Tax refunds -- Is the money slipping through your hands?

Tax day has come and gone, income tax returns have been filed and are being processed by the IRS and millions of Americans are planning how to spend their refunds. Estimates say that the average federal tax refund this year will be approximately $750.

Millions of American taxpayers each receiving a $750 refund check results in a massive opportunity for U.S. banks to increase their overall assets. The typical banking customer deposits his tax refund into a checking account for two to three days before moving it to another account or spending it, creating a narrow window of opportunity for banks to translate the transient money into lasting assets for themselves. For a midsize bank with approximately 1 million customers, this is $750 million that falls into its hands and then slips through its fingers. Good news for banks: Customer relationship management (CRM) can be the safety net that keeps this asset from slipping away!

How can a financial institution leverage the swell in deposits around tax time to increase the long-term value of client relationships? The answer: know customers and their needs, and then cross-sell them appropriate investment options to keep their money with the bank. Parents of young children may want to start a college fund, while high earners who are single are more likely to be interested in an aggressive investment plan. By applying intelligence (or analytics) to customer data, banks have the opportunity to translate knowledge of each customer into personalized offers that keep transient money as an asset to the organization.

This step, delivered via intelligent CRM software, gets banks halfway to where they need to be to turn tax returns into long-term assets. The second step, which is equally important, is to empower the workforce with an understanding of the right way to deliver each personalized offer to each customer. Understanding how to cross-sell a customer by positioning a personal offer as a solution to a problem that customer faces greatly increases the likelihood of that offer being accepted. The combination of CRM technology and workforce methodology gives financial institutions the tools to retain a significant portion of the $750 million residing in their customers' accounts from tax returns.

A slowing economy only makes it more critical for banks to utilize CRM software and implement a customer-focused methodology to increase customer value. By personalizing interactions with customers and offering them products and services that are relevant and timely, banks have seen as much as a 10% improvement in performance during the regular course of business -- an opportunity that multiplies for the few months around tax time.

It's also important for banks to remember that technology alone won't deliver the returns banks are looking for. A recent AMR Research study found that only 12% of companies that have implemented CRM software say that it has exceeded their expectations, largely because of employee resistance to change. Banks need to embrace the technology and educate the workforce with methodology that instills a customer value focus throughout the organization. By coupling technology and methodology, banks are giving their frontline employees the tools and knowledge to delivver value to customers and increase the profitability of the bank.

A CRM strategy based in a customer value methodology will help banks leverage tax refund deposits to deliver the customer revenue and relationships that banks crave, and need, to survive in leaner economic times.


This story, "Tax refunds -- Is the money slipping through your hands?" was originally published by Computerworld.

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