TORONTO (Canada), October 1, 2001 – Competition from new competitors is making life more varied and interesting for financial services customers. Banks and insurance companies that don’t fully understand their customers’ needs do so at their peril, according to the 10th annual Cap Gemini Ernst & Young Special Report on the Financial Services Industry.
The Report, entitled Paths to Differentiation, surveyed 250 senior executives from over 100 financial services organizations in 13 countries, including 50 executives from 20 of Canada’s leading banks and insurance companies.
“What we’re seeing in Canadian financial services is a reconfiguring of the industry,” said David Bolton, Vice-President and Team Leader, Financial Services Sector, Cap Gemini Ernst & Young Canada. “Customers no longer feel that they are tied to one institution for life. They can do business wherever, and with whomever they please, including aggregators and newcomers alike. Traditional financial services organizations are responding to these new options and over the next 3 years will invest substantially in the IT support they need to develop long-term partnerships, rather than purely transactional or product-based relationships, with their customers.”
Globally, the Report underscores the supremacy of the customer and points to common themes, such as: growing acceptance of open finance; renaissance of the branch channel; realization of e-commerce as a complementary channel, not a substitute for, face-to-face service; and lack of return on investment (ROI) models for Customer Relationship Management (CRM) investments.
Relative to their global counterparts, Canadian financial service providers are more accepting of ‘Open Finance’. For example, according to the data, 43% per cent of Canadian financial institutions said they currently provide or plan to offer other firms’ competing products and services through e-commerce channels. This compares to just 21% globally, suggesting Canadian banks and insurers embrace a model whereby competing products are offered alongside proprietary ones as a means of solidifying customer loyalty. However, 69% are still more comfortable with complementary products, reflecting a ‘products and services’, rather than a true customer-focused, mindset.
Financial institutions are also recognizing that customers want more face-time. While branch rationalization was once touted as a way of reducing costs, financial institutions increasingly see that greater profitability comes from maintaining long-standing relationships with customers, many of whom prefer face-to-face transactions with their financial institution. Hence, the Report points to a reconfiguring of branches and a general understanding that Internet banking on its own may no longer be an acceptable substitute in the battle to attract and retain customers.
Increasingly, many global financial institutions see e-commerce as one channel amongst many, rather than a dominant strategic option in the customer retention tug-of-war. In comparing year over year data the trend is clear: e-commerce is no longer seen as a cost reduction strategy, but as a way of retaining customers through improved service levels. “It’s all part of the industry’s increased focus on the customer,” said Gregory Smith, Consulting Manager, Cap Gemini Ernst & Young Canada. “Financial players surveyed indicate that the expected drop off in both transactional and sales activity through the face-to-face channels will be less dramatic than previously thought. Despite the prevalence of online banking and ATM use, there is an increased focus on the part of financial institutions to integrate all the technologies that are required to support the commitment of putting the customer first.”
According to the Report, customer relationship management (CRM) tools were seen as a means of connecting to the customer. “Virtually all Canadian respondents saw CRM as a means of understanding, acquiring and retaining valuable customers, with 53% of Canadian respondents indicating that their CRM strategies were designed to increase profitability,” said Mr. Smith. “All Canadian financial institutions surveyed emphasized their desire to be partners with their clients, instead of advisors on specific products or services, with 71% citing CRM as a key tool in helping them to reach this goal.”
Asked what lies ahead for the financial services industry, Mr. Bolton points to an increased reliance on m-commerce and to further restructuring in the sector. “There’s no doubt about it, we’ll see more financial institutions lobbying to gain critical mass, mainly through acquisitions. We’ll also see a shift away from the current product-focused environment to a customer-centric mentality. Further down the road, we anticipate the development of mega firms, of ‘best of breed’ product providers, and of companies that specialize in orchestrating customer experience. These will be three separate and distinct financial services entities in the global financial services sector of the next five years.”
Surveys for the 2001 Report were conducted from April to June 2001. Canadian financial institutions not participating in the 2001 survey are invited to contact Cap Gemini Ernst & Young to discuss benchmarking their organization by way of a ‘live’ comparison to the global database.
Cap Gemini Ernst & Young Canada is a leading Canadian management and information technology consulting firm, providing strategy and technology consulting services, systems integration and technology development, design and outsourcing capabilities on a global scale. Cap Gemini Ernst & Young serves many of Canada’s leading financial services organizations. The firm also works on behalf of many of the country’s leading consumer products, energy and utilities, health care/life sciences, high tech, automotive, supply chain management, telecom and media companies. Cap Gemini Ernst & Young Canada is headquartered in Toronto, and has offices in Vancouver, Calgary and Montreal.
Cap Gemini Ernst & Young is one of the largest management and IT consulting firms in the world. The company offers management and IT consulting services, systems integration, and technology development, design and outsourcing capabilities on a global scale to help businesses continue to implement growth strategies and leverage technology in the new economy. The organization employs about 60,000 people worldwide and reports global revenues of about 8.5 billion euros (2000 pro forma). More information about individual service lines, offices and research is available at www.ca.cgey.com.
Note: A downloadable PDF version of the Report and supporting information is available on the Cap Gemini Ernst & Young Canada Web site. www.ca.cgey.com/news/paths_mediakit.