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March 6, 2000

New CRM Tools Help Financial Institutions Diversify
As banks expand services, next-generation products are expected to increase profits

By Charles Waltner

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hanks to the recent passage of the Financial Services Modernization Act, financial-services companies are developing a ravenous appetite for customer-relationship management software.

Freed from the constraints of the 66-year-old Glass-Steagall Act, which kept many types of financial institutions--including investment banks, retail banks, mutual-fund companies, and insurance providers--from moving into other businesses, financial companies are looking to sell more than one product to their customers. CRM tools are crucial to those efforts.

The reason for their appeal is simple: More products in the hands of each customer means more profits. "That's what everyone is salivating over," says Jeffry Wagner, senior VP and director of profitability at Huntington Bancshares Inc. in Columbus, Ohio.

Huntington offers a variety of retail and business banking services, such as small-business loans, personal checking accounts, and credit-card services. To survive against growing competition, Huntington is using next-generation CRM tools to bring revolutionary efficiencies to its selling processes and increase profit from each customer.

New CRM tools help companies such as Huntington increase the profitability of promotional campaigns, product categories, and customers. Their effective deployment could play a large part in determining the winners and losers in the deregulated industry. "The companies that don't use the tools necessary to know the needs of their customers are the roadkills waiting to happen," says Bill Bradway, research director at Meridien Research.

Companies are increasingly using more-sophisticated CRM tools to help identify other products in their inventories that will appeal most to their customers. For example, if Huntington knows a customer has two college-age children, it might offer him or her a home-equity loan for college tuition.

Jeffry Wagner Photo by Janet Adams Huntington is tapping Oracle's Financial Services suite of applications--particularly its Market Manager, which helps manage sales campaigns. Data used to drive Market Manager and other applications in the suite, such as the Risk Manager and Performance Analyzer, is stored in an Oracle database populated with data from 33 of Huntington's core applications, which run everything from customer accounts to product management. Product, customer, and generic demographic information acquired from outside services is combined with basic account information.

The software lets Huntington accurately see to what degree products and customers are profitable. For example, Huntington can examine the specific profitability of any account, individual customer, or household. Looking at the profit of each account, rather than assuming it, is key to future success in the face of rapidly increasing competition, Wagner says. That's because 10% of a bank's customers generate the majority of its profits, while the other 90% break even--or even cost the bank money.

The Oracle tools help Huntington identify which types of accounts, customers, and households are in the magic 10% and which are in the other 90%. With that knowledge, the company can ensure the key 10% remain happy, and find ways to make the other 90% profitable, a process known in the industry as customer "migration." For instance, the bank might try to persuade a customer with a low-balance savings account to use a credit card or encourage that customer to use automated phone support rather than talk directly to customer-service representatives, which carries a much higher transaction cost for the bank.

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