Responsive

Customer
Engagement in
Banking

James Taylor
CEO, Decision Management Solutions

More information at:
www.decisionmanagementsolutions.com
Relevance, Real-Time
and Recency drive
improved customer
engagement

2011 Decision Management Solutions
Banks are facing new competitive
dynamics, increasing regulatory
requirements, and more
demanding customers. Building
share of wallet with existing
customers is critical to future
growth. Banks must create
responsive customer engagement
by delivering relevant offers in real-
time based on the most recent
insight to survive and thrive.

Sponsored by




Contents:
Introductionthe changing banking marketplace 1
Responsive Customer Engagement 3
Delivering Responsive Customer Engagement 6
Next Steps 10
Traditional profiling and
targeting
Responsive Customer
Engagement

1
Introduction
The changing banking marketplace
We are in an economy that changes daily and,
as an organization, we need to respond quickly
to increase our market share and retain
customers.
SVP Large Financial Services firm


The banking industry is changing rapidly. Banking
customers have more product, channel and banking
choices than ever yet banking products are largely
undifferentiated. Customer loyalty is diminishing globally
as banks struggle to regain trust. According to a recent
survey, CLOs at tbe worlo's largest tlnanclal tlrms are
seeking to rebuild customer trust in their banks and
brands, after the financial crisis tarnished their images,
through customer retention and by enhancing customer
engagement
1
.
This is being made more complex by the increasing
range of choices available to banking customers. Banking
services are proliferating with more account types and
products on offer. Competition comes from traditional
banks and non-traditional players like online-only
financial services companies and retailers. With more
choice, customers are less loyal and increasingly likely
to own financial products from multiple companies. A
recent report
2
showed that over 24% of customers in
Europe have changed their bank in the last 12 months.
While Asian customers are much less likely to change
banks
3
only 6% have changedthey are also more
likely to own products from multiple banks (only 26%
hold four or more products from their main bank
compared to 46% in Europe). Whether by changing
banks or simply buying new products from additional
banks, customers' loyalty to tbelr maln bank ls more
fragile than ever.

2
Introduction
Factors That Affect Why Customers
Leave a Bank (%), 2011
5









Results from a recent voice of the customer survey
5
,
shown above, shows Quality of service tied with ease
of doing business as the factor that most influences
the initial choice of a bank and the decision to stay. It
is also the leading factor in deciding to leave a bank. In
an lncreaslngly nolsy market, acqulrlng new
customers to replace this lost business has
become more difficult and expensive. One way
for banks to grow remains effective in this
environmentselling more to existing
customers. Leading banks have responded by
becoming more customer centric, moving away
from a product line focus to one based on
growlng sbare ot wallet.
The value proposition for being customer-centric
in financial services is clear. Using existing
customer relationships to increase sales helps sell
more products to each customer and ensures the
bank controls a larger sbare ot wallet.
Successful efforts result in more profitable,
longer-term customer relationships.
But the typical banking customer is changing and
traditional approaches to profiling and targeting
customers are no longer enough. Generic mass-
market messages are increasing irrelevant to
customers. Customers are moving away from a
branch-centric approach to one focused on self-
service. They are no longer using a branch or call
center in repeatable, predictable ways as their
primary interface with their bank. Increasingly
they expect their bank to respond to their
unique demands for self-service, mobile access,
always-on support and more. At the same time
these customers now have an expectation for
immediate response that has been created by
online retailers. They demand the kind of loyalty
programs and social discounts offered by retailers
and others of companies. They want their privacy
to be respected too, so banks must deliver a new
relationship that is both opt-in and secure.
Banks cannot afford to wait to respond to this
cbanglng lanoscape. |t's lncreaslngly easy tor
customers to move to new providers so any
delay means losing revenue. Those who move
quickly will build the kind of deep customer
insight needed to create a long term competitive
advantage. Banks need to move beyond simply
trying to manage the customer experience to
creating a new kind of responsive customer
engagement. And they need to do so now.
Banks are responding to these challenges by
understanding and quickly responding to customer
banking behavior. Some leading retail banks are
developing real-time marketing and customer
acquisition systems. These systems deliver rlgbt tlme,
rlgbt cbannel opportunltles to cross sell products
and extend loyalty rewards while these opportunities
are still highly relevant. Event processing technology is
used to consider large numbers of customer banking
events such as credit card purchases and ATM
transactions as well as life events such as birthdays
and overseas travel. These events are evaluated
together with a single customer view and a propensity
model to determine in real-time the next best offer
for this particular customer.
19%
24%
27%
35%
36%
36%
39%
45%
45%
49%
50%
51%
55%
Peer Recommendations
Rewards/Loyalty
Brand Image
Personal Relationship
Branch/Bank Locations
Product Availability
ATM Locations
Accessibility/Convenien
Quality of Advice
Interest Rates
Fees
Ease of Use
Quality of Service
% Responses
Capgemini 2011

3
Real-time data can be used to analyze
customer behaviors and so we can answer
customer needs immediately
Decision Management Executive at large FS
institution
The core objective of any customer engagement
program is to deliver the right products and services, to
the right customers, at precisely the right time, through
the right channel. It means making the right decisions
about how to interact with customers every time you
interact with them. Responsive customer engagement
adds a focus on immediacy. As such, responsive
customer engagement has three key elements -
relevance, real-time and recency.
Relevance
Customers respond to the decisions a bank makes
about offers, messaging and other interactions as though
those decisions were personal and deliberate. When
they are not, when they are made without
consloeratlon ot tbe customer's unlque protlle, banks
run the risk of losing business. A focus on relevance
means ensuring that offers, pricing and messaging are all
based on a complete understanding of the customer and
on tbe bank's relatlonsblp wltb tbat customer.
Relevance means using information about the customer
relationship across all channels in the context of a
particular interaction. This involves using information
from a customer data warehouse, data in operational
systems as well as wbat ls bappenlng ln tbe bank's
systems as customers interact and use their products.
Responsive Customer
Engagement
Relevance; Real-Time; Recency

4
Responsive Customer Engagement
Responsive Customer Engagement
This focus on relevance replaces traditional mass
marketing to customers with a strategy that targets a
slngle customer. Olo scbool macro oeclslons about
messaging, pricing, terms and conditions are being
replaced with customer-centrlc mlcro oeclslons tor
each specific customer. Everything known about a
customer within the bank combined with their most
recent activities drives an individually targeted and
intensely relevant experience.
Real-time
The modern consumer has become more accustomed
to real-time response from companies. Their ebook
reader downloads a book in seconds, their insurance
company allows them to make a claim online and they
can get a boarding pass issued right on their
smartpbone. Tbese customers oon't want to walt
days for a response in the mail, be told to come to
the branch, or even to be referred to a supervisor in
the call center. A focus on real-time means ensuring
that the right response to a customer is delivered
instantly within their choice of channel.
Real-time means making decisions, responding to
requests, handling customer inquiries and approving
products in real-time. It means minimizing the time to
deliver the products, services and support to a
customer at every opportunity. It also means sensing
tbe customer's neeos ano loentltylng opportunities as
they occur. Market shifts, external events, competitor
campaigns all must be sensed in real-time.
The outcome of this real-tlme sense ano respono
approach must be relevant and appropriate. It must
take account of location and context so that
customers will respond. Suggesting a customer open a
new account while they are using SMS to chat with
friends is not going to be successful. Real-time sensing
combined with understanding of relevance creates
situation-based opportunities to better serve a
customer.
Recency
Banks have a lot of information about customers.
They have internal data including account information,
application information, transactions and demographic
and external data such as credit bureau reports. This
data is important to the understanding of customer
behavior over time. This history has a delay built in,
however as it takes a finite time to record this
information and make it available. To create
responsive customer engagement a bank must
combine this history with what is happening right
now. A focus on recency uses what just happened,
what the customer is doing at the moment, as well as
customer history to make more effective decisions.
For instance a promotion can take advantage of real-
tlme usage patterns ano a customer's current locatlon
and context. If they have just deposited a large check
out of their payroll cycle then the bank can display an
offer for a high yield savings account. If they are using
their credit card less today than usual then perhaps a
suggestion for local restaurants that accept it and a
reminder of the frequent flyer points they could earn
will prompt them to use it. Recency improves the
propensity of customers to accept these offers.
In a responsive customer engagement environment,
continuous improvement is critical. Long-term
continuous improvement of relevance is important,
but so is short-term, highly iterative improvement.
This kind of rapid improvement also requires a focus
on recency. When a bank can see how well a
campaign is performing in real-time they can make
immediate and continuous changes to the decisions
driving that campaign to keep it on track and
maximize its value. Their changes can be based on
what is working now real-time performance
tracking.
A leading bank in Asia with over 200 branches across
15 markets is leveraging every touch point and all
cbannels to respono to customers' needs in a

5
Responsive Customer Engagement
proactive and engaging way. By responding at the right
time and in the right channel, they are able to respond
ano antlclpate customers' neeos. They use contact
rules to govern when and how to contact customers
through their preferred channels and timing. By better
understanding customers at the touch point, the bank
provides more relevant services, better customer
engagement and cross and up-sell of their services and
products. For example it can recommend nearby
retail partners when a customer is at the mall or use
information about recent airline ticket purchases to
drive an offer for travel insurance next time the
customer logs on. Offers that are relevant, real-time
and based on recent behavior.
Delivering relevant, real-time and recency requires
instrumenting for visibility, contextual understanding
sensing and responding and continuous improvement.


6
Operational responsiveness the ability to
quickly and effectively make the right
decisionsis a priority for every forward
thinking organization. Any organization can
make decisions quickly, but most lack the
infrastructure to do so successfully. The results
are either quick decisions made poorly, or good
decisions made too late. Either way can cost a
business dearly
Dr John Bates, CTO Progress Software Corporation
Responsive customer engagement requires relevant
interactions, delivered in real-time and based on the
most recent information availablerelevance, real-time,
recency. Delivering responsive customer engagement
does not require ripping out and replacing existing
systems. In fact most banks already have many of the
key elements required for delivering responsive
customer engagement including:
Online and mobile banking systems as well as ATMs,
branches and call-centers.
Social media platforms for banking.
A wide range of customer data that is increasingly
integrated and understood.
To deliver responsive customer engagement they need
to build on this existing infrastructure. They need to
lncrease tbelr vlslblllty to wbat's bappenlng rlgbt now,
improve their ability to understand what this tells them
about their customers, make the decisions that will help
them sense and respond appropriately, and
continuously improve their decision-making.





Delivering Responsive
Customer Engagement


7

Delivering Responsive Customer Engagement
Elements of Responsive Customer Engagement
Instrument for visibility
Responsive Customer Engagement requires an
understanding of the customer and related events
across all channels and for all aspects of the relationship.
Most banks today lack real-time visibility into their lines
of business and across organizational and system silos.
They have many legacy systems and a wide range of
platforms. They need to be able to combine all the
information they hold into a coherent picture of what is
happening right now with regard to customers and to
transactions.
Lvents are tbe key to lmprovlng rlgbt now vlslblllty.
An event can be thought of as a packet of information
about a change in status. Events can reflect big changes
like the opening or closing of an account as well as
much smaller ones such as a customer logging in to an
ATM or sending a balance request SMS. Instrumenting
existing systems to generate events improves the
visibility a bank has across its disparate systems and
channels. The business process steps implicit in existing
systems can be identified and events generated as
transactions flow through these steps. Combined with
an understanding of how these
steps are linked, this raises the
visibility of customer transactions
as they flow through these
applications. Monitoring these
events creates transactional and
process visibility.
Events are also generated by
customer interactions at various
touchpoints throughout the
banking process. Even though
branches, ATMs, mobile and online
channels all use different platforms,
a common event processing
infrastructure can gather and
monitor events from across the
bank. This event stream gives insight into customer
behavior, process execution and operations that cut
across channels, systems and organizational silos.
Understand in context
Instrumenting existing systems and processes in this
way makes customer behavior and banking operations
more visible. This visibility allows for an up to date
picture of what is happening in the bank. The next step
is to make this visibility more actionable by adding
insight and understanding how what is happening
lmpacts tbe bank's ablllty to serve customers.
Banks need to correlate and analyze all these events to
extract meaning from them and then combine this
insight with more static data to generate a complete
picture. Events that show what a customer is doing at
the moment can be combined with transactional data to
see if the behavior of that customer is stable or
changing in some way. Social media data can add insight
into their view of the bank and its products. Historical
profitability data for products can be factored in to see
how the profitability of this customer might change if

8
Delivering Responsive Customer Engagement
they were sold specific additional products. The current
and future loyalty of customers, the likelihood that
fraud is occurring, and the products that will most likely
be appealing to a customer can all be determined.
This understanding can be combined with contextual
information to create a truly dynamic customer profile.
The static data might show a customer as a long term
user of basic services with a steadily climbing savings
balance. The events might show that they just made an
unscheduled deposit and have been on the website
looking at rates for long term savings products. The
dynamic customer profile that results is that a long term
customer may have just received a bonus that brings
their total savings to the point where they are looking
for a better rate. A customer profile that is rich,
accurate and completely up to date.
Sense and Respond
No matter how revealing the insight that a bank gains
from analyzing its data and events the bank must act on
this insight to get value from it. The insight should be
put to work in every operational system that interacts
with customers, across all channels and lines of
business. Whether a customer is using a product,
getting help, researching new products or talking to a
member of staff, the bank must be able to sense the
opportunity to interact with the customer and respond
appropriately.
Sensing and responding appropriately to customers has
several elements. Events that indicate risk or
opportunity must be detected so that an appropriate
action can be triggered. These events could come from
systems the bank runs like the website or online
banking system as well as from third party systems like
social media and review sites. When existing systems or
processes have problems that impact a customer these
events too must be sensed so that problems do not
fester. Banks need to move beyond this kind of
management by exception to also spot
underperformance in their business processes
situations where nothing is going wrong but where
customer treatment is not optimal.
Having sensed a need or opportunity, the bank needs to
respond appropriately. A centralized decision enginea
Next Best Action engine as it is sometimes calledis
needed that can be triggered in each circumstance. Such
an engine makes decisions using the rich customer
understanding developed, product portfolio
information, customer preferences and the context of
the request. Once the right decision is made it can be
acted on rapidly. Real-time fulfillment processes can be
triggered if the customer needs to be set up for new
products. New messaging and offers can be sent to call
center staff, ATMs or web pages to effectively target the
customer with an offer. Other events can be fed back
into the event processing system to trigger further
actions and more.
The right decision is made based on the most recent
information to respond in real-time with an offer or
action that is intensely relevant to a particular customer
and their current situation.
Using real-time customer activities, a leading bank in
Asia increases customer engagement in their
redemption program. They responds to a customer
credit purchase with a timely text message update of
their loyalty points when value thresholds are reached.
This provides an immediate reminder for customers of
the incentives to increase their use of tbe bank's credit
cards. The marketing team manages the business rules
that define the incentives to target customers and these
rules are executed in real-time delivering higher
acceptance rates for the marketing campaign.
Improve continuously
If the world was static and predictable the first three
steps might be enough to deliver responsive customer
engagement. For banks, perhaps more than most, this is

9
Delivering Responsive Customer Engagement
not the case. Customers, competitors, regulations and
the markets themselves are constantly changing. New
products and offers are constantly being developed and
introduced and it is not clear how customers might
respond to them.
In a rapidly changing world, decision making is not static
but must be continually refined and kept up to date.
Banks developing responsive customer engagement
need to ensure that their tools and processes allow for
continuous refinement and improvement of the
decisions they make. New rules, new models, new
insight about customers must be generated on a regular
basis to make sure that the responses customers are
getting are the most relevant to them even as
circumstances constantly change.
When uncertainty or risk is high, banks need to use
events and analysis to monitor the effectiveness of the
decisions being made in real-time. If a new campaign is
not performing to expectations it can and should be
tweaked to improve its results. If response rates to
established activities suddenly decline then the bank
needs to know and to be in a position to act
accordingly.
For a bank implementing responsive customer
engagement, continuous improvement means being able
to make both long-term proactive improvements and
short-term reactive ones. For instance it needs to be
able to quickly change the terms of an offer being used
to respono to a competltor's new Tv ao as well as
review and adapt its segmentation approach if
acceptance rates have declined for a particular micro
segment of its customer base.
Responsive customer engagement changes the way
banks interact with their customers. It marks the end of
treating customers based on static categories and
macro decision-making. Instead it delivers real-time
micro-decisions that precisely target each customer
based on an ever-changing dynamic profile and an
immediate view of the customer's partlcular
circumstances. It can drive more effective cross-sell
decisions or increase customer engagement with online
redemption offers. Responsive customer engagement
drives consistency across touchpoints. It can drive an
intelligent response to everything a customer does,
generating customer loyalty and engagement while
building a sustainable competitive advantage.

10
Next Steps

Customers who choose to stay with their
current primary bank for additional products
are most driven by positive past experience and
perceptions that their bank is more focused on
customers than on profits
Rockwell Clancy J.D. Power and Associates
4


Responsive customer engagement is increasingly a must-
have for banks worldwide. Customers are looking for a
better banking experience and are increasingly willing to
move to those banks that show themselves as being
customer-centric and truly responsive.
Responsive customer engagement is relevant, real-time
and recent. Banks have many of the technologies they
need to deliver responsive customer engagement but
they need to instrument their business to improve its
visibility, understand the behavior of their customers in
context, decide and act effectively on this
understanding, and create a process for continuous
improvement.
To get started with responsive customer engagement
banks should take three immediate steps:
Identify the decisions they make about interacting
with customers and the decisions they could make to
improve customer engagement.
Tie their existing systems and their decision-making
together by instrumenting existing systems, capturing
events and analyzing real-time activity as well as
historical customer data.
Monitor decision effectiveness over time and in real-
time and use this feedback for short- and long-term
continuous improvement.

11
References
1. Furlonger, David and Newton, Alistair. Top Banks: Their IT Plans and
Investments, 4Q10. s.l. : Gartner Group, 2011. G00211062.
2. Ernst & Young. Understanding customer behavior in retail banking. The
impact of the credit crisis across Europe. 2010.
3. Ernst & Young. Retail banking in Asia Pacific: Pursuing Customer Loyalty.
2010.
4. J.D. Power and Associates. J.D. Power and Associates 2011 U.S. Retail
Bank New Account Study(sm). s.l. : J.D. Power and Associates, 2011.
5.Capgemini. 2011 Global Banking Voice of the Customer Survey.





About Decision Management Solutions
Decision Management Solutions provides consulting and implementation services for all aspects
of decision management. Decision Management improves business performance by identifying
the key decisions that drive value in your business and improving on those decisions by
optimizing your organization's assets: epertlse, oata ano elstlng systems.
Our end-to-end, decisions-based approaches and methodologies address key business priorities,
such as cost competitiveness, differentiation, customer retention and growth. We offer an array
of consulting services for companies, ranging from advice about adopting decision management
strategies to tactical support for successful implementation projects.
Decision Management Solutions is led by James Taylor, a leading expert in decision management.
James has over 20 years experience in developing software and is the foremost thinker and
writer on decision management. James has experience in all aspects of the design, development,
marketing and use of advanced technology. He has consistently developed approaches, tools,
processes and platforms that others can use to build more effective information systems. In
addition, Decision Management Solutions has an extensive network of industry and
implementation partners.
More information is available at http://www.decisionmanagementsolutions.com.
To engage us or request information, email info@decisionmanagementsolutions.com.