CRM Gets Lift from Financial Sector

Investment in customer relationship management technologies by retail financial institutions will drive healthy growth of these tools through 2005, according to research from TowerGroup.

North American financial institutions will take a front seat in spending on CRM-related information technology, driving an expected compound annual growth rate of 6 percent for the category between 2001 and 2005. The report focuses on “Customer Knowledge” technologies, including data warehousing, analytics and knowledge distribution.

TowerGroup estimates that IT spending on the customer knowledge side of CRM in retail financial institutions will be $4.3 billion. Just over half ($2.2 billion) of this amount will be spent in North America, where TowerGroup expects spending on customer knowledge technologies to grow at a compound annual growth rate of 6 percent, considerably higher than the anticipated growth for the economy as a whole over the same period.

Knowledge distribution technologies, which include marketing customer information files (MCIFs) designed to assist marketers; campaign management and database marketing software that designs, executes and tracks complex marketing campaigns; and customer interaction management/personalization software that directs personalized messages between a customer and an institution, accounted for 19 percent of the total customer knowledge area. These services will experience the most rapid growth at a 7.8 percent compound annual growth through 2005.

Investment in CRM technology will get a lift from more small and medium-sized retail financial institutions who will actively pursue CRM business strategies in the next few years. Investments in CRM have typically been focused among large retail financial institutions, but increased adoption among small businesses will be driven by an increased recognition among retail financial executives that CRM IT spending is comprised not just of technology, but also of business processes and people. This realization will result in greater emphasis by small to mid-sized institutions on policies, processes and employee training relative to CRM.

“Until recently, CRM has been the province of very large banks. In the minds of many retail executives, CRM was equated with a major technology expenditure,” said Kathleen Khirallah, a senior analyst in TowerGroup’s Retail Banking practice. “We’re now seeing the beginnings of a change in perspective. Across North America, retail financial services executives are realizing that CRM is far more than technology — it also encompasses business processes and people.”

By coupling technology with business policy reviews and training programs, Khirallah said companies will be able to support total CRM initiatives.

“This shift will bring significant benefits to smaller retail institutions, as they discover that their organizations can actively pursue CRM business strategies without investing every last dime of their capital on technology,” Khirallah said. “This will include exploring ways to make their technology investments more efficient within their infrastructure as they simultaneously develop different types of training for their employees.”