The Relational Data Base: A Survival Kit for Banks
Barthel, Matt, American Banker
Bankers are coming to realize what marriage counselors long have known: relationships are not easily understood.
According to the American Banker/Tower Group 1995 Survey of Technology in Banking, fewer than one in five financial institutions surveyed had the ability to quickly identify all of the products and services used by members of a particular household.
And as nonbank invaders competitors threaten to occupy even more of banks' turf, the industry is scrambling to fix situations like this one.
Observers say most institutions - and particularly the largest players are moving aggressively to acquire the technology to know their customers better.
The systems that can help banks attain such knowledge - including relational data base management software and parallel processing computers - are expensive. But the cost of not investing is much greater, many bankers contend.
"I think you're history if you don't" invest in customer- knowledge technologies, said Jonathan J. Palmer, chief technologist and head of retail banking at Barnett Banks Inc., Jacksonville, Fla.
Mr. Palmer said that bankers clearly recognize the need for such systems.
At a recent conference, he asked a crowd of bankers how many of them worked for institutions investing in so-called "data warehouses," where vast amounts of client and demographic data are stored and mined. Virtually everyone raised a hand.
Unfortunately, the solution to the customer knowledge problem requires much more than merely recognizing the need for such systems.
And bankers historically have been slow to act on this front.
"In the 15 or 20 years I've been working with banks, they've been wringing their hands over this same set of issues without making much progress," said Fred Reichheld, a director with the consulting firm Bain & Co.
"Most banks have not put this at the absolute top of the priority list. It's always (been) third or fourth or fifth, and it never seems to get done."
Mr. Palmer and others insist that is changing. Part of the change is being driven by technology advances. Data storage, processing, and communications tools are getting ever-cheaper, making it more cost effective for banks to mine the lode of available customer data.
A more significant catalyst, however, is the crush of nonbank competition in recent years.
As has been well documented, nonbanks are garnering an increasing "share of wallet" from consumers at banks' expense. The main reason for this is clear, according to Mr. Reichheld: "Banks are a bad relative value," he said. Bank response to nonbank competition thus far has been to consolidate and reduce costs, but "that's not likely to cut it much longer."
In order to please customers, many banks, including Barnett, BankAmerica Corp., and Banc One Corp., are moving customer data to a single repository - a data warehouse - that can provide branch and customer service employees with comprehensive customer relationship information.
The goal, from a customer service perspective, is to be able to satisfy inquiries about various accounts through a single point of contact.
At many institutions today, a customer seeking information about a mortgage loan, a credit card account, or a checking account has to contact different business units that handle these products.
Giving customers a single point of contact would, at the very least, allow banks to equal the level of service that consumers have come to expect from their contact with insurance and investment companies.
Consolidating customer account information has benefits beyond customer satisfaction. One of these is improved marketing and sales.
With a single silo of data, banks can identify cross-selling opportunities more readily than if information is housed in "islands of information," observers said. …