Bank product or what bank customers buy
When implementing CRM systems in banks, for obvious reasons, one has to deal with automation requirements for managing a banking product catalog: cross-selling, needs analysis and product selection, marketing, sales, after-sales service – all these processes require formalization and systematization of the product catalog.
Since the products are developed to meet customer needs, it is logical that the processes associated with managing the product catalog should be automated in the bank’s CRM system.
Based on many years of experience in the financial sector, I can conclude that banks have not yet developed a clear and unified understanding of what a banking product is a banking operation.
After long, long interviews, conversations, disputes, analysis, we managed to isolate individual elements that allowed us to create a banking product structure that would satisfy the goals of marketing processes, customer needs analysis and product selection, sales (including taking into consideration bonuses and loyalty programs), execution of a transaction (contract), service.
So-called basic technology, which determines the type of product, has become such a basic element of a banking product. Such technology is a combination of banking operations aimed at solving a clearly defined range of tasks in the provision of banking services to customers.
Such basic technologies are, for example:
- current accounts
- deposits and savings accounts (as a type of current)
- loans: overdraft, credit line, car loan, mortgage
- card accounts (as a type of current accounts, access, and operations with which are carried out mainly through payment cards)
- payment cards (as one of the tools of remote banking services, with the help of which it is possible to carry out operations on accounts)
- internet banking (as one of the tools of remote banking services, with which it is possible to carry out operations on accounts)
With this approach, a banking product consists of a set of basic technologies with its own specific list of parameters (currency, term, minimum and maximum amounts, type of card, etc.).
Banking products of the same type differ from each other in the number and value of basic parameters.
- for a deposit product: replenishment option, type of interest payment, auto-prolongation, capitalization
- for a loan product: intended use, the necessity of granting and type of collateral, a form of granting credit funds, repayment form
As a result, this approach to the systematization and automation of the product catalog allows you to quickly configure and bring to the market a new product. Moreover, marketing influences aimed at promoting a new product can be carried out without fear of losing the ability to control effectiveness when all settings and tests in the ABS, card system, front office, etc. are not yet completed on the product.
Consider an example. Often, banking specialists, investment experts are asked the question: «How to avoid currency risks and at the same time maintain and increase their savings?» You can almost always hear the following answer: «Money needs to be stored in banks. At the same time, it is worth doing this in different currencies: in national currency – 50%, in US dollars – 30%, in EURO – 20%». The ratio of currencies may differ in expert estimates, but the general idea is similar.
Suppose some advanced bank, responding to the interests of potential customers, creates a new product «Currency piggy bank». The essence of this banking product is that the monthly amounts for accumulation are converted according to the indicated principle into various currencies and distributed on the corresponding deposits opened with the possibility of replenishment. To evaluate the effectiveness of a product (development, marketing, resource value, profitability), it is important to operate the product as a whole.
It should be understood that in ABS this product will be represented by at least three deposits in different currencies (hryvnia, US dollar, EUR) and conversion services. In addition, some system (or just end-users armed with sheets of instructions and regulations :)) must operate with the rules for the prolongation, closure, early termination and maintenance of such a product. Accounting systems, if they can cope with it, then after significant improvements. If we assume that payment cards or loans are added here, the number of improvements will increase significantly.
Another thing is if the logic of processing the rules for selling and servicing products will be taken over by a single product catalog in the CRM system. «Currency piggy bank» in this case can be represented as a complex product. Such a banking product will include three simple deposit accounts in different currencies, a currency conversion service (suppose that in this product the service of converting currency from hryvnia to US dollar and EURO will be free at the current commercial rate), as well as additional conditions for tracking the synchronism of the life cycle of all three accounts in service.
Moreover, the bank will be able to include in this product a plastic card of a certain class for the customer’s choice and a card account with special conditions of service at the bank’s ATMs, to which monthly accrued interest on all deposits, previously converted into hryvnias, will be transferred.
The structure of the banking product «Currency piggy bank» can be represented as follows:
Product «Currency piggy bank»
Parameters: product type, expiration date, customer segment, unit
- Deposit in UAH
Parameters: type of product (deposit), currency (hryvnia), term, interest rate
- Deposit in US dollars
Parameters: type of product (deposit), currency (US dollar), term, interest rate
- Deposit in EUR
Parameters: product type (deposit), currency (EUR), term, interest rate
- Card account «Interest on deposit»
Parameters: cash withdrawal at ATMs, cash withdrawal at cash desks, transfer to a bank account
- Card «Mass»
Parameters: card type, validity, the issue price
- Service «UAH / USD conversion»
- Service «UAH / EUR Conversion»
- Internet banking
As a bonus to this approach, the bank has the opportunity to form product packages not only based on its own product line, but also include partners’ products: insurance companies, car dealers, telecom operators, trading companies, etc.
The given example of banking, the product is not a fantasy. If the bank considers improving customer satisfaction to be its priority, then the limitations of the ABS or the card system should not be an obstacle, and customers will ultimately appreciate this approach!