Recent legislative changes require all deposit-taking banks, building societies and credit unions to develop capability to generate a ’single customer view’ to remain compliant.
The far-reaching benefits of doing so will more than offset the cost and effort involved, as well as prompting many deposit-takers to wonder why they waited so long to develop this in the first place.
Typically, customer data is fragmented, inconsistent and spread across too many internal understanding of a customer’s value, behaviour and risk.
This makes it challenging for organisations to effectively deliver the right customer service needed to retain valuable clients and grow business through cross-selling services.
So some form of single customer view is essential for better managing customer relationships. And with new rules now governing the Financial Services Compensation Scheme, it will be a critical in ensuring that deposit-taking institutions continue to act within the law.
Under the new FSCS rules introduced by the Financial Services Authority, deposit-takers will be required to provide speedier compensation to individuals and small businesses in the event that the deposit-taker fails.
New regulation will require compensation to be paid faster so a single customer view will be essential
The compensation is limited to £50,000 per person per firm. From December 31 2010, the Deposit Guarantee Schemes Directive will require deposit guarantee schemes, such as the FSCS, to pay compensation within 20 business days of a deposit-taker defaulting.
The FSCS also intends to work with trade bodies, the FSA, deposit-takers and suppliers to ensure firms are able to provide the single customer view information in a format which is readily transferable to and compatible with FSCS systems to enable a fast payout of seven days from default.
But creating a single customer view system is not as easy as it first sounds. Most companies are good at gathering customer data but few are as good at managing this information.
Collating customer data from multiple systems, departments and geographic locations into one single system is no mean feat.
The complexity and cost of doing so have been the main reasons for business inertia to change.
But the long-term business benefits of increased customer loyalty, together with the need to remain legally compliant, means this can no longer be ignored.
No doubt, many loan providers will have breathed a huge sigh of relief that the legislation has not previously affected them directly. In fact, some lenders may not even be aware of the new FSCS rules.
But with many loan providers now looking at deposit-taking as an alternative approach to gaining warehouse funding, the single customer view requirement will almost certainly move up the lenders’ to-do lists this year.
So the regulators have moved achieving a single customer view from a ’nice to do’ system to a ’need to do’ one, and prudent organisations need to act now to get their house in order.
History has shown us that a lack of coherent integrated information about customers is a costly oversight and the future will prove that the opportunities engendered by a single customer view system are far greater than first thought.