New research finds that 42% of European retail banks are still increasing their CRM investment.

According to Datamonitor’s new report, IT Efficiency in Financial Services: European Financial Services Technology Survey 2002, 42% of European retail banks say that they are still increasing their spending on CRM. This makes CRM the most significant area of growth in technology spending for banks in 2002.

It is surprising to see that banks are still ramping up CRM investments, despite the overall IT squeeze (17% of banks say they will not be increasing IT spend in any area this year). The investment reflects the fact that many institutions are yet to see value from their CRM systems. They feel that more work is needed before the full potential of the investment they have already made is realized.

Institutions in the insurance and investment sectors also see CRM as a priority, but are more restricted by tight IT budgets. Tackling the infrastructure challenges that are still generating massive inefficiencies within insurers’ systems is a significant priority. The poorer prospect for revenue growth in the short term means that cost saving is the key goal of IT investment, so revenue-generating technologies like CRM are harder to justify.

Traditionally, financial services institutions (FSIs) have justified their IT investments by the increased cost efficiency of their internal processes. More recently, as firms have begun to invest in the Internet and CRM, IT success has been measured in the way it enhances products and services.

In the current trading environment, many insurers and investment managers have partially reverted to cost efficiency as the main measure of success, with a new emphasis on improving the cost efficiency of IT investments themselves.

However, the longer-term trend for CRM remains bright. When the economy picks up, financial services providers look set to use the broader measure of IT success again, encompassing efficiency and effectiveness.

Related research: Datamonitor, 2002: IT Efficiency in Financial Services

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