Barely a day goes by without some mention in the business news media of Northern Rock, the US sub-prime crisis or the pressure on prime rates.

All this bad news is bound to trickle down into every aspect of retail bank operations — and the IT departments are not immune.

A study released last week showed that although customers want better communication, retail banks are being held back by legacy systems and processes that simply can't do the job.

Research firm Coleman Parkes has just released its survey, 'The Future of Customer Communications in Retail Banks.' Sponsored by Xerox, the study found that on the whole, banking systems across France, Germany, the UK and the Netherlands are unable to support the one-to-one marketing model.

'Over the past three years, we've seen a significant shift in the way retail banks want to communicate with their customers,' said said Mark Eldred, general manager of sales operations, Xerox Global Services.

'The perfect one-to-one marketing approach is the Holy Grail for many, and the 'will' is there, but poor unstructured data, old document processes and lack of integration all contribute to a major communications headache.'

Customer churn is becoming a growing problem for banks; the old rule that only two per cent of consumers can be bothered changing banks no longer holds true since the advent of internet banking.

The challenge now is for banks to fully harness technology so that they can communicate effectively and build better, long-lasting relationships with their customers.

>>Eighty-nine per cent of retail banks surveyed identified a need to drive both the personalisation of communications channels and the communications itself, based on individual customer preference.

>>Ninety per cent of UK banks agreed that more targeted messages will positively impact sales revenues.

>>Nearly all banks, 85 per cent, believed that customer loyalty will improve if they can segment customers and communicate appropriately with them.

But most marketing professionals will tell you that this is the stuff you learn in your first year at university, so what's holding the retail banks back?

According to the survey, it's the current legacy systems and processes. Seventy per cent of banks report that they are struggling to keep up with the required changes to meet customer demand.

The UK retail banks cited the three main challenges they are facing as: poor flexibility, poor availability of customer data, and a lack of integration of communications channels.

But the survey finding that I find most telling is that nearly all retail banks, 86 per cent, agree that customer behaviour is increasingly pushing them to use different channels for communication.

'Banks can ill-afford to make mistakes. Poor customer service and a major error by the bank are among the top issues that will drive a consumer to change banks, so banks need to focus on a high level of customer service and quality of information management,' said Ian Parkes, director at Coleman Parkes which undertook the research.

Along with a fundamental shift in attitude to customer service, it will take some serious investment in next generation systems if retail banks want to make good on their promises to improve communications.

But with the current market conditions, will retail banking be able to afford the upgrade?

Maybe not.

'With share prices of many financial services technology firms taking a tumble recently, amidst rumours that IT budgets will be among the hardest hit after the global credit crunch, European retail banks may find themselves hard pressed to meet their customers' demands for more personalisation if upgrading legacy systems and processes is stalled by an IT budget squeeze,' said Ian Parkes.

The shopping list is comprehensive:

>>Eight-four per cent of banks expect to implement customer data systems with software as a service (77 per cent); enterprise wide customer relationship management systems (76 per cent) with mobile convergence/VoIP (75 per cent) not far behind.

>>Mobile device communication will grow from 51 per cent to 78 per cent in three years, and email communication will grow from 71 to 89 per cent. Perhaps surprisingly, instant chat will be part of the communications activity for 58 per cent of banks, compared with only 30 per cent now.

It all sounds great. I can't help but hope my bank took part in this survey.


>>Sherrilynne Starkie is the managing partner of Strive Public Relations, a communications consultancy serving the Isle of Man. She provides her views on business and technology each week in Tech Talk. Visit her business blog Strive Notes for frequent updates.
www.strivepr.com