Category Archives: Vertical
The need to be more customer-centric in financial services is more important than ever as banks and insurance companies look for ways to reduce churn as those in the industry know that loyal customers spend more on higher margin products and are likely to refer additional customers. Bankers and insurers who understand this, and get this right, are in a better position to maintain profitable and lasting customer loyalty and reap significant financial rewards. The current market conditions remain significant and will be difficult to overcome without the right information management architecture to help companies be truly customer centric. Here’s why:
- Customer satisfaction with retail banks has decreased for four consecutive years, with particularly low scores in customer service. Thirty-seven percent of customers who switched primary relationships cited in an industry survey showed poor customer service as the main reasons.
- The commoditization of traditional banking and insurance products has rapidly increased client attrition and decreased acquisition rates. Industry reports estimate that banks are losing customers at an average rate of 12.5% per year, while average acquisition rates are at 13.5%, making acquisitions nearly a zero-sum game. Further, the cost of acquiring new customers is estimated at five times the rate of retaining existing ones.
- Switching is easier than ever before. Customer churn is at an all-time high in most European countries. According to an industry survey, 42 percent of German banking customers had been with their main bank for less than a year. As customer acquisition costs running between of €200 to €400, bankers and insurers need to keep their clients at least 5 to 7 years to simply break even.
- Mergers and acquisitions impact even further the complexity and risks of maintaining customer relationships. According to a recent study, 17 percent of respondents who had gone through a merger or acquisition had switched at least one of their accounts to another institution after their bank was acquired, while an additional 31 percent said they were at least somewhat likely to switch over the next year.
Financial services professionals have long recognized the need to manage customer relationships vs. account relationships by shifting away from a product-centric culture toward a customer-centric model to maintain client loyalty and grow their bottom lines organically. Here are some reasons why:
- A 5% increase in customer retention can increase profitability by 35% in banking, 50% in brokerage, and 125% in the consumer credit card market.
- Banks can add more than $1 million to the profitability of their commercial banking business line by simply extending 16 of these large corporate relationships by one year, or by saving two such clients from defecting. In the insurance sector, a one percent increase in customer retention results in $1M in revenue.
- The average company has between a 60% and 70% probability of success selling more services to a current customer, a 20% to 40% probability of selling to a former customer, and a 5% to 20% probability of making a sale to a prospect.
- Up to 66% of current users of financial institutions’ social media sites engage in receiving information about financial services, 32% use it to retrieve information about offers or promotions and 30% to conduct customer service related activities.
So what does it take to become more Customer-centric?
Companies who have successful customer centric business models share similar cultures of placing the customer first, people who are willing to go that extra mile, business processes designed with the customer’s needs in mind, product and marketing strategy that is designed to meet a customer’s needs, and technology solutions that helps access and deliver trusted, timely, and comprehensive information and intelligence across the business. These technologies include
Why is data integration important? Customer centricity begins with the ability to access and integrate your data regardless of format, source system, structure, volume, latency, from any location including the cloud and social media sites. The data business needs originates from many different systems across the organization and outside including new Software as a Service solutions and cloud based technologies. Traditional hand coded methods and one off tools and open source data integration tools are not able to scale and perform to effectively and efficiently access, manage, and deliver the right data to the systems and applications in the front lined. A the same time, we live in the Big Data era with increasing transaction volumes, new channel adoption including mobile devices and social media combined generating petabytes of data of which to support a capable and sustainable customer centric business model, requires technology that can handle this complexity, scale with the business, while reducing costs and improving productivity.
Data quality issues must be dealt with proactively and managed by both business and technology stakeholders. Though technology itself cannot prevent all data quality errors from happening, it is a critical part of your customer information management process to ensure any issues that exist are identified and dealt with in an expeditious manner. Specifically, a Data Quality solution that can help detect data quality errors in any source, allow business users to define data quality rules, support seamless consumption of those rules by developers to execute, dashboards and reports for business stakeholders, and ongoing quality monitoring to deal with time and business sensitive exceptions. Data quality management can only scale and deliver value if an organization believes and manages data as an asset. It also helps to have a data governance framework consisting of processes, policies, standards, and people from business and IT working together in the process.
Lastly, growing your business, improving wallet share, retaining profitable relationships, and lowering the cost of managing customer relationships requires a single, trusted, holistic, and authoritative source of customer information. Managing customer information has historically been in applications across traditional business silos that lacked any common processes to reconcile duplicate and conflicting information across business systems. Master Data Management solutions are purposely designed to help breakdown the traditional application and business silos and helps deliver that single view of the truth for all systems to benefit. Master Data Management allows banks and insurance companies to access, identity unique customer entities, relate accounts to each customer, and extend that relationship view across other customers and employees including relationship bankers, financial advisors, to existing agents and brokers.
The need to attract and retain customers is a continuous journey for the financial industry however that need is greater than ever before. The foundation for successful customer centricity requires technology that can help access and deliver trusted, timely, consistent, and comprehensive customer information and insight across all channels and avoid the mistakes of the past, allow you to stay ahead of your competition, and maximize value for your shareholders.
 2010 UK Retail Banking Satisfaction Study, J.D. Power and Associates, October 2010.
 “Customer Winback”
 Mortgage Servicing News
I had the privilege to be invited to testify to the Health I.T. Policy Committee workgroup on the topic of data quality back in November. I’ve been an advocate for the work of the committee for years and am constantly impressed with the considerable insight and genuine passion they bring to their work. The opportunity to testify, however, was my first opportunity to actually participate in the policy-making process and it certainly was both a learning opportunity for me, as well as a chance to share my thoughts on the important topic of data quality. (more…)
Dennis Moore, senior vice president and general manager, Master Data Management, Informatica, discusses how MDM can help companies improve customer service.
During this video, Dennis answers the following questions:
- What did you discuss at the 2012 European MDM product advisory council?
- With the holiday season upon us, how can companies use MDM to best serve their customers?
- What have other industries learned from Retail? How can they apply what you have shared with us today?
In this video, Peter Ku, director of solution marketing, Global Financial Services, Informatica, discusses the data challenges associated with FATCA compliance.
The Foreign Account Tax Compliance Act (FATCA) was signed into U.S law in March 2010 and is coming into effect on January 1, 2014. The new law will require Foreign Financial Institutions to report the names of U.S. persons and owners of companies who have bank accounts in these banks for tax reporting and withholding purposes.
Peter answers the following questions:
1) What is FATCA and what are the requirements financial services companies must comply with?
2) What must financial institutions do to successfully meet these requirements?
3) What do financial institutions need to address the data-related challenges and comply with FATCA?
Like most Americans last week, I was glued to the news several days prior to Hurricane Sandy hitting landfall on the East Coast of the United States, hoping it would pass with minimal damage. Having lived in Hawaii and Florida for most of my life, I personally experienced three hurricanes and know how devastating these natural disasters can be during the storm and the hardships people go through afterwards. My thoughts are with all those who lost their lives and their belongings due to this disaster.
Hurricane Sandy has been described as one of the largest storms both in size and in property damage to homes and businesses. According to the New York Times, the total economic damage from Hurricane Sandy will range between $10 to $20 billion with insurance companies paying for $5 to $10 billion in insurance claims. At the high end of that range, Sandy would become the third-most expensive storm for insurers in U.S. history. As property, casualty and flood insurance companies prepare to face a significant wave of calls and claims requests from policyholders, I wonder what the implications and costs will be for these companies who lack reliable, trusted and accurate data which has plagued the industry industry for years.
Reliable, trusted, and accurate data is critical in helping insurance companies manage their business from satisfying regulatory requirements, maintaining and growing customer relationships, combating fraud, to reducing the cost of doing business. Unfortunately, many insurance companies, large and small, have long operated on paper-based processes to onboard new customers, manage policy changes and process claim requests. Though some firms have invested in data quality and governance practices in recent years, the majority of today’s insurance industry has ignored the importance of managing and governing good quality data and dealing with the root causes to bad data including:
- Inadequate verification of data stored in legacy systems
- Non-validated data leaks and data entry errors made by human beings
- Inadequate or manual integration of data between systems
- Redundant data sources/stores that cause data corruption to dependent applications
- Direct back-end updates with little to no data verification and impact analysis
Because of this, the data in core insurance systems can contain serious data quality errors including:
- Invalid property addresses
- Policyholder contact details (Name, Address, Phone numbers)
- Policy codes and descriptions (e.g. motor or home property)
- Risk rating codes
- Flood zone information
- Property assessment values and codes
- Loss ratios
- Claims adjuster estimates and contact information
- Lack of a comprehensive view of existing policyholder information across different policy coverage categories and lines of business
The cost of bad data can be measured in the following areas as firms gear up to deal with the fallout of Hurricane Sandy:
- Number of claims errors multiplied by the time and cost to resolve these errors
- Number of phone calls and emails concerning claims processing delays multiplied by the time per phone call and the cost per Customer Service Rep or field agents handling those requests
- Number of fraudulent claims and the loss of funds from those criminal activities
- Number of policy cancellations caused by poor customer service experienced by existing policy holders
- Not to mention the reputational damage caused by poor customer service
Having a sound data quality practice requires a well-defined data governance framework consisting of the following elements:
- Data quality policies that spell out what data are required, how they should be used, managed, updated and retired. More importantly, these policies should be aligned to the company’s goals, defined and maintained by the business, not IT.
- Data quality processes that involve documented steps to implement and enforce the policies described above.
- Specific roles including data stewards that represent business organizations, core systems (i.e. Underwriting Data Steward), or Data Category stewards who understand the business definition, requirements and usage of key data assets by the business.
Finally, in addition to the points listed above, firms must not discount or ignore the importance of having industry leading data quality software solutions to enable an effective and sustainable data quality practice including:
- Data profiling and auditing to identify existing data errors in source systems, during data entry processes and as data is extracted and shared between systems.
- Data quality and cleansing to build and execute data quality rules to enforce the policies set forth by the business.
- Address Validation solutions to ensure accurate address information for flood zone mapping and loss analysis
- Data Quality dashboards and monitoring solutions to analyze the performance and quality levels of data and escalate data errors that require immediate attention.
As cleanup activities progress and people get back on their feet from Hurricane Sandy, insurance companies should take the time to measure how well they are managing their data quality challenges and start looking at addressing them in preparation for these inevitable events caused by Mother Nature.
History is the likely final arbiter of the effectiveness of the American Recovery and Reinvestment Act (ARRA), commonly called the Stimulus Bill. But, the legacy of that piece of legislation may forever change the way people view government spending. As never before, the ARRA called for and implemented transparency requirements associated with spending. In theory, citizens were able to track how stimulus dollars were being spent directly in their communities and the government was able to more easily identify improper payments, waste, fraud, and abuse. One of the lasting results is that the stimulus has done more to increase the need and imperative for government transparency than almost any other trigger in history. Further, there has been a large increase in demand for transparency at all levels of government. (more…)
In an recent blog,
“The CRM boom 10-15 years ago in the commercial world was largely driven by an intense desire to grow business. But, it is important to remember that it was actually very balanced. Customers and business both benefited. Customers got better service, more access to information, less wait times, etc. Business got better intelligence about their customers, more customer loyalty, better insight into product expansion opportunities, and ultimately high profit. Thus, a win-win for the customer and business.
For government customer service improvement efforts, the win-win scenario has not been so clear. Citizens have more access to information, more transactions and interactions can be done online, and access to government is streamlined, at least in some cases. Certainly government has realized some benefits from in terms of economy of scale or operational efficiencies, but not enough.” (more…)
“The public deserves competent, efficient, and responsive service from the Federal Government. Executive departments and agencies must continuously evaluate their performance in meeting this standard and work to improve it.” whitehouse.gov (Executive Order 13571, 1993)
For government organizations striving to improve customer service, the path to success has not always been easy. Incremental improvement initiatives have only provided a marginal return. As previously discussed, these initiatives have fallen drastically short of the win-win scenario threshold. Further, demand for new, better, and faster services is out pacing the ability of these already strapped organizations to deliver on additional capabilities. Budget cuts, new regulations, high staff retirement rates, and a plethora of competing priorities seem to derail the best intentions. (more…)
What is a 360° View of the Citizen? Not a new question, but perhaps one that is not been completely understood by government. Is the 360° View just the latest buzz word or pipedream, or a real solution for governments that can drive new levels of customer service, while also addressing some of the greatest challenges facing governments today including the dramatic requirement to reduce costs, improve service delivery, decrease error rates, and impact positive outcomes? Given the siloed nature of government, a 360° View may seem elusive at best or incompletely unrealistic to some. But, some forward-thinking governments are already well down the path of achieving a 360° View of the Citizen and using the power of this approach to improve customer service, meet the increasing demand for transparency, reducing improper payments, waste, fraud, and abuse, impact better program outcomes, and drive positive policy changes. (more…)
Government organizations continue to face increasing pressure to improve customer service and operational efficiency. To date, almost every organization has embarked on some type of program ranging from 311 call centers to CRM projects in an effort to be more responsive. However, these initiatives may be only scratching the surface of what is needed to achieve real improvements across government. (more…)