This guest post is written by Microsoft Partner Customer Effective.

As prospects of a double-dip recession fade, the size and pace of bank failures in 2011 is significantly lower than this time last year. Yahoo! Finance references the FDIC’s failed bank list and notes that 25 banks with $9.9 billion in total assets failed through the first eleven weeks of 2011, whereas 37 banks with $21.6 billion in total assets failed through the first ten weeks of 2010. The rebuilding phase began for banks in 2009, and it continues today. In order to refocus on growing future revenues, banks have de-risked their balance sheets, raised new capital, and aggressively written down bad loans and securities.

Despite this recent progress, Retail Banks are still struggling with declining customer loyalty and brand image perceptions. A 2007 study from J.D. Power and Associates, for instance, found that 46% of customers indicated they would not change banks during the next twelve months. In 2010, though, only 34% proudly proclaimed they would not switch banks in the next year. As a result of the banking consolidation wave of the past decade, the current prevailing low interest rate environment, and the increasing ease of switching banks, today’s customers are more inclined than ever to shop around and take advantage of promotional teaser rate offers from both bricks and mortar financial institutions and online banks. Further complicating matters, the legislation of Dodd-Frank, Regulation E, and the CARD Act is drastically increasing compliance costs and reducing fee revenue for banks. For example, CardHub.com predicts that one proposal of Dodd-Frank could result in Retail Banks losing 57% of the revenue they receive from interchange fees, which are collected from merchants each time a consumer swipes a debit card. In response to these drastic measures, many banks have implemented pilot programs for charging higher fees on checking accounts. Some have already chosen to increase late payment fees and overdraft fees, while others have completely eliminated the popular free checking account option. As Retail Banks react to such sweeping legislative changes and restrictions by modifying their fee structures for checking accounts and credit cards, it is inevitable that many customers will shop for a new low-cost banking service provider. In order to better deal with these unprecedented regulatory challenges and the probable ensuing shifts in consumer behavior and loyalty, Retail Banks must focus on relationship banking rather than traditional transactional, product-focused banking.

Even prior to the rampant financial-overhaul legislation, banking customers demanded personalized service at a reduced cost that is available at all times and from any location. To deliver a better customer experience and achieve sustained customer relevance and loyalty, Retail Banks must create a customer-centric organizational culture and execute a firm-wide collaborative CRM strategy. Banks that leverage a top-tier CRM system, such as Microsoft Dynamics CRM 2011, will be able to capture greater knowledge on all customer interactions across every bank distribution channel and department. Retail Bank employees will no longer be disconnected or limited by non-integrated systems because all of the sales, underwriting, advisory, and service teams can collect and view consolidated comprehensive client data in one centralized location within CRM 2011. Having a unified 360° view of customer and account data and activities improves the quality and consistency of the Retail Bank’s service model across all distribution channels. As Retail Bank employees take advantage of CRM 2011, they can refer to the complete financial picture of the client’s situation. Now with more insights on their clients, Relationship Bankers can recommend more relevant products and services in terms of client goals and timelines, and deepen customer relationships. Instead of just quickly opening up one simple checking account, Retail Banks can place clients in a tiered account relationship package that rewards clients with lower and possibly even zero fees if used responsibly. The act of more effectively profiling the customer and addressing his needs with a better-suited set of solutions makes it easier to retain clients and cultivate trust. Moreover, by placing clients in appropriate accounts and offering improved client service with the help of CRM 2011, banks will produce more lasting, positive experiences with customers, regardless of the channel touchpoints. Thus, customers will be more inclined to do additional business with their primary bank, and they will have less incentive to be lured away by a limited-time special offer from a rival institution.

The utilization of CRM 2011 can also help Retail Banks lower their operating expenses. With CRM 2011, the barriers of organizational and product-centric silos can be eliminated, the intuitive user interface can be personalized and customized per job role, and many routine cross-departmental manual-intensive processes can even be automated via robust workflows and dialogs. As Retail Bank CRM users coordinate and collaborate more effectively, they will increase their productivity and operational efficiencies. As a result, CRM 2011 helps Retail Banks reduce overall operating costs, which is certainly essential to offsetting rising compliance costs and lost revenue from intensifying regulatory scrutiny.

Customer Effective has tailored the Microsoft Dynamics CRM 2011 platform for top-performing Retail Banks, Commercial Banks, Community Banks, and Credit Unions to enable them to retain loyal, profitable customers, enhance customer relationships, and better meet client needs and requirements, despite mounting regulatory hurdles and challenging economic conditions. To learn more, please visit www.customereffective.com. - Kevin Wessels