottom-line value of CRM. However, 58% of report participants have not developed any form of return on investment (ROI) model from CRM initiatives, a similar percentage cannot track customer churn or determine their overall profitability, while 40% cannot determine levels of cross-selling.

About Cap Gemini Ernst & Young:
The company offers management and IT consulting services, systems integration, and technology development, design and outsourcing capabilities. The organization employs about 60,000 people worldwide and reports global revenues of about 8.5 billion euros (2000 pro forma).

Cap Gemini Ernst & Young

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