IT based CRM in Banking

Today, many businesses such as banks, insurance companies, and other service providers realize the importance of Customer Relationship Management (CRM) and its potential to help them acquire new customers, retain existing ones and maximize their lifetime value. At this point, close relationship with customers will require a strong coordination between IT and marketing departments to provide a long-term retention of selected customers. This paper deals with the role of Customer Relationship Management in banking sector and the need for Customer Relationship Management to increase customer value by using some analitycal methods in CRM applications. CRM is a sound business strategy to identify the banks most profitable customers and prospects, and devotes time and attention to expanding account relationships with those customers through individualized marketing, repricing, discretionary decision making, and customized service-all delivered through the various sales channels that

the bank uses. Under this case study, a campaign management in a bank is conducted using data mining tasks such as dependency analysis, cluster profile analysis, concept description, deviation detection, and data visualization. Crucial business decisions with this campaign are made by extracting valid, previously unknown and ultimately comprehensible and actionable knowledge from large databases. The model developed here answers what the different customer segments are, who more likely to respond to a given offer is, which customers are the bank likely to lose, who most likely to default on credit cards is, what the risk associated with this loan applicant is. Finally, a cluster profile analysis is used for revealing the distinct characteristics of each cluster, and for modeling product propensity, which should be implemented in order to increase the sales.

2. Customer Relationship Management In literature, many definitions were given to describe CRM. The main difference among these definitions is technological and relationship aspects of CRM. Some authors from marketing background emphasize technological side of CRM while the others considers IT perspective of CRM. From marketing aspect, CRM is defined by [Couldwell 1998] as .. a combination of business process and technology that seeks to understand a companys customers from the perspective of who they are, what they do, and what they are like. Technological definition of CRM was given as .. the market place of the future is undergoing a technology-driven metamorphosis [Peppers and Rogers 1995]. Consequently, IT and marketing departments must work closely to implement CRM efficiently. Meanwhile, implementation of CRM in banking sector was considered by [Mihelis et al. 2001]. They focused on the evaluation of the critical satisfaction dimensions and the determination of customer groups with distinctive preferences and expectations in the private bank sector. The methodological approach is based on the principles of multi-criteria modeling and preference disaggregation modeling used for data analysis and interpretation. [Yli-Renko et al. 2001] have focused on the management of the exchange relationships and the implications of such management for the performance and development of technology-based firms and their customers. Specifically the customer relationships of new technology-based firms has been studied. [Cook and Hababou, 2001] was interested in total sales activities, both volume-related and non-volume related. They also developed a modification of the standard data envelope analysis (DEA) structure using goal programming concepts that yields both a sales and service measures. [Beckett-Camarata et al. 1998] have noted that managing relationships with their customers (especially with employees, channel partners and strategic alliance partners) was critical to the firms long-term success. It was also emphasized that customer relationship management based on social exchange and equity significantly assists the firm in developing collaborative, cooperative and profitable long-term relationships. [Yuan and Chang 2001] have presented a mixed-initiative synthesized learning approach for better understanding of customers and the provision of clues for improving customer relationships based on different sources of web customer data. They have also hierarchically segmented data sources into clusters, automatically labeled the features of the clusters, discovered the characteristics of

normal, defected and possibly defected clusters of customers, and provided clues for gaining customer retention. [Peppers 2000] has also presented a framework, which is based on incorporating e-business activities, channel management, relationship management and backoffice/front-office integration within a customer centric strategy. He has developed four concepts, namely Enterprise, Channel management, Relationships and Management of the total enterprise, in the context of a CRM initiative. [Ryals and Knox 2001] have identified the three main issues that can enable the development of Customer Relationship Management in the service sector; the organizational issues of culture and communication, management metrics and cross-functional integrationespecially between marketing and information technology.

3. CRM Objectives in Banking Sector The idea of CRM is that it helps businesses use technology and human resources gain insight into the behavior of customers and the value of those customers. If it works as hoped, a business can: provide better customer service, make call centers more efficient, cross sell products more effectively, help sales staff close deals faster, simplify marketing and sales processes, discover new customers, and increase customer revenues.It doesn't happen by simply buying software and installing it. For CRM to be truly effective, an organization must first decide what kind of customer information it is looking for and it must decide what it intends to do with that information. For example, many financial institutions keep track of customers' life stages in order to market appropriate banking products like mortgages or IRAs to them at the right time to fit their needs. Next, the organization must look into all of the different ways information about customers comes into a business, where and how this data is stored and how it is currently used. One company, for instance, may interact with customers in a myriad of different ways including mail campaigns, Web sites, brick-and-mortar stores, call centers, mobile sales force staff and marketing and advertising efforts. Solid CRM systems link up each of these points. This collected data flows between operational systems (like sales and inventory systems) and analytical systems that can help sort through these records for patterns. Company analysts can then comb through the data to obtain a holistic view of each customer and pinpoint areas where better services are needed. In CRM projects, following data should be collected to run process engine: 1) Responses to campaigns, 2) Shipping and fulfillment dates, 3)Sales and purchase data, 4) Account information, 5) Web registration data, 6) Service and support records,

7) Demographic data, 8) Web sales data. 4. CRM At ICICI Bank ICICI Bank has to manage more than 13 million customers. The bank has over 550 branches, a network of 2025 ATMs, multiple call centres, Internet banking and mobile banking. Its customers often use multiple channels, and they are increasingly turning to electronic banking options. Business from the Internet. ATMs and other electronic channels now comprises more than 50 per cent of all transactions. In the process of making its business grow to this level, ICICI Bank has distinguished itself from other banks through its relationship with customers. The Teradata solution focuses on a Customer Relationship Management (CRM) platform. Information from various legacy and transaction systems is fed into a single enterprise called wide data warehouse. This allows the bank to generate a single view of its customers. The warehouse has the capability to integrate data from multiple sources comprising Oracle and flat files. The Behaviour Explorer enables profiling of customers and querying on various parameters. These enable the bank staff create suitable campaigns for targeting individual customers on the basis of their requirements. The logistics in the system have also led to other benefits like interactive reports, unearthing cross-selling opportunities as well as finding out about the channel usage undertaken by a segment. The data access was facilitated through the use of Cognos Power Cubes. The Benefits of CRM Customers usage pattern: ICICIs CRM data warehouse integrates data from multiple sources and enables users to find out about the customers various transactions pertaining to savings accounts, credit cards, fixed deposits, etc. The warehouse also gives indications regarding the customers channel usage. New product development: Analysis at ICICI guide product development and marketing campaigns through Behaviour Explorer, whereby customer profiling can be undertaken by using ad hoc queries. The products thus created take into account the customers needs and desires, enabling the bank to satisfy customers through better personalization and customization of services. Central data management: The initial implementation of CRM allowed ICICI to analyse its customer database, which includes information from eight separate operations systems including retail banking, bonds, fixed deposits, retail consumer loans, credit cards, custodial services, online share trading and ATM. Some Noteworthy CRM Initiatives of ICICI Bank

Mobile ATMs: Customers of ICICI Bank can access their bank accounts through mobile ATMs. These ATMs are kept in vans and parked at locations that have a high traffic of bank customers such as the commercial areas in a city or upmarket residential areas ICICI Bank now provides standard ATM facilities through ATM vans. This facility has been tried at Mumbai, Chandigarh and various places in Kerala during specified timings. Bulk Deposits: The ICICI Banks Bulk Deposit ATMs enable customers to deposit large amounts at one time. Unlike conventional ATMs, which are able to accept only 30 notes at a time, these ATMs allow the deposit of huge amounts. The Bulk Deposit ATM is available in Mumbais Vashi sector branch office of ICICI. The bulk deposit facility can be availed of by select customers who need to deposit huge amounts of cash. ICICI Bank issues a special card called the `Deposit Only Card to facilitate this service. This card allows for deposit transactions only. The service is further facilitated by the provision of special bags at ATMs in which a customer can put his money. After the deposit slip is filled, the bag can be inserted in the ATM. The transaction slip is then generated by the ATM as an acknowledgement of the deposit. ICICI Bank also has cash pick-up service for business customers under the business banking segment. ATMs for the visually challenged: ICICI Bank has launched ATMs with special voice-guided systems, which guide a visually challenged person to access ATMs without any help. The jack on the terminal enables headphones to be connected to it and voice commands enable the customer to transact business. Customers may choose a suitable language to get voice commands. After the language selection is done, the customer is guided to ensure that the ATM card is inserted in the right slot and thereafter, guidance is provided for entering the PIN by using the keypad. A raised button is provided on number 5 to enable users to identify the numbers easily through touch. The slot for cash collection has such raised `pips that enable easy identification through touch. Other Services through ATMs: Apart from the usual transactions involving the bank, some other services can also be availed of by ICICI Bank customers. These include: Prepaid mobile recharge Buying and renewing Internet packs (such as those of TATA Indicom Internet service provider and Sify). Making donations for Tirupati Tirumala Devasthanams, Nathdwara temple and Shri Mata Vaishnodevi shrine. Mutual fund transactions, and Bill payments Mobile phone as a Virtual Wallet: The mobile phone has been transformed into a virtual wallet a new innovation in mobile commerce. On September 19, 2005, Airtel, ICICI Bank and VISA announced the launch of mChq a revolutionary new service which is a credit card using the mobile phone. This is the first mobile-to-mobile payment option which enables Airtel customers and ICICI Bank Visa cardholders to pay for their purchases with their Airtel Mobile phones. The

service has eliminated the need for carrying physical cash for making a purchase and also the problems associated with the point of sale (POS) terminal since the mobile phone services as a secure POS and a payment mechanism. Social Events: ICICI Bank organized the largest domestic invitational amateur golf event for HN1 (high-net-worth individuals) customers. This nation-wide golf tournament had over one lakh high-net-worth clients of ICICI Banks private banking division participating in the event. Mobile Banking Benefits: Mobile banking enables the customer to avail of many facilities by just sending an SMS. These facilities, which are currently offered free of cost, are as follows: Locating ATM Locating branch Locating drop box Alert facilities like salary credit, account debit/credit, cheque bounce, etc., and Queries on banking, cards and demat account