(reprinted with permission from Your Virtual Insurance Dec 17, 2001, SellingWithTechnology.com)
Imagine a financial institution so entwined with its
customers that product offerings seem more like partnership arrangements than sales
pitches. The client’s first contact may be walking in the door of a brick and mortar
establishment and asking for a checking account, but from that point forward, every
banking, insurance and securities whim is anticipated and the proper product provided at
the right time through the most advantageous channel.
And this relationship can carry beyond personal finance.
Say this same person decides to start a business. The institution can offer the same
services except on a corporate level, essentially anticipating when the owner may desire a
commercial loan, business insurance or investment products.
Although such a cradle-to-grave cross-selling scenario may seem the stuff of science
fiction, it may be just around the corner, according to some financial observers.
“There are early stage developments in both ‘smart’
and ‘corporate’ CRM systems,” said Mark Greene, general manager of global banking for
IBM. “I think you will see first iterations of both business intelligence embedded
CRM and corporate CRM within the next year.”
Indeed, many of the pieces are already in place to make
such a future possible. Thanks to the recent repeal of Glass-Steagall and other
restrictions, financial institutions within the United States are merging, and now have
the ability and desire to offer multiple financial services from under one roof.
“We’re looking at a different type of financial
services company,” said David Medeiros, TowerGroup’s acting research director of
commercial banking, at a conference. “[They] will be more highly diversified…with
the ability to offer a wider array of services to a larger number of customers.”
At the same time, the technology now exists to make these
companies more intuitive in their offerings and actions. A unified customer transaction
database/data warehouse allows information from bank, insurance and securities silos to be
pooled in one universally accessible area. Modern customer relationship management (CRM)
programs help mine and interpret the information, and aid in creating predictive models of
customer behavior (see article on page A8). Middleware packages tie everything together,
making sure each division within the converged institution knows what the others are
doing, and offering the customer a unified face accessible through multiple channels.
Some converged institutions have tied all these aspects
together and are cross-selling their products to customers. Many of these pioneers are
from Europe and Asia, where one-stop financial shopping has existed for quite some time.
“We’re doing many things to log and to track all
interactions that a client has with us so that we can much more proactively manage that
account, to help the participant as well as sell other opportunities,” said Paul
Donovan, executive vice president of information systems for ING U.S. Worksite Financial
Services. (For more on ING’s cross-selling strategy, see article on page A4.)
In addition to ING, HSBC, Lloyds TSB, Royal Bank of
Scotland, Zurich Financial Services and Allianz have cross-selling programs. North
American companies are also starting to enter the cross-selling scene, including Canada
Trust, TD Bank of Canada, Charles Schwab, Bank of America, Citibank and USAA.
Despite this progress, a myriad of obstacles remain before
cross selling can truly become universal and ubiquitous. Indeed, some have raised concerns
over the privacy and security issues created by cross selling. Some are still crunching
numbers to see if cross-selling potential outweighs initial costs. There’s also worry that
silo-based culture at financial institutions will not readily adapt to the cross-selling model.
Unfortunately, the salve to these fears is not readily
available. One thing converged cross selling can accomplish, however, is a reduction in
operating costs. According to a recent IBM study, companies are spending upwards of $2,000
to acquire a customer already utilizing services within their company. A cross-selling
system can prevent this unneeded expense.
Vendors are also responding by creating technology to ease
privacy, security and other fears. Bill Pieroni, general manager of global insurance for
IBM, believes technology can ultimately alleviate all cross-selling concerns, but it is
opportunity that will eventually drive financial institution into the cross-selling waters.
“It is estimated that there will be a multi-generation
wealth transfer of $4 trillion over the next 10 years,” he said. “You will see
more and more smart and focused institutions gearing up [with cross selling and wealth
management] to take advantage of this.”