Financial services strategies for growth:

Focus on the customer amid market turmoil

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A report from the Economist Intelligence Unit

 Financial services strategies for growth: © The Economist Intelligence Unit 2008
Focus on the customer amid market turmoil

Preface

F inancial services strategies for growth: Focus on the customer amid market turmoil is an Economist
Intelligence Unit brieÞng paper, sponsored by SAP. The Economist Intelligence Unit conducted the
analysis and wrote the report. The Þndings and views expressed in the report do not necessarily reßect
the views of the sponsor.
The report is based on research and in-depth interviews with nine senior executives in the banking
and insurance sectors, as well as insight gleaned through three Advisory Boards held in New York, São
Paulo and London. The author is Alison Rea and the editors are Katherine Dorr Abreu and Dan Armstrong.
James Rubin conducted additional interviews for the report. Danielle Noble was responsible for layout.
The Economist Intelligence Unit would like to thank all those who contributed their time and insight to
this project.

October 2008

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 Financial services strategies for growth: © The Economist Intelligence Unit 2008
Focus on the customer amid market turmoil

Executive summary

T urmoil in the Þnancial markets is leaving fewer institutions competing harder to win over a more wary
and demanding group of retail clients. Banks and insurers that can both reassure customers and
develop compelling, targeted products will cement customer loyalty, grow market share, boost revenue
and strengthen their brands.
To achieve these goals, retail bankers and insurers must keep their focus squarely on the customer.
A Þrm’s capacity to respond to evolving customer needs will be a key determinant of its success. This
will hinge on providing different types of products and services to meet the needs of different types of
customers.
The Economist Intelligence Unit recently examined the state of customer service delivery at Þnancial
institutions, interviewing senior consumer banking and insurance ofÞcers at nine organisations around
the world. Some of the Þndings include:
! During difÞcult economic times, reputation is critical to maintaining customer conÞdence, and banks
and insurers that effectively capture and act on customer needs increase their chances of building loyalty.
! To identify customer needs successfully, Þnancial services Þrms must put into play a full range of tools,
from employee training to capturing and analysing customer data, whether internally generated or from
external sources.
! Pressure is mounting from savvy, well-informed customers for a full array of up-to-date product and
service offerings. This requires a cohesive set of channel offerings with integrated business processes
from front to back ofÞce.
! Electronic and in-person services should not be viewed as substitutes but rather as complementary
options in retail banking and insurance.

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Focus on the customer amid market turmoil

Introduction

A s this report went to press, the Þnancial services industry in the United States and Europe was in
turmoil, with credit markets frozen and uncertainty as to the effectiveness of a recovery plan offered
by the outgoing Bush administration and grudgingly passed by the US Congress. Banks and brokerages
continued to falter, particularly in the US and in Europe. Although Asia and Latin America initially seemed
less susceptible to the market seizure, their economies were already showing the effects of slowing
growth, or even recession, worldwide.
In uncertain times, success in retail banking and insurance requires the vision to look beyond the
current chaos and prepare for what happens next. When the smoke clears, institutions will still have to
invest carefully in the right people, processes and technology to be able to offer compelling products and
services. “Customer service is going to be a key differentiator,” says Miguel Huller, general director of
retail banking products at Mexico-based Grupo Financiero Banorte.
Large banks and insurers will grow on multiple fronts by:
! offering the innovative delivery channels that will increasingly serve the emergent tech-savvy youth
segment;
! providing customised services to the growing ranks of customers with retirement needs;
! addressing the needs of customers in the wealthier strata, both in emerging markets and at home; and
! identifying and developing services for potentially proÞtable subsegments of the unbanked
population.
Customers are scrutinising providers as never before. A crucial element of reputation will soon be
seamless, fast delivery across all channels—physical branches, the Internet, call centres and mobile
phones—and across all product lines, including banking, brokerage and insurance. This will require
technologies to help manage costs, risks and operations. Customer data must be used more effectively
to retain and attract customers, and employees will need more sophisticated tools and better training to
help customers realise their Þnancial goals.
Balancing demands for scarce resources will be even tougher given pressure on revenue from slowing
global economic growth and competition from a smaller number of better-capitalised survivors. The
winners will be those that can invest in the future rather than scaling back, those that can raise new
capital while cutting expenses.
“This is a period of opportunity for banks that remain committed and continue to meet the needs of the
customers,” says Jim Smith, executive vice-president and head of the Internet Services Group at
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Focus on the customer amid market turmoil

World Þnancial services outlook: a Þve-year forecast
Financial services Þrms looking to invest in a customer service
revolution may Þnd themselves hampered by fallout from a demanding
economic climate. According to a recent report from the Economist
Intelligence Unit, World Þnancial services outlook: A selective crunch,
the scarcity of credit will constrain economic growth in most developed
markets. By contrast, emerging markets—most of which, so far, have
continued to enjoy relatively strong growth—face higher inßation and
weakening world demand for manufacturing and commodity exports.
The Economist Intelligence Unit expects that lending will remain
subdued in most developed economies, as banks react to reduced
growth and rebound from losses inßicted by asset writedowns.
Prospects for banks in the developing world appear to be better, but
these institutions are also vulnerable to damage.
Insurers—particularly in the developed world—continue to be
exposed to losses from risky Þnancial instruments, plunging equity
prices, severe natural disasters and slower economic growth. On
the plus side, the Economist Intelligence Unit sees growth in life
insurance premiums remaining strong.
The Economist Intelligence Unit’s long-term outlook for the
Þnancial services industry is rosier, with growing demand across a
range of products and services as new markets open up. These include
huge numbers of currently underbanked and uninsured people around
the world, ageing workers needing retirement advice and younger
consumers wanting more technological control over investments,
insurance and savings.

Wells Fargo. Turmoil can also lead to opportunity for an insurer like Manulife International Ltd., says
Alan Merten, vice-president for employee beneÞts. The Hong Kong-based unit of the Canadian insurer
brands itself as a quality provider, not a discounter competing on price. Tight economic times require
companies to “work a bit smarter, not harder”, he says.

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“At times like these,
people’s desires for
security, trust and
feeling that their
money is safe will
dominate consumer
behaviour. If you can
develop and sustain
a reputation for
that, this is a time of
great opportunity.”
Alastair Campbell, Standard
Chartered Bank
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Financial services strategies for growth: © The Economist Intelligence Unit 2008
Focus on the customer amid market turmoil
Identifying challenges and opportunities
O ver the next Þve years, providing convenient and effective service should help Þnancial services
institutions to grow. But while the opportunities are signiÞcant, so are the challenges.
Seizing opportunities
A reputation for superior service will result in more prosperous institutions valued more highly by
customers, depositors, investors and credit agencies. Identifying customer wants and developing
products and services to meet them will expand market share and brand recognition at the expense of
rivals hurt by market turmoil. These organisations will garner a larger share of wallet by cross-selling
to each customer and through value-based pricing. The result: growing revenue and proÞt, higher
share prices and better credit ratings, yielding the ability to attract deposits and premiums despite the
funding crunch.
SatisÞed customers buy more products and services and are willing to pay more for them. “If we have
the right products, the right tools and the right customer-service experience, we will have a very sticky
relationship with our customers. They will value us and come back to us to buy their next product,” says
Mr Smith of Wells Fargo. The California-based Þnancial services giant boasts a cross-sell rate of Þve to
six products per household, about double the industry average. Behind this metric is a strong sales
culture, performance incentives, sophisticated data systems, an expansive network of “stores” and well-
developed electronic distribution capabilities.
Reputation has always been important. Now it is the difference between riches and ruin. “At times like
these, people’s desires for security, trust and feeling that their money is safe will dominate consumer
behaviour. If you can develop and sustain a reputation for that, this is a time of great opportunity,” says
Alastair Campbell, global product head of consumer transaction banking at London-based Standard
Chartered Bank. His bank has focused on building a trusted brand through disciplined, diversiÞed growth
underpinned by strong cost and risk controls.
Companies with the ßexibility to adapt to changing conditions are well positioned for growth.
Customers’ demands reßect market conditions, reports Gary Bhojwani, CEO of Allianz Life of North
America. “In times of greater market volatility, people want more Þxed products, they want more stability.”
Uncertainty also encourages people to seek sound advice and to buy products that protect income and
savings, notes Chris Blunt, Chief Operating OfÞcer for Life & Annuity at New York Life Insurance Company.
He believes his company is well positioned for this, with a large network of agents providing personalised
advice and strength in annuities offering guaranteed income.
 Financial services strategies for growth: © The Economist Intelligence Unit 2008
Focus on the customer amid market turmoil

Overcoming challenges
At many Þnancial services companies—and banks in particular—the reality often diverges starkly from
the long-held goal of anytime, anywhere service. “Banks typically are not rated highly in terms of
customer satisfaction levels,” says Donal Forde, managing director of Republic of Ireland-based Allied
Irish Bank’s (AIB) Republic of Ireland unit. It won’t be easy for banks to co-ordinate the disparate factors
needed for a more coherent and effortless customer experience, he notes, saying: “Returns won’t be
quick. You have to be prepared to stay the journey.”
Insurers, like asset managers, must satisfy two sets of clients: the agents and brokers who distribute
the products, and the end-customers who buy policies, annuities and other products. Chubb Group of
Insurance Companies seeks to engender loyalty among agents by providing ease-of-business tools that
help agents and brokers effortlessly to look smart for clients. Creating loyalty among end-customers
requires Þne-tuning the claims process, the point at which a piece of paper—the policy—becomes a
tangible product, believes Mark Schussell, vice-president and public relations manager at Chubb. This is
where an insurer can differentiate itself: while many insurance policies can be easily copied, competitors
cannot easily replicate high-calibre claims service, Mr Schussell says.
The challenging environment for Þnancial services will make scarce funds even scarcer. “When revenue
and proÞt are falling, that’s never a good time to be faced with the challenge of investment,” says Mr
Forde of AIB. The cost of compliance, already high, will only worsen as new rules are enacted in response
to capital shortfalls.
Financial services companies are also facing challenges from retailers, telecommunications operators,
mono-line providers and, in Europe, postal services companies. In emerging markets, retailers such
as Casas Bahia Commercial (Brazil) have taken the lead in providing credit to the large swathes of low-
income populations. Although the company derives 40% of its revenue from Þnancing its customers, its
rates are well below market rates, the company reports. Wal-Mart opened its Þrst branch of Banco Wal-
Mart in Mexico in November 2007, targeting low-income and unbanked customers with services

New York Life Insurance Company: Ensuring personal
service
While technology will play a strong role in the future, personal service
is here to stay when it comes to life insurance as consumers seek help
in understanding a diverse set of complex products. “We’re an agent-
driven company. We believe that insurance is a relationship business.
That’s what’s sustained us for 163 years, and we believe that’s our
secret sauce,” says Chris Blunt, CEO for life and annuity operations.
To sell many of its products, the insurer relies on a network of
10,000 licensed career agents that it actively recruits and trains. It
also increasingly uses technology to support these agents’ efforts in
building customer relationships by providing the agents with up-to-
date customer account and product information, and by providing the
means to process policies faster.
The US-based mutual company works to identify the tools and
technology platforms that will help its agents to do a better job in
the future. It is currently studying whether arming its agents with
Blackberries, rather than or in addition to laptops, would boost
effectiveness in the Þeld, for instance, by speeding policy issuance.
The company has also been exploring the ways that the buying
habits of people under 30 years of age may differ from those of its
older customers. Many of its agents now are using personal web pages,
blogs and pages on social networking services such as Facebook
to initiate contact with potential customers. “Our primary point of
service delivery is our agents themselves. We refer to them as our
brand ambassadors,” says Mr Blunt.

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Focus on the customer amid market turmoil

they cannot Þnd elsewhere. Also in Mexico, aggressive market entrants, including global buyers of
local franchises, have cut prices and introduced new products. One way that Banorte has responded is by
trying to introduce more sophisticated products and encourage the use of self-service banking channels
such as ATMs and Internet services with greater functionality, says Mr Huller. The bank has also worked to
expand the number of branches and its merchant point-of-sale network for credit and debit cards.

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 Financial services strategies for growth: © The Economist Intelligence Unit 2008
Focus on the customer amid market turmoil

Ensuring growth

T hriving in the Þnancial services market over the next Þve years will require reaching the customer,
identifying the customer’s needs and creating loyalty through excellent execution. “Customers tell us
that they want to deÞne what it is for them to be Þnancially successful and then they want a partner that
will actually help them to achieve those dreams,” says Mr Smith of Wells Fargo.
The Economist Intelligence Unit’s report, The digital company 2013, conÞrms the crucial role of the
customer in shaping how Þnancial services providers will operate in the future. Whereas only 14% of
Þnancial services respondents in the survey cite customers as the main source of today’s innovative ideas,
27% expect them to be drivers of change in Þve years. They will overtake in-house R&D (30% today and
21% in Þve years) and employees (28% and 22%, respectively), according to the survey.
As customers become an important source of innovation, skill at responding to customer information
will become a primary competitive differentiator. Financial services Þrms are already moving in this
direction, with a strong trend towards product and service customisation.
Reaching the customer
Offering the right mix of products, services and channels to strengthen the bond with customers remains
a challenge for banks and insurers everywhere. And the bar is constantly being raised by those able to
provide faster, more convenient access either online or in person.
Creating an emotional connection that will generate loyal customers will require transforming
branches and call centres into customised-service hubs that are responsive to customer needs. Trusted
advisers will remain important, especially when it comes to obtaining investment advice or buying life or
property and casualty insurance.
New York Life has been meeting this challenge by continuing to invest in well-trained agents, who
Mr Blunt believes will be able to de-mystify complex life and annuity products to help customers select
the right product for their life stage and Þnancial needs. “It doesn’t matter if you’re Gen Y, Gen X or Baby
Boomers, the reality is that people still have a preference—particularly when it comes to their money—to
wanting to sit down with someone.”
Data from The digital company 2013 report show the trend towards customisation. Only 32% of
Þnancial services respondents say that their products today are customisable in most aspects, and only
9% say they are completely customisable. In Þve years, 48% expect products to be mostly customisable,
and 28% expect products to be completely so.
Allianz has signiÞcant efforts under way to customise its products. “We’re launching [different variations
of products] every three to six months,” Mr Bhojwani reports. The insurer is also investing in building out its
customer service and technology platform in order to improve the relationship experience for its agents.
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Focus on the customer amid market turmoil

The need for personal and customised advice requires branches, especially to serve ageing customers
who want to retire comfortably on Þxed incomes. Indeed, the bankers interviewed spoke of the ongoing
importance of branches. Although many services—especially routine transactions like account enquiries
and funds transfers—have already migrated to ATMs, automated call centres and Internet or mobile
channels, companies are continuing to invest in physical branches.
Insurers must also identify the appropriate type of product and service for each customer. “For some
people,” says Manulife’s Merten, “communicating appropriately means more regularly, and for others it
means actually less and more concisely.” He adds: “The challenge is to use technology to let people tell us
what they want”, and to provide them with the same quality of experience, whether in person, by phone
or on the Web.
The Internet is well entrenched not just in the developed world, but in emerging markets as well. Wells
Fargo has added a little over 1m active Internet customers a year to reach a current total of some 10.8m.
About two-thirds of its checking accounts are now managed actively online.
Demand for mobile services is also growing quickly around the world, especially among younger
customers. Being able to deliver a wide range of services through this channel offers great promise for
banks and insurers operating in countries with younger populations, such as Brazil and Mexico, or where
the number of mobile phones is huge and growing, such as China or India.
Already, customers use their phones and hand-held devices for activities ranging from balance
transfers and enquiries to stock trades and credit-card payments. Mobile phones are also able to receive
SMS messages when credit cards are used to verify charges immediately.

The emerging markets: Online banking is rising
Physical branches will continue to be important in emerging markets.
But Internet and mobile banking will be crucial drivers of retail
banking growth, given the youthful demographics in many regions,
such as Latin America, and the sheer size of untapped demand in
others, such as China and India.
Online channels will not only help to capture previously untouched
customers, but could also reduce the need for physical branches.
Some companies may even bypass branch service altogether. As
mobile services become ubiquitous, this may be an especially lucrative
strategy in the developing world.
Standard Chartered expects an explosion of online opportunity
across its Asian, African and Middle Eastern footprint, says Alastair
Campbell, global product head of consumer transaction banking.
Although electronic transaction growth has been brisk, doubling
about every three and a half years, he believes that opportunities
for his bank are just beginning: 90% of all consumer transactions in
India and China are still done in cash, compared with 50-70% in Hong
Kong and Singapore and 20-30% in the US.
“The path from cash-based and branch-based banking in each of
our markets to electronic-based and particularly electronic remote,
ie Internet and mobile, is a massive positive for Standard Chartered
because we will never compete on depth of branch presence in each of
our markets,” notes Mr Campbell. Although his bank has been opening
as many branches as it can in China, it still has only 52 compared with
11,000 for the smallest local Chinese banks. The bank also aims to
capitalise on the huge growth potential of mobile telephony in fast-
growing emerging markets by meeting the untapped demand with
mobile services.
In Latin America, many banks also view online and mobile services
as a strategic imperative. US-headquartered Citibank, which has a
presence in 25 Latin American countries, has been working with retail
and telecommunications companies as well as with other banks to
develop regional mobile-payments solutions, and is introducing new
services such as an online installment loan platform in Colombia.
Similarly, Grupo Financiero Banorte is working with other Mexican
banks to launch a year-long pilot programme for mobile-payment
transactions.

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“Whether the
customer decides to
access through the
telephone, Internet,
ATM, or uses a card
anywhere in the
world, the service
must be there. We
have to ensure
that the customer
doesn’t have any
problem with the
bank experience.”
Miguel Huller, Grupo Financiero
Banorte
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Financial services strategies for growth: © The Economist Intelligence Unit 2008
Focus on the customer amid market turmoil
Mobile SMS money-transfer services have taken off in developing countries such as Kenya and the
Philippines, says Mr Campbell of Standard Chartered. This lets people without bank accounts or credit
cards transfer money or pay remittances using a mobile phone. Although mobile services are still limited
to micro payments, Standard Chartered plans to expand them across its territory to meet rising demand.
Increasing mobile functionality even further, banks have been working with telecommunications
companies, merchants and other banks to create common formats and universally accepted payment
systems to facilitate payments from bank accounts to merchants or individuals. This improved service will
allow customers to use mobile devices to transfer larger amounts of money safely. Banks that provide it
would have another way to win customers.
Pressure will mount for a full array of up-to-date and well-integrated channel offerings. “Whether the
customer decides to access through the telephone, Internet, ATM, or uses a card anywhere in the world,
the service must be there. We have to ensure that the customer doesn’t have any problem with the bank
experience,” says Mr Huller of Banorte.
Identifying customer preferences
Before they can deliver consistent products and services at a reasonable cost, Þrms will have to Þgure out
what customers want. Companies can obtain information not only from the customer, but also aggregated
from internal data and myriad public search and social networking sources.
The most fundamental requirement is well-trained employees who know how to ask questions and
listen when customers call or visit. Alternately, many institutions, including Banorte, solicit consumer
feedback through online, telephone and in-person surveys, interviews and focus groups. Banorte Þts
the method to the product it is developing. For instance, to develop payroll services, the bank might
interview people as they leave their ofÞces at closing time.
Wells Fargo has built a suite of tools to model the current customer experience against an ideal future
experience. It also uses interviews and other customer communications to study how its customers like
to manage their Þnances. The results drive investment decisions, customer-experience designs and
innovations led by a dedicated team that develops new approaches. “It’s a robust process, but it gives
us some real advantage because we have a very good sense of both what is feasible from a technology
perspective and what’s really going to work with a customer,” says Mr Smith.
Systems to help companies manage customer information can also be used to determine preferences
for whole consumer segments by clustering people with similar attributes to identify service preferences.
Likely buying tendencies can then be provided as prompts to tellers and call-centre employees or pop up
when a customer accesses accounts through an ATM, mobile phone or the Internet.
For data mining to be effective, companies must build centralised customer data warehouses with
consistent information across legacy systems. New York Life’s “virtual service centre” is providing its
agents with useful data to support sales and its customers, including 4.3m policyholders, with ready
account access. “I don’t think anyone has mastered it yet, but we’ve been moving down this path for quite
a while now. This will be a decade-long process,” says Mr Blunt.
Mining customer data for leads is not enough; front-ofÞce personnel must also use them effectively.
Few people take the time to read the small notes at the bottom of statements or pause to listen to why
hypothetically they would want car insurance when they have come in to set up a checking account.
 Financial services strategies for growth: © The Economist Intelligence Unit 2008
Focus on the customer amid market turmoil

Mr Blunt believes that although ten years ago banks were light years ahead on mining client data,
insurers have now caught up. New York Life trains its agents to use data-mining results to start a dialogue.
“It’s one thing to mine the data. It’s another to use the data to build a relationship,” conÞrms Mr Blunt,
who notes that agents, unlike tellers, are professional relationship managers known for forging long-
term, multi-generational client bonds.
Since customer preferences can differ by region and by lifestyle and life-stage segments, a cookie-
cutter approach to sales around the globe will not sufÞce. While Citibank has some global products such as
credit cards, it uses careful research and benchmarking to make sure its products are competitive globally
and locally. “The right service is important to the customer,” says Raul Anaya, CEO for Citibank in Central
America and the Caribbean.
Creative solutions to allow Þrms to proÞt from smaller transactions will be necessary to tap new
markets, especially in the developing world. Often this group includes rural dwellers with little money
or access to banks or insurers. Citibank can now deliver credit cards right away in some parts of Asia
through mobile processing and the use of embossing devices in nearby stores. Similarly, New York Life’s
fast-growing life insurance joint venture in India is close to launching technology that will let agents
use hand-held devices to issue the equivalent of US$10 policies on the spot after asking Þve or six simple
questions. Mr Blunt says having to approve and process paper applications would not be cost effective or
timely for such small policies.
Creating a loyal customer
Solid execution comprised of differentiated, targeted products, seamless, streamlined delivery and a
service culture will be critical to supplying better service. But customer service “is only a differentiator
if you execute on it” , says Manulife’s Merten. Service must tie into customer loyalty and trust.
Since few Þrms can supply everything that customers want, a common response has been to offer
tiered pricing and service. For instance, wealth management clients, who are likely to provide higher
returns, may get a private banker. Low-income, low-margin customers get more generic service. A risk of
this approach is alienating those who feel they are getting short shrift.
Mr Campbell of Standard Chartered believes that rather than treating electronic and human channels as
substitutes, they should be recognised as distinct modes. “Let’s focus on emotional engagement through
humans and focus on transactional convenience and simplicity through computers, enabling our customers
to choose the emotional mode for the particular transaction they’re trying to get done,” he says.
At Wells Fargo, online tools help customers to create action plans to manage Þnances, create budgets,
do long-range planning and set up savings plans. It also tracks customers online, so it can intervene
with online help when a problem arises. For instance, it builds rules into the system that monitor the
time it takes to Þll out the Þelds on a speciÞc web page and click the next button. If nobody clicks after a
reasonable time, or if someone clicks the cancel button, the company can open up a window and say, ‘Can
we help you?’ Similarly, New York Life has created a distributed workßow capability that lets it direct an
application or query to the service centre with the right expert.
Redesigning back- and front-ofÞce processes to be more uniform, accurate and efÞcient will be decisive
in crafting a better experience. Limiting errors and reducing wait times are only two of the many potential

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Focus on the customer amid market turmoil

beneÞts. Centralised support for operations, administrative activities and technology demands can
also help to provide better, more affordable service. AIB, for instance, has been moving account and
credit functions out of operating units into support centres in Northern Ireland and Poland.
Most essential in the Þght to improve service is persuading workers to change habits. This requires
implementing a culture of service, one in which “people understand that we’re here to serve, to make
a difference, to give our agents tools they need to help the customer”, Allianz’s Bhojwani says. Hiring
the right people, training them well and paying for performance should be supported by effective
performance measurement systems that track leads and calls, offer appropriate incentives and
communicate objectives clearly.
New York Life’s training includes a managerial review process in which agents enter call data and
questions online. This promotes consistent enterprise-wide training and highlights areas needing
additional work so that customers are assured good service. Teachers can stay up to date on complex
products and track statistics that help to identify and transfer the skills of the best agents. The insurer
is also starting to use its intranet and blogs and podcasts to facilitate communication and knowledge-
sharing among agents and other employees.

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 Financial services strategies for growth:
Focus on the customer amid market turmoil
Focus on the customer: Regional perspectives
In the context of extreme turbulence in the Þnancial markets and
slowing economies worldwide, the Economist Intelligence Unit
brought together senior executives of the Þnancial services industry
in New York, London and São Paulo in the fall of 2008 to discuss the
importance of customer service in deÞning the future of retail banking
and insurance. Central themes emerged in the discussions:
! Excellent customer service eludes Þnancial services companies as a
whole;
! In engaging clients, retail banks and insurers must Þnd a balance
between meeting customer needs and remaining proÞtable;
! Staying close to the client means not only keeping data about the
customer, but using the data effectively to develop products and
services.
The meetings provided regional perspectives, highlighting issues
that are of particular relevance in each market. These are summarised
below.
New York
Communication is central to customer service, particularly during a
crisis, according to participants in the US. At such times, it is essential
to maintain open lines with clients, both to reassure them and to
gather information needed to respond to evolving situations.
In order to carry out this mission, front-line personnel must be
kept informed. And this requires good data—that is, accurate, timely
and well managed. The power of information systems essentially boils
down to communication, whether provided in person or online. For
the back ofÞce to effectively feed the front line, however, it is critical
that a thorough understanding of processes precede any automation
of those processes.
Participants agreed that a culture of service must come from the
top. This requires that senior management be engaged and actively
align what they learn about customer needs with the company’s
operational goals. It is not enough to do big things, however; to
enhance the customer experience, Þnancial services Þrms must give
operational managers sufÞcient authority to use the information
gathered through interaction with customers to make the small
adjustments that result in a personalised experience.
London
The main challenge for Þnancial services companies is to move away
from an attitude of “we have a product, whom do we sell it to?”
toward a concern with “what do clients want?”, afÞrmed a participant
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© The Economist Intelligence Unit 2008
in London. New, non-traditional players such as Virgin and Tesco
are making inroads into the UK’s Þnancial services market, taking
advantage of their huge footprints—physical or digital—and their
reputations for excellent customer service. To maintain their position,
Þnancial services companies must use existing information about
customers intelligently, designing offerings that reßect real needs.
They must also evaluate which customers they really want to keep.
The current climate of uncertainty raises the question of how
to restore trust. One participant noted that consumers have been
“jolted” into examining their Þnancial products, and this might have
long-term effects with regard to their expectations and demands.
In London as in New York, communications with customers and
employees was viewed as central to rebuilding trust.
Companies that have strong brands have an advantage in
improving relationships with customers in times of crisis. For basic
products such as checking accounts or simple insurance, price will
likely continue to be critical and the Internet a good medium for
delivery. Consumers who are looking for more complex offerings,
however, are likely to be attracted to more personal service from
companies with well-reputed brands. But “brand loyalty can be lost
quickly”, a participant argued, and success “will be based on how you
treat the consumer”.
São Paulo
The challenge of customer service is very real in Brazil as well. “There
is not a single case in Brazil of a bank or insurer that has enchanted its
customers,” a participant in the São Paulo meeting declared.
Market segmentation is critical in a country where large numbers
of people are getting access to Þnancial services for the Þrst time.
But the Þnancial services Þrms are not prepared for this: they are
structured in such a way that they offer their clients too much,
what one participant termed “over-service”, rather than providing
targeted offerings to speciÞc groups. While they have to a large extent
overcome the problems of incompatibility of legacy systems, often
the result of mergers, these companies do not yet have the customer
information needed to successfully target speciÞc groups.
Not only do they not meet their clients’ needs, their cost
structures are overburdened, undercutting their competitiveness.
Telecommunications companies, mass-market retailers and new
players such as PayPal Þnd fertile soil in which to act as Þnancial
intermediaries. This is aggravated by the lack of a culture of customer
service: retail banks and insurers are there to sell, but not to provide
ongoing service. Participants argued that a focus on the customer
has to come from the top, and that senior management in Brazil’s
Þnancial services industry still has to learn this lesson.
 Financial services strategies for growth: © The Economist Intelligence Unit 2008
Focus on the customer amid market turmoil

Conclusion: Looking to the future

G iven volatile Þnancial markets and the need for big investments in people and technology, the task
facing Þnancial services providers is daunting. But the pay-off from improving customer service is
equally great. The winners in the race to improve service will be those who successfully:
! harness technology to manage risk while offering greater levels of service and more unique products
at a lower cost by integrating processes from front to back ofÞce;
! lift cross sales by providing such good service that customers concentrate more business with one
provider;
! identify customer preferences through data mining and in-depth research;
! create innovative products and services to keep up with demand for technological solutions from the
young and advice for the retiring;
! offer tiered pricing and services without estranging customers; and
! institute a culture of service through effective training and performance pay.
Improving customer service requires a disciplined approach. Technology investments must be carefully
targeted to improve efÞciency, risk management, needs analysis, and product and service quality. A
single, real-time view of the customer across all accounts and channels, while difÞcult to achieve, is
necessary in order to promote seamless delivery.
Consumers have become more discerning and demanding. Most want both online and in-person
services. Routine transactions will continue to migrate online, freeing up staff to provide value-added
services such as investment and insurance advice.
Change is difÞcult, but complacency is expensive. The good news is that Þnancial services companies
that persevere in improving customer service will be able to reap rewards in this decade and beyond. “The
challenge will be trying to deliver on all dimensions without burdening yourself with an unacceptable
cost,” says Mr Forde of AIB.

14
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