Implementation of CRM in Bank Of Kathmandu

Implementation of CRM in

Bank of Kathmandu








Submitted to:

Mr. Prajay Shrestha

Ace Institute of Management
Sinamangal, Kathmandu



Submitted By:

Manish Shrestha

Dipendra Shakya

Kshitiz Sherchan

Tulsi Jung Basnet

Birendra Kumar Rauniya


14th March 2008

Business case for the new technology
Banking institutions today face many challenges including competition for deposits, loans and increasing customer demands, shrinking profit margins, and the need to keep up with new technologies. As it encounter these obstacles and when organization is diversified financial services company, its future depends on one critical factor - strong customer relationships. And those relationships depend on banks’ ability to provide personalized service to every customer, every time, every-where. That is why now it is the time for bank to discover the Customer Relationship Management. With CRM, bank can improve the quality of sales and service at every touch point, including branch offices, ATMs, fax, Internet, e-mail, and direct marketing. And, bank can also respond more quickly to fluctuating interest rates, and changes in consumer and commercial lending demand. As a result, organization can focus on what is important to business, increasing customer satisfaction, building asset levels, expanding customer relationships, services, reducing operational costs, and building profitability.
Information gained through CRM initiatives can support the development of marketing strategy by developing the organization's knowledge in areas such as identifying customer segments, improving customer retention, improving product offerings (by better understanding customer needs), and by identifying the organization's most profitable customers
According to recent projections, bankers and their financial service company will spend almost $7 billion per year on CRM and increase that by 14 percent each year for the next several years in US only. (source: silicon.com)y
Bank of Kathmandu products
The banks core activities are as follows:-
1. Making Deposit
2. Loan Management activities
3. Investment activities

1. Making Deposit
BOK provides its customers various deposit schemes. Deposit facility rightly meets the customers’ needs in today’s fast paced business world. It also enables an access to modern banking, ensures attractive return to surplus funds, making personal banking convenient and efficient to best suit ones investment plan. Design with an array of features, BOK’s deposit base comprises of depositor ranging from general public, business houses, NGO’s , INGO’s diplomatic agencies to institutional depositors. Followings are the different deposit schemes: -
1. Current Account
2. Saving Account
· General Saving Account
· Sajilo Bachat Khata
· Ladder
3. Fixed Account
4. Operative Call Account
5. Recurring Savings Scheme
Kopila Bachat Yojana
Mero Bachat Yojana

2. Loan Management
As any other banks, this bank’s loan management also comprises the activities of granting and taking loan. BOK is led by the vision to become a significant contributor to the economic development of the nation. In an endeavor to grow stronger mutually, BOK has devised various credit facilities that suit the banking requirements of its customer, to assist their business. Following are the different types of loans:-
Corporate Loans
Business Loans
Retail Loans
Staff Loans
Development and Credit Loans
Consumer Loans

3. Investment Activities
Investment is one of the major role of any banks and financial institution and so does BOK as well. The bank invests in various investment activities like:
Inter bank lending
Shares
Development Bond
Placement to financial institution
Treasury bills
The investment activities in BoK are divided into two categories. They are:
1. Local Currency Investment and
2. Foreign Currency Investment.
Regarding the internal lending activities of BoK, the liquidity maintenance activity is considered as the main role. 5% interest rate is maintained from the last two weeks deposits. To reduce the risk factor in terms of lending, short-term borrowing is made available for maintaining CRR. As we know that the banks with the Treasury bills have their bargaining power, BOK also has its substantial bargaining power and have high interest rates as they’ve many treasury bills.





A brief description of the technology being implemented
Before describing the proposed technology to be implemented within the boundaries of CRM it is first very crucial to understand what is CRM software that has been proposed is supposed to do? There are two tasks: customer acquisition and increased sales to existing customers. CRM is often justified by the phrase, “Make the right offer at the right time to the right customer.” How can the proposed software do that? By collecting demographic and behavioral information about each potential and existing customers, and using that to create actionable customer segments leading to communications that make relevant offers that will strike responsive chords in the recipient’s mind, resulting in sales. We are focused toward developing a technology that generally makes heavy use of data mining to dig out the basic hidden trends that which could be used for a variety of purposes.
v To design and execute a specific marketing campaign to target market including customer acquisition, cross-selling, up-selling, retention.
v Analysis of customer behavior to aid product and service decision making (e.g. pricing, new product development etc.)

Implementation:
This could be done by developing a software that could find relevant correlation between different sets of data and give the result on the screen in a user friendly way so that it make the decision maker in a position to propose new services as products based on the relation detected by the technology.

Interface services:
CRM’s internet architecture provides universal access to CRM application for the mobile workforce by delivering the solution within a standard web browser, wireless Access protocol enabled device, mobile sms device and PDA.
The presentation layer detects the device type being used and outputs the user interface in the format most appropriate for that device.



Business Logic Services:
CRM provides a framework that enables companies to integrate information from multiple applications into CRM solutions. This information is available through an intranet, the internet and mobile internet platforms. The Business logic services layer express business functions such as opportunity management, customer service, marketing automation, territory assignment, customer self-service and workflow.
These functions have several components that work together to co-ordinate the delivery of information and functionality to clients. These components checks user security, maintain user persistence, synchronize data with mobile users, and return information from the database.

Database Access service:
All database operation in this CRM is performed through components of common database service Interface layer. To maintain data integrity, the CSDI layer validates data updates such as sales leads being imported to CRM from an extended application before they are written to this database. This validation prevents any new data from corrupting the database or creating duplicate records. CRM retrieves and collect data from these databases and presents it in a uniform manner to the user.











Business Benefits
Customer Relationship Management (CRM) provides the insight and analysis you need to anticipate customer needs and build lasting, profitable customer relationships.
CRM excels because it does the following:
Ø Provides the flexibility to create unique customer experiences –CRM enables a wide range of end-to-end business processes to address an array of marketing, sales, and service situations. The functionality of CRM is deployed step-by-step and easily adapts and extends to create a more distinctive customer experience.
Ø Drives the organization to more consistent, relevant interactions across all channels and touch points –CRM allows organizations to make the most of every customer interaction across the entire customer life cycle by ensuring that each interaction is consistent and relevant, with real-time information about the complete history, context, value, and profitability of each customer.
Ø Enables end-to-end processes within the industry value chain – CRM is the only application that helps organizations drive customer value, loyalty, and profitability across the entire value chain. With best-in-class front-office functionality that complements industry-specific processes, CRM turns the vision of customer-driven growth into reality.






Short comings of the existing method
Bank of Kathmandu Limited has become a prominent name in the Nepalese banking sector. Today it has become a landmark in the Nepalese banking sector. One of its main objectives is:
To use the latest banking technology to provide better, reliable, and efficient services at a reasonable cost.
In pursuit to deliver the products and services of the highest standards, Bank of Kathmandu has state-of-art technology for rendering quality services. It is using Finacle as banking software, VSAT and Radio Modem for networking, and centralized banking operations for better risk management, consistent service deliveries and lowering operating cost.
Today customers are in-charge. Due to mushrooming number of new banks with various new facilities, it is easier than ever for customers to compare and switch banks. As like other financial institution, today Bank of Kathmandu also faces many challenges including competition for deposits, loans, increasing customer demands, shrinking profit margins and the need to keep up with new technologies. Due to the high competition bank is not being able to differentiate in the market based on interest rate. The only factor that banks can differentiate themselves in is more personalized and customized service to customers. So now a day’s customer relationship has become more important for any organization to remain profitable.
Bank of Kathmandu is using Finacle as its main operating software with all the daily operation based on it. There is no such separate software which maintains customer database. And more over it seems that there is no effort used to improve customer relationship. Behind the scenes, institutions encountered unexpected difficulty in integrating customer data properly at the time of need. For all customer related queries, the employees rely on the data that was entered at the time of account opening which contains the customer contact details only. It doesn’t maintain any other interactive data taken from customer at various touch point.Recently BOK has introduced new type of saving deposit named Hello Deposit associating with Mero Mobile. Advertisements are being published in almost all news paper, in TV and in Radios, which we believe is an additional cost. Despite of having huge customer base, BOK is not utilizing its existing customer as its marketer for this new product. If only BOK had automated software that could directly communicate with their customers BOK could have saved huge amount and time invested in promoting the new product. BOK can use their own customer to market the new product
The various short coming we found from the existing technology is:
1. BOK services lacks customization
2. Customer relationship is manually managed
3. No relevant information to develop and promote new product.
4. Behavior of customer is difficult to observe.
5. Not techno drive

Cost, time and feasibility estimates
Cost analysis:
Additional cost for CRM
1) Business planner and consultancy: 2* 30000= Rs 60000
2) Software developer to customize CRM
No of developer = 5
Wages per ahead per month = 30,000
Total = 1,50,000
3) Training cost :
Training program: one month
No of trainers = 2
Wages per head = 20000

Total = 40,000
4) Program Testing cost= 5 * 20000=1,00,000
Grand total: 1+2+3+4= Rs 3,50,000

Time:
Overall planning and designing for CRM =2 weeks
Software development period = 1 month
Training period = 1 month
Testing period = 1 month

Feasibility study:
Technical feasibility:-
Bank of Kathmandu is already using Finnacle for maintaining database of the customers. The database operates functionally at present. In order to make the use of these data cross functionally it requires a system that includes built-in workflow functionality.
Requirements:
· Additional software module that can access the existing customer database in Finacle.
· An application integrator in order to bring Finacle and CRM on single platform.
· All the hardware requirements already exist so we need not go for any leveraging .





Justification for the investment
CRM is about, organizational change and guiding employees to implement a new and more sophisticated approach to the customer. Today customers are in-charge. Once a customer is satisfied with the company, then company will be in good profits. It is only bank’s customer who put down or up the reputation of the company. Advertising is aimed chiefly at getting customers to go to a particular business. Once a customer arrived, it is important to provide him or her with an excellent service experience. Providing good customer service is important to a company because it keeps their customer coming back and helps to build new customer business relationships.
Customer service is the most important difference between competitors. Only those companies can survive who gives good customer service with more focus on personalization and customization. For example, Customer visit to a bank for opening an a/c, if that bank doesn’t give good customer services like Debit-cum-ATM card, Auto Invest Account, Internet Banking, Phone Banking, Anywhere Banking, Standing instructions, Nomination facility, Doorstep service etc. then that bank will loose its customers. Customer Relationship Management is the tool to retain customer in bank.
No doubt due to the intense competition in financial sector in Nepal, banks' rely on customer relationships as a growth driver. Selling multiple banking products to customers not only increases a bank's profits but also increases chances those customers will remain with the bank
Bankers at all points of the CRM spectrum are looking for a way to quantify their return on investment — either what it actually is or, if just starting out, what it should be and over what period of time should the value be realized. Ironically, the answer to this question may lie in a simple review of a few known quantities generated from historical innovation.
Look, for example, at ATMs. What drove many bankers to invest in ATMs was the promise of reduced branch cost and rush in teller, since customers would use them instead of a branch to transact business. But what was discovered is that the financial impact of ATMs is a marginal increase in fee income substantially offset by the cost of significant increases in the number of customer transactions. The value proposition, however, was a significant increase in that intangible called customer satisfaction. The increase in customer satisfaction has translated to loyalty that resulted in higher customer retention and growth of bank.
Internet banking shows similar characteristics. Again, bankers invested believing that the Internet was a lower-cost delivery channel and a way to increase sales. Studies have now shown, however, that the primary value of offering Internet banking services lies in the increased retention of highly valued customer segments. Again, the intangible called customer satisfaction drives the value proposition.
Now we explore CRM. CRM is not another ATM or Internet bank. It is not a checking account, a stock or a mortgage. In fact, CRM is not anything a customer should even know about. CRM cannot be sold to customer. So, one can conclude that CRM is not tangible. If it’s intangible, can it be expected to produce a tangible return? Probably not, or at least not with any direct financial value exclusively linked back to the investment in CRM. CRM has power to help bankers quickly and directly improve customer satisfaction.
Further, the primary value of CRM is its potential as a customer retention tool. People are starting to measure CRM in terms of increased customer satisfaction rather than ROI.

CRM IN BANK TURN STRONGER RELATIONSHIPS INTO STRONGER PROFITS

With CRM, bank can gain state-of-the-art capabilities for managing the customer interaction cycle from start to finish, including the following:
Customer engagement support
Provide an open, cross-bank platform for collecting customer information from core banking and legacy systems, to achieve a unified view of each customer. Develop consolidated financial products that match the needs of customers at every stage of life – such as bundled programs that incorporate retirement savings and life insurance. Identify and nurture your most profitable customers to increase their loyalty. Plan, execute, and evaluate advertising, direct mail, and sales promotion programs to en-sure a unified message. Track all customer calls and e-mails.
Business transaction support
CRM alert tellers, loan officers and customer service representatives and financial advisors service personnel to customer appointments and important events. Capture and organize customer communications that take place through any channel. Perform sophisticated analyses of customer and product profitability. Empower loan officers and service personnel to access loan proposals, loan applications, contact reports, and internal follow-up queries.
Customer service support
Answer customer queries regarding account balances, loan maturities, interest rates, statements, product features, and other issues. Handle transaction-related complaints more efficiently. Plan and track the activities of customer information systems.
Date and Event Recognition
Recognizing special dates of client's lives is another great way to show them that organization don’t do business with them but are taking care of them

Ø Sending prime clients a birthday card, or even a small but thoughtful gift.
Ø Congratulate strategic client on their wedding anniversary, or even send flowers or a card to their house.
Ø Send a special token of appreciation to the prime customer to the home or office after a set amount of time that they have been involved with you - maybe annually or semi-annually.

As organization should see, the possibilities are limitless. Organization should show that it goes above and beyond the call of duty to recognize a date or an event that was important to client. They won't forget that when it comes time to decide whether or not to keep working with you.

With a proper implementation of CRM, a great deal of time and money can be saved. A well operating CRM system can be an extremely powerful tool for management and customer strategies.
Help in business forecasting
Forecast can be made for deposits, loans and investments on the basis of available customer database. Deposits, loans and investment decision can be made based on the customer data. For example, recent hello deposit scheme can be targeted to customer aged between 16-35 years because SIM card is more concern for this age people. Like wise, forecast can be done daily, monthly, quarterly, and year-to-date regarding on various banking services.
From the factual customer data base there is least deviation on planned target. If found any deviation then the related department personnel will improve to meet the planned target. In this way CRM helps out in daily decision making
As the fully integrated customer relationship management (CRM) helps bank turn outstanding service into outstanding profitability. With it,bank can accomplish these goals:
Control costs –
CRM help to track the variables of bank’s sales, marketing, and promotional programs to improve performance while reducing overall costs. Reduce compliance costs through more efficient management and reporting of customer related data. Reduce loan administration and deposit account maintenance expenses through online statements and
electronic check imaging.

Increase revenues and profits

Underwrite more loans through better understanding of customer needs and better risk analysis. Generate new accounts and assets through better coordination of sales and marketing programs. Help relation-ship managers and marketers identify prime prospects for fee-based products. Increase cross-sells of other banking products through a superior understanding of customer needs and product profitability.

Manage the customer life cycle

Build an intimate profile of each customer, and provide personalized guidance for finances in every aspect of life – including young adulthood, home ownership, business ownership, family protection, retirement planning, education planning, retirement, and estate planning. Design products to meet the financial goals of bank’s clients.

Build customer trust

Provide today’s sophisticated customers with the information they need to make sound financial decisions. Build loyalty through superior banking service and consistent messaging. Expand share of wallet by providing innovative financial products, value pricing, and having a clear understanding of individual financial goals.

Go mobile

Allow your customers to keep track of their financial information wherever they go, using any Web-enabled laptop, personal digital assistant, or cell phone.











Challenges of Implementation

In a number of cases, we acquired the technology before we designed the processes. If we had designed the processes first and then designed the technology to support it, people would have been able to manage it better.
Ø Unrealistic high expectations
Ø Exaggerated claims by CRM vendors.
Ø Training and development
Ø Lack of understanding and preparation