Management Strategies

10:10 AM
Michael Leyva and Kishen Kumar, Capgemini
Michael Leyva and Kishen Kumar, Capgemini
Commentary
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Agility: The New Generation of Successful Banks

Identifying and understanding customer segments will not be as important to the future success of institutions as developing agile organizations with innovative cultures.

Long gone are the days of basing customer segmentation on market insights and setting strategies focused on types of customers, accounts balances and spending patterns.

That’s not to say customer segmentation is a thing of the past. Today, and in the years ahead, banks will remain fiercely focused on customer segmentation, but effective strategies will continue to move away from traditional ways of segmenting. Successful banks will concentrate on improving customer experience, channels and digital transformation to push the envelope and meet the evolving needs of customers. Banks that are agile and able to quickly adapt will be able to differentiate themselves from their competition.

It’s no secret that banks have already made major changes in this area. Existing customers are changing how they want to interact with their banks, while upcoming generations of customers are fully embedded in mobile, digital and social media as a way of life. Customers expect to engage with their bank on these types of platforms. Other characteristics and preferences of customers include:

• They are becoming heavy users of digital channels

• They look at the online opinions of other consumers

• They are becoming more mobile

• They want a superior consumer experience

To meet these evolving preferences, the financial services industry has been going through a digital transformation – an evolution that has had an enormous impact on the way business is done. For example, services that have been traditionally handled through branches, mail and call centers have or are moving to digital channels.

Additionally, banks and other financial institutions are selling more and more financial products online. Today, more than 40 percent of financial services products are sold online. Banks like Citibank, JP Morgan and others across the world are launching products on their social media channels like Facebook and Twitter. In the last year alone, more than 50-100 products were launched on digital platforms, with the retail industry leading the charge ahead in this area.

[For More of Our Social Media Coverage, Check Out “Social Media And The Next Generation Of Lending Customers”]

Banks and other financial institutions have also taken a step forward in leveraging social media as a part of their product and customer service strategy to provide consumers with online forums to engage with each other. These digital communities allow like-minded consumers to discuss their financial needs, product reviews and experiences, and are driving banks to come up with real-time products and services to meet their needs.

Digital transformation in the banking industry has changed the way banks communicate with customers, the channels they use and the way they sell products. All of these efforts help improve the customer experience and put more power in the hands of customers than ever before. But, customers aren’t the only ones who are reaping the benefits. Digital transformation is enabling banks and financial institutions to:

• Listen and engage with consumers

• Enhance product launches and promotion

• Build communities and promote new products

• Aggregate and distribute content across the social web

• Improve comprehensive digital consumer experience

• Integrate e-Commerce and customer care platforms

In addition to a rapidly changing customer landscape, banks will also continue to be challenged by increased regulations in the years ahead. Whether it is the Frank Dodd Act, Volcker Committee report or Basel-III regulatory “norms”, banks will have to figure out how to push forward with innovation while complying with these regulations – a challenge that can be compounded by the use of existing legacy and batch-based applications.

While vast change and regulations can seem daunting, banks who will survive and prosper are the ones who are nimble, quick to change and push the envelope. This will require both an agile business and technology culture.

Michael Leyva is the vice president and global core banking practice lead, and Kishen Kumar is the India practice head of diversified financial services, at Capgemini.

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Jonathan_Camhi
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Jonathan_Camhi,
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1/13/2014 | 9:50:45 PM
re: Agility: The New Generation of Successful Banks
If you're talking about using other data elements to segment then I definitely agree. With all of the unstructured data both outside and inside of the bank, there are a lot of opportunities for banks to segment customers in non-traditional ways for new insights.
KBurger
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KBurger,
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1/13/2014 | 9:29:28 PM
re: Agility: The New Generation of Successful Banks
I think the key is "moving away from traditional forms of segmentation" -- which have tended to focus either on straight demographics (age, income, domicile, etc.) or channel preference (branch users, online customers, etc.). Analytics capabilities today allow for much more granular segmentation that can go into more specific behaviors.
Kelly22
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Kelly22,
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1/13/2014 | 5:37:52 PM
re: Agility: The New Generation of Successful Banks
A focus on customer experience over segmentation benefits both banks and their tech-savvy customers. While a lot of progress has already been made in this space as the 'digital transformation' is underway, I think we're going to see more of it as more banks catch on to the trend this year.
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