Abstract

Rewarding customers based on "Total Relationship Value" and providing differential treatment is a key focus area for Financial Service Providers. This requires the ability to recognize and reward customers continuing loyalty and patronage across the Institution's lines of business, products, services and delivery channels.

Drivers

Most banks are organized around product lines, resulting in technological and organizational silos of operation. Although CRM systems and CIF data allow Institutions to view their customer's entire relationship, core banking systems are not well suited for creating pricing or benefits that span these application silos. Customer's receive different (and often disproportionate) treatment for each product that they possess, and there are no rewards for overall Institutional loyalty. As a result many consumers hold financial products with multiple Institutions.

Meanwhile, many banks struggle with customer profitability. Customer acquisition costs are high, while profit margins are low, and attrition rates are rising. Some retail banks report that over 80% of their customers are "unprofitable". This makes the retention of profitable customers, of paramount importance.

Solution

miRevenue enabled solutions from Zafin Labs help Financial Institutions differentiate themselves from their competition with flexible, customer centric, recognition and reward programs. Financial Service Providers can extend existing loyalty & benefits programs and/or launch new programs across all products and services with minimal impact to existing infrastructure. Benefits and reward calculations are managed external to existing core banking applications with a simple posting mechanism to apply credits or rewards back to the authoritative systems of record.

miRevenue maps existing customer and account information, product definitions and transactions providing rules based, differential pricing, benefits and rewards based on customer, target market, geography, channel, product, package, or partner. Differential treatment could include:

• Reward points to an internal or external redemption program
• Fee concessions or waivers on transaction or interval service charges
• Credits that can be consumed against future usage of a product

Benefits or reward definitions can be attached to products and/or product packages, providing tangible incentives for customer's to bring their entire wallet share to the Institution. Benefit costs can be apportioned to products, allowing for "loss leaders" in a package with "fair" revenue attribution.

The determination of eligibility for (or value of) a benefit can be based on numerous Institution wide customer attributes such as:

• Number of Products with the Institution
• Years with the Institution
• Total Managed Assets
• Monthly Security Transaction Volumes
• Total Value of Chargeable Transactions
• Any attribute that can be derived from reference and/or transactional data

These attributes are used dynamically, ensuring that customers who are given preferential benefits based upon their "valuable institutional relationship", maintain that relationship or potentially lose some of those benefits over time. Benefits and rewards can also be made explicit to customers via statements, indicating fees that are being waived and reinforcing the Customer's value to the Institution.

miRevenue also support benefits monitoring and reporting. Standard or individualized benefits, resulting in fee concessions are treated as revenue leakage, and can be tracked and reported by product, package, customer, market segment, geography, branch, or Sales Agent.

Benefits

Using miRevenue to provide dynamic benefits and rewards based upon total customer relationships has numerous advantages including:

• Customer Acquisition improvements through innovative product packages, benefits and reward programs
• Customer Wallet Share increases through benefits and rewards that are biased by the number (and use) of products held with the institution
• Customer Retention or "stickiness" via the accumulation of reward points and by benefits biased towards customer longevity
• Profitability improvements by focusing benefits and rewards on "valuable" customer relationships, reducing or eliminating undue revenue leakage
• Operational Effectiveness improvements from externalizing benefits and rewards handling for all products, into a single system controlled by Product Managers rather than IT development staff

Conclusion

Banking customer have a strong distaste for fees and a proven appetite for reward programs. miRevenue supports flexible, customer-centric benefits and rewards, with minimal implementation and integration effort, ensuring that the right benefits are passed on to the right customers for the right reasons. Dynamic and relationship driven benefits help financial institutions move away from ad-hoc relationships by structuring incentive programs based on True Ongoing Customer Relationships, effectively influencing customer behaviour to the Institution's and the Customer's mutual advantage.

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