Personal banking for the masses? Try Amazon face-to-face.

March 8, 2009

Banks realized that although electronic banking is cheaper than maintaining branches, they don’t need to deter clients from seeking personal contact. In fact, they might get the most out of the branch by not trying to figure out how they could “herd” different people to different communication channels (branch, internet, telephone) for different services, as one of my interviewees said. Rather, they can let them come for whatever reason—once you have the customer’s willing attention, you can achieve a lot.

The problem is how to have effective interactions with a large volume of small retail clients who are largely unknown to the clerks serving them. The problem of banking as a mass financial service is how to singularize an already standardized product to an ever-growing mass of mobile clients. First, this is different from “high finance”—the topic of much research in the social studies of finance—where products are custom-developed by investment banks for large corporate clients (see Vincent Lepinay’s work in the volume Market Devices). Second, the Hungarian bank I studied wanted to be in the niche of quality services, but had to deal with an exploding customer base. A single clerk typically does not personally recognize the clients who show up at her branch. Third, we shouldn’t forget that clients had just been raised by banks to be mobile—the movement towards electronic banking and telephone services meant that you could break away from your local branch and complete transactions anywhere, with or without human assistants.

Banks’ return to the personal is via the technologies that personalize. The technology Customer Relationship Management is spreading to support the clerk’s work of serving clients, providing personal banking for the masses. CRM refers to both an information and communication technology (SAP, Oracle, and Salesforce are leaders of this market) and the strategy of “relational marketing,” which is based on the idea that the firm should be organized around the customer instead of the product. Instead of selling as many products as possible to any number of people over the short term, the customer-centered strategy is to treat each customer longitudinally and focus on selling multiple products to that customer throughout the lifetime. This means that each interaction with the client has a dual goal: it counts towards the relationship long-term, while it should also be used to attempt a sale. Pitching products and building a relationship can both be done in a very personalized way because the bank has had information about the client and knows her habits well.

CRM as an information system makes instant familiarity with an individual client possible because it tracks clients by pooling data from all corners of the bank, and renders it legible for the bank staff who have live interactions with clients. When clients use the bank’s services they leave a trace, but these myriad points of data about a customer are scattered around the organization in heterogeneous formats. More precisely, in order for tracking technologies to work, there must be traces to piece together, so the bank has to make sure that each contact is recorded in specific form that is acceptable to the technology that will integrate it. Customer Relationship Management integrates all that data, analyzes it, compiles, updates, and delivers it to the screen of any clerk at any branch of the bank.

At the bank I studied, Customer Relationship Management software did more than tracking: it tailored the product offer to each (existing) customer. When the customer visits the branch next time, the clerk pulls up the profile and immediately sees the list of products that match the profile, and she is supposed to be offering the customer some of those products. Amazon is the prime example of mass customization, with its technique of collaborative filtering that compares customers’ behavior as it is visible within the system (what items they have purchased) and based on that calculates what new products to recommend. The CRM that I observed in action at the bank branch relies partly on similar calculations that relate one customer’s behavioral pattern to the rest, in a dynamic evolving fashion that recalculates the best offers when new data are entered.

Ironically then, banks are bringing in impersonal technology to turn personal encounters with customers into a more individualized experience. In the next post, I will describe CRM in action, based on my observations of the situation between the client and the clerk. The fact that in this version of dynamic and personalized product recommendations, there is someone between my “Amazon screen” and myself, and that someone selects the product they think is appropriate for me–what’s more, I am not aware that there is an Amazon screen–has all kinds of consequences for what kind of exchange can be accomplished between me and the bank.

5 Responses to “Personal banking for the masses? Try Amazon face-to-face.”

  1. danielbeunza Says:

    Zsuzsi — this is the best account I ever read of the problems addressed by CRM: mass singularization. I think, however, that your title does not quite get at the technological leap that it involves relative to plain collaborative filtering. CRM is not quite about using Amazon face to face (somehow, a redundant-sounding operation), but about going beyond Amazon. Selling the books that people would not buy on Amazon. And then selling them computers. And cars. And ever more lucrative products.

    The metaphor, however is interesting in that it has often happened to me that physical bookstores do use Amazon. They do so in a “I’m not supposed to do it” way. For instance, to locate a book that is not in their text-based computer catalogue. And this creates the type of human-computer-human trio that you write about. The question I often ask myself is, why don’t they accept this as regular practice, and what would it mean for book selling?

  2. zsuzsannavargha Says:

    That’s true, Daniel, CRM goes beyond Amazon in that it actively sells you stuff that you wouldn’t consider by yourself, and as you say, not only books but then totally different kinds of goods. This kind of “cross-selling” is one of the key strengths of CRM, and it is strategy-driven. Amazon is “just” a marketplace when it comes to recommending products: the algorithms aggregate what other customers have been doing (“other customers have bought/viewed this”), but the company’s strategic goals for selling certain products are not reflected in that list. If the bank wants to focus on selling home insurance, then it can adjust the Customer Relationship algorithm in such a way that home insurance will be on its list of offers for the customers with the desired properties.

  3. zsuzsannavargha Says:

    What I wanted to emphasize by referring to CRM as a kind of face-to-face Amazon is that customers at the branch don’t read off the screen what the software is offering them, but it’s the bank staff that “conveys” the recommendation. This is a huge difference in how the whole interaction plays out on the ground, between human (clerk)-software (CRM)-human (client). Online systems like Amazon have much less control over whether the customer even reads the recommendations, and what she chooses. CRM at the branch is focused and directed by the human, the bank salesperson.

    I like the “I’m not supposed to be using this” path of Amazon sneaking into organizations, to complement the official inventory systems. There are two main uses of this kind: locating and identifying books, and exploring text. Academics certainly use Amazon parallel to the online library catalogs both to locate and explore books before deciding to borrow, or if the library doesn’t have it. For full text provision and the explorative use, the division of labor may be that Amazon has advantage in the newest releases while Google books and libraries are really good at making older texts available online. But for bookselling the issue is locating/identifying books. It’s a good question what would happen to if bookstores formally acknowledged their use of Amazon as a catalog. They could still keep their catalog separate from Amazon and let the store staff use Amazon as they see fit. I think the question is what Amazon’s plan is for this kind of guerilla use by offline rivals. Maybe there is a kind of symbiosis that works two ways: bookstores suffer because customers check out the best and newest of their physical volumes but then order the books from Amazon; and Amazon suffers back because bookstores use it alongside their catalog to sell their own books. The scale seems to be tilting still towards Amazon…Or do you think bookstore should do something radical and integrate with Amazon?

  4. marthapoon Says:

    Z, I know this reply is a little late on the ball, but I’m curious as to why the agency in this account remains with banks. (Banks have realized…) CRM seems to have been developed by a second party provider of technology. Was this in response to banks or was it introduced to them? And if the latter, how might this change the account that begins with a auto-realization by banks…? M

  5. I read your blog for quite a long time and must tell you that your articles always prove to be of a high value and quality for readers.

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