A U.S.-BASED BANK SEEKS A BETTER WAY TO PREDICT customer behavior. An international bank looks to an IT solution to help manage its mergers and acquisitions. A credit-card company must reduce its exposure to
risk, while a Wall Street options exchange simply has a need
Such developments are key indicators of what finance-sector companies are seeking in IT solutions. Battered by
what’s been described as the harshest economic downturn
since the Great Depression, these enterprises must make
better use of data to slash operating costs and increase revenue. And they’re willing to invest to do so.
Despite the uncertainty of a double-dip recession, enter-prise-IT spending in the financial-services sector worldwide
will increase this year to $554.6 billion, from $531.4 billion
in 2009, according to industry researcher Gartner, based
in Stamford, Conn. In 2008, spending hit $565 billion, so
there’s clearly room to grow when the economy improves.
Gartner expects software as a service (SaaS), cost-
optimization and risk management/compliance solutions
to emerge as key drivers in the demand for tech products.
“We’re seeing a moderate recovery in 2010,” says Susan
Cournoyer, managing vice president of technology and
service-provider research at Gartner, “but we expect a
strong recovery beyond that.”
Julien Courbe, a principal at the financial services
advisory practice at New York-based industry consultancy
PricewaterhouseCoopers, agrees that IT spending in the
financial services sector is cautiously rising, and adds that
there are many promising high-growth niches. Retail banks
and insurers, for example, are projecting a 50 percent to
100 percent increase in online users during the next two years,
and demand will be high for solutions to serve these customers.
“There is a great deal of focus on the development of
the online-revenue channel,” Courbe says. “But banks,
insurers and asset managers continue to struggle with profitability, and are also looking for ways to intelligently reduce
costs and, at the same time, develop new revenue streams.
Customer relationship management solutions can help meet
those goals. CRM is seen as a way to help customers better
protect investments and returns while still gaining a greater
‘share of wallet’ among existing customers.”
Baseline recently spoke with four enterprises in the
banking/finance industry that are benefiting from IT solutions. In all four cases, the companies are looking for a better
way to use or manage data. Yet each case presents its own
distinct story about how IT can provide these services.
“We’d know how much business customers were doing
with us,” says Tanner Mueller, who manages the marketing
database for First Tennessee, which oversees more than
$20 billion in assets. “And we’d know, for example, whether
they were customers who only had a checking account.
That made them a good candidate for a savings account.
We’d know if they had a CD about to mature, because that
would make them a good candidate for a new CD. But it
really wasn’t a lot of demographic data to work with.”
That’s when First Tennessee deployed IBM’s SPSS predic-
tive-analytics solution, which enables the bank to consider
more than 125 sources of information. This includes external
data, such as fluctuations in the Federal Reserve interest rate,
along with a wealth of internal data about customers, including
income, occupation and even the publications they’re likely
to read. Using this broader breakout, the bank’s ROI on a
number of key cross-sell campaigns increased by 600 percent.
“To go from using just two or three demographic points—
and maybe five or six banking transactional ones—to
[125 sources of information] is of great value to us,” says
Mueller. “We now rank customers based on a score system
and push that data to those on staff who can make the best
use of it. It’s great to go to our product managers with this
kind of predictive information, which has a lot more meat
than what we were providing before.”
The State Bank of India has also signed on with IBM’s
CRM packages in order to better share critical data
throughout its organization—including foreign offices, asso-
ciates and subsidiaries—and enable more informed business
decisions. “This solution will allow our bank staff to concen-
trate on valuable tasks such as upselling and cross-selling,
performing more sophisticated analysis and delivering a
higher level of customer service,” says Krishna Kumar,
deputy managing director of information technology.
TAPPING INTO CRM
In the banking industry, “upselling” and “cross-selling”
programs are where the money is made. A person who
walks into a branch to deposit a week’s paycheck is a good
customer, but a walk-in who deposits a week’s paycheck
into a certificate of deposit (CD) is even more valued.
To gain better predictive insight into its customers,
Memphis-based First Tennessee Bank sought an advanced
CRM tool to save on marketing costs and time by distinguishing the customer niches that are likely upsells. For
years, First Tennessee had relatively little data about this.
BRINGING BANKS TOGETHER WITH VIRTUALIZATION
Mergers and acquisitions are business-as-usual for the
banking/finance industry, and Brussels-based Dexia Bank
Belgium needed help to make a successful transition after
buying two other significant banks. All three of the banking
organizations had the basics when it came to IT infrastructure: local servers and file services and access-management
solutions. There was also a mix of needed applications that
couldn’t be easily migrated into the new, unified structure.
When Dexia attempted to bring all the technology together,
the outcome was predictable.
“The engineers would say the infrastructure was outdated,” says Thierry Abeels, a member of the executive
board of Dexia’s technology services. “The users would
say that accessing services was too complex. The managers
would say that fixing it was too expensive.
“All the traditional IT solutions we had were very limited
in functionality, with no mobility and high costs for mainte-
nance. To integrate these different banks into a single one,
we needed a new, modern, single front-end IT solution.”
That solution would have to be put in play within less
than 10 months of the mergers for more than 6,500 people
located in more than 1,100 offices—with no disruption
to branch activities. And it needed to be mobile, so the
BASELINE JULY/AUGUST 2010