Published by GCCRM (www.gccrm.

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Customer Relationship in the Banking Sector
The Key Value of CRM in the Banking Sector

Mr. Kevin Jiang, CRM Solution Director, SAP China

www.sap.com

This article is exclusively written for GCCRM.

The major difference between China's banking sector and foreign banking sector is about
customer consciousness and service concept. Overseas countries have almost 20 years of history
in customer relationship management. As the banks in the West are under a relative competitive
environment, they have accumulated substantial experience in the aspect of customer service.
On the other hand, since the banking sector in China has just opened to the market, some
divisions still have superficial understanding of the "customer-centred" concept and fail to have
an in-depth understanding of customer demands. They implement the practice of non-
discriminating customer service strategy continuously and fail to get hold of real profit-making
customers so as to carry out different treatments or provide one-to-one customer service. The
banks' database has accumulated a huge amount of customer data but an effective data mining
system that can used to conduct data analysis is unavailable. The banks cannot even identify
different accounts of the same customer, let alone the offer of one-to-one customer service. The
banks' failure of integrating various data has created many "isolated data islands". This problem
in the finance sector makes it hard for the decision-making level to understand the overall
database operation and therefore, they cannot provide effective assistance through making
decisions.
Traditionally, banking business is divided by finance products. Saving account is a system while
international card is another. There is nothing wrong indeed. However, in order to survive in the
competitive market, our bank, based on emphasising on transaction process and bad debt
investigation, must focus on the function of sales and service. We must change from the
scenario stated at the left side of the following chart to the scenario at the right side.
There is no overnight transformation from being finance product-centred to customer-centred.
Due to the business nature of the banking sector, this transformation has to be at a gradual pace.
In the first phase, we suggest to launch the task in two basic areas: firstly, to improve the
products by targeting on customers such as China Merchant Bank's innovative launch of "All in
One Card". Secondly, service needs to be improved. For example, the offer of relevant and
convenient channels to customers (call centre, Internet, short messages, etc), standardised
workflow of each contact point and a satisfactory complaint management system.

In the second phase

In the second phase we hope to integrate and utilise effective customer data that based on the
offer of basic service. Therefore, we can have a higher level of analysis on customer demands
and customer behaviour, as well as different customer services.

The bank has many core business systems and customer data is spread everywhere in these
systems. Before providing different services, first of all the bank needs to integrate various
customer data sub-systems, to form a unified customer data system and then the foundation of
CRM. It can provide unified customer data to various business departments, mainly include
basic data, account relationship, and data regarding the relationship of third party derivative
finance products.

The establishment of a unified customer data system will combine diversified channels with
good service interface that offered by the bank to its customers. And through good service
interface bank managers or call centre staff will be able to have sufficient customer data at once
to interact with customers in the course of customer contact. Therefore, they can complete the
tasks of product sale or service swiftly and accurately. Besides, the bank needs to make sure that
data obtained through various customer communication channels such as call centre, the Internet
and mobile facilities is consistent and can be shared.

A basic customer data system should have the following functions:

1. Customer files
2. Enquiry function
3. Customer relationship
4. Account conciliation
5. Credit ranking management
6. Memo / record of history
7. Customer security management and risk control

In the third phase

With the result of customer behaviour analysis obtained from the second phase, the third phase
is about further considering how to have an overall improvement of bank products and business
processes.

The key value of CRM in the banking sector is realised in analysis. It will help you to have a
better understanding of customers and their needs, allow you to maintain your profits and risk
management on one hand, and to provide better customer service on the other. Its goals are to
analyse what has happened while also predict what will happen soon (e.g. what kinds of
customers are likely to leave, what kinds of products are commonly demanded by all customers)
according to historical data and data mining technique. Vibration analysis is the driving force of
the launch of promotion activities that targeting on customers with "risk". Meanwhile, the
discovery of product groups will lead to suggestions of cross sales among all customers. A good
CRM system will provide ready-made model and tools to assist clients in conducting relevant
analysis.

Targeting on the banking sector, the analysis of CRM data mining tools have provided with
industry model, such as:

- Connection and categorisation analysis: can be applied to cross sales or upward sales of
finance products, include the analysis of the connection between customer groups and relevant
relationship between customers and product groups.

- Decision analysis: can be applied to the maintenance and prediction of behaviours of a certain
customer groups.

- Scoring (Deterioration) analysis: can be applied to customer scoring and credit ranking, etc.

- RFM model: to categorise customers in detail through three aspects according to whether
customers have any business with the bank recently (recency), the frequency of business
(frequency) and the amount involved (monetary).

In the course of customer contact, we found that customers showed great interest in our CRM
system. Moreover, they would like to ask me a question - what is the best business practice of
our CRM? After an introduction, I would always share my experience with them: I love playing
bridge. When I was at high school, I bought a book written by a bridge master that covers 12
traditional rules of winning, such as to give an A card so as to view the cards of the table player,
the second player always give away smaller cards while the third player always give away larger
cards. In fact, nowadays many banks have a basic understanding of CRM, such as high quality
of service, customer data integration, different services to different levels of customers, and
maintain customers who have high value. However, what makes our bank distinctive, how to
show customer care in detail and how to create a true understanding of customers? The bridge
master has mentioned the thirteen rule of winning a bridge game. I think this is also the
fundamental way of maintaining good customer relationship - thinking.

About the Author

Kevin Jiang is currently the CRM Solution Director of SAP China. He has over 8 years of SAP
business solution experience. He is involved in many CRM projects for various industries, such
as FAW-VW(AUTO), SVA(HI-TECH), Stateline(TELECOM).

Kevin used to be the SAP Support and Customer Care Manager of Greater China, which
supported the entire SAP customer groups in Mainland China and Hong Kong. His main job
was to arrange the support resource to provide qualified service according to SLA, and to take
proactive actions to meet special requirements of different customers. He was also the Quality
Manager to lead his team passing the ISO9002 external audit for the company. And Kevin, also
acted as an internal auditor, carried out ISO9002 internal audit for SAP Asia including offices in
Korea and Thailand. The satisfaction level of CN & HK customers in 2000 was the top one
among all other APA countries.

At the beginning of 2001, Kevin took the role as CRM Solution Director of SAP China to lead
marketing, presales and implementation to provide SAP CRM solutions to the customers. Kevin
Jiang has strong background on application deployment on large enterprise, especially on CRM
solution's integration on other application like Financial Accounting, Controlling, and HR.
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