Catering to Customers Is Key, Report Says.

Having poured lots of money into Y2K computer repairs and preparation for the euro, the financial-services industry is now spending more on managing customer relationships. But according to Ernst & Young's eighth annual Special Report on Technology in Financial Services, survey respondents don't know whether their initiatives are sound.

Most firms lack a clear vision and business case for these initiatives, the report said. Some 63% don't know whether their strategies are increasing or decreasing profitability; 60% don't know if they are helpful in cross-selling; and only 25% segment their customers by profitability. Nonetheless, 77% of respondents reported having from one to 10 customer-relationship-management initiatives, and 54% believe they are critically important.

"The urgency is clear to many firms that they must purposefully position themselves with customers in their rapidly evolving marketplace or face very uncertain futures," said Phil Lawrence, director of e-commerce initiatives for Ernst & Young's Financial Services Consulting Group. Lawrence said firms must decide whether to compete with price and efficiency, become niche players or seek to differentiate themselves through relationships with customers. "There is little doubt that the hottest battle financial-services firms face is to control the customer gateway," he said.

This year's report surveyed more than 125 banks, mutual funds, brokerage firms and insurance companies in the United States, Canada, Europe, South Africa, Latin America, Australia and Asia Pacific. For more information, visit Ernst & Young's Web site at www.ey.com.