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The Shift to Customer Centricity Is On

As regulation and consumer habits change, banking profits from traditional sources are getting squeezed. Banks are looking for new strategies to help them build profitable new revenue streams. One of the more successful approaches we’ve seen from banks worldwide is that of customer centricity.

There's an interesting example from the technology industry that highlights how having a customer-centric strategy can play out to success—and conversely, how the lack of one can lead to decline. Back in the 1990s, Microsoft changed the game in office productivity by launching Microsoft Office. By viewing the customer's entire set of needs, they could offer a tightly integrated office suite and operating system. As a result, they crushed the individual product powerhouses of the time, WordPerfect and Lotus 1-2-3. Today, Google embraces the consumer desire to conveniently access core services (e-mail, contacts, calendar, map locations, etc.), linking them together to provide a unified customer view—for instance: A reminder about my upcoming flight (calendar), my current location (map location) and that I should leave early because traffic is really bad (context).

At FICO, we agree that regardless of channel or product, customers should be treated with full knowledge of all their activities. Interestingly, we are seeing more and more banks adopting integrated customer strategies, rather than individual product strategies. In 2011, only 29% of our worldwide clients using FICO® TRIAD® Customer Manager were managing at the customer level (unified view). Today, that number has jumped to 38%. Indeed over that timeframe, a solid half of new TRIAD sales and upgrades involved customer-level management.

We also see interesting regional differences among TRIAD clients. For instance, only 20% of North American banks managing at the customer level vs. 59% in Europe. We believe that this is one of the factors impacting churn rates. In 2012, only 37% of European customers stated they had changed their main banking provider vs. 45% in the US and Canada, according to the 2012 Global Consumer Banking Survey by Ernst & Young.

Customer-centric banks understand their customers, and become their partners in good times and in bad. We have been working with these banks as they evolve from account-focused to customer-focused institutions (and supporting them with technology advancements such as those described in last week's TRIAD 9 news). Their evolution starts with top-down buy-in of the strategy, then requires coordinating risk and marketing strategies to work hand-in-hand.

The effective deployment of real-time analytics acting at the customer level, along with the sharing of information across all areas within the bank, allows these institutions to make more profitable customer decisions. In parallel, banks that effectively engage customers in a person-to-person or digital dialogue (as appropriate depending on the situation) have been shown to favorably impact retention, share of wallet and net promoter scores.

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