Banks are powering forward to realize blockchain’s promise of making the financial system fast, more transparent, efficient, and less risky. Just how is this supposed to happen? According to John McLean, CTO, vp of global blockchain team at IBM, blockchain‘s shared ledger holds the potential to reduce costs, complexity and time, enable trusted record keeping, and improve discoverability.
Sounds great, right? Hype aside, though, one of the salient criticisms of the technology’s potential application to the banking industry is that it functions more as a band-aid than as a framework cure. As David Andolfatto, a researcher at the Federal Reserve Bank of St. Louis told the New York Times, “If you take a snapshot of the existing plumbing, it looks a bit ugly … There’s nothing magical about a blockchain in solving this problem.” This is the same plumbing described as “consist[ing] of decades-old hardware and software that is patched together like Frankenstein meets The Mummy.”
Interestingly, blockchain isn’t the first technology to be hailed as the savior of banks’ crumbling infrastructure. Like the poets, CRM was there first – back in the 80’s. In 2001, when CRM software began to come into its own, Jack Fields floated CRM as the answer to banks’ “legacy systems and information silos-segregated databases from autonomous divisions with separate record keeping, customer information and agendas to protect.” Like blockchain, CRM promises to speed things up and provide “shared, trusted processes [that] enable trusted record keeping and improving discoverability”.
Obviously, the two technologies have different purposes. Banks are looking to blockchain to improve fund transfers, while CRM is about improving customer experience. “If you were to turn around and look at the systems of the person who’s helping you [at a bank], they’re not the type of system you would use side by side,” said Joe Salesky, CEO at CRMNEXT, a software provider targeting the financial industry. “14 hops across screens, and cutting and pasting your account number, for a lost wallet or change of address, [all] because the systems are so stovepiped.”
According to Salesky, his company’s efforts to remove friction and streamline the banking experience for employees as well as customers has had significant results for its 400,000 banking clients. CRMNext has improved the net promoter scores of its customers by over 40%, and in many cases, according to Salesky, it can increase revenues and significantly reduce task completion time.
And yet, while academia hasn’t devoted a heck of a lot of attention to CRM recently, the research that has been conducted came up with – you guessed it – conflicting results on the efficacy of CRM. One 2009 study found that implementing CRM in the U.S. commercial banking industry contributed to a decline in cost efficiency but an increase in profit efficiency. Another study showed that CRM did generate better firm performance, when managers focused on maximizing the value of the customer. A third, more recent, and more damning study demonstrated that a firm’s motivation for adopting CRM practices significantly influences CRM effectiveness.
Even Accenture’s Banking 2016 report notes that “the increased capture and application of customer data, properly managed and updated through an advanced CRM platform, can help enhance the value and return on product catalogues, commercial campaigns based on realtime propositions, as well as lower distribution costs by optimizing capacity by micro-segment preferences” – can, not necessarily does.
What does this mean for blockchain? Perhaps nothing. After all, as we noted, blockchain and CRM are completely different technologies with differing goals. Nevertheless, CRM’s varying track record is a compelling roadmap for “transformative” new technologies on the market; a tool is only as effective as the company – and managers – that wield it.
Take Wells Fargo, for example. The bank uses a CRM, SalesForce, to connect its employees with customers, products, and risk management practices. “Salesforce helps us be a relationship bank,” said Steve Ellis, EVP, and head of the innovation group at Wells Fargo. But in spite of having a CRM tool with a specific product for financial services, Wells Fargo became embroiled in a 2-million wide fake account scandal in 2016.
“When people view CRM as lead management you end up with challenges like Wells Fargo has, where you’ve got leads, but do you really know the customer?” Salesky argued. “And Wells Fargo is just one that came to light.”