New core processing systems are helping a growing number of banks achieve a longtime goal: a comprehensive view of their customers.
The credit crisis, new regulatory requirements and increasing demand for higher cross-sale revenue have all renewed banks' interest in improving their ability not only to see but also to slice and dice customer information in real time.
Developing these capabilities has stymied all but the most technologically savvy financial companies. Most banks use separate software programs from multiple vendors to manage their varied operations, creating a patchwork of disparate systems through which data doesn't easily flow.
Experts say the new generation of core processing applications can resolve these issues, but many banks remain reluctant to take on core replacement projects.
"It's becoming more imperative for them to really understand who their profitable customers are, or at least be able to see the entire relationship the customers have with them, to be able to make sure they're taking care of their customer and making sure they're successfully acquiring new customers they want," said Cathy Pricco, a senior principal in Seattle with the banking and insurance practice of the consulting firm West Monroe Partners.
"The core processing systems have a lot of information on them but there are many, many bank systems that are not necessarily on the core platform," she added.
The end goal for many banks is being able to see at once the status of their customers' deposit accounts, loans, credit card transactions, brokerage accounts and other details so they can get a more accurate view of just how profitable their patrons are, pitch them the products that make the most sense and spot potential problem areas.
While banks have been slow to make the investments necessary to create that environment, the issue dominates their technology planning.
"You can be sure that every bank is currently evaluating how to get a better view and a better understanding of their customer across multiple business lines of the bank," said Michel Jacobs, the executive vice president of new solutions development at Fidelity National Information Systems Inc.
The Jacksonville, Fla., bank technology vendor has seen traction with its Profile Customer Information Management, or CIM, application, which aggregates information about a customer across the bank, Jacobs said.
CIM enables a bank to integrate "multiple systems of records," including for loans, deposits and cards.
American Savings Bank, a $4.9 billion-asset subsidiary of Hawaiian Electric Industries Inc., recently consolidated its technology vendor relationships from more than six providers to just one, Fiserv Inc.
As part of the consolidation, the Honolulu thrift also converted to the Brookfield, Wis., vendor's Signature core processing system in May.
"We were not happy at all with our front ends," said Rick Robel, American Savings' executive vice president of operations and technology.
For example, employees had to enter information several times in different systems when opening new customer accounts.
Consolidating with a single provider not only helped American Savings gain a pricing advantage, it also has made it easier for the banking comapny to access its customer data and has simplified the process for inputting and processing information. Now, "we do have the ability to tie in everything from a 360-degree view of the customer," he said.
"We can really understand what they [customers] have and present all that information because I have the same Fiserv delivery channels on the front end," he said.
With its core conversion completed, American Savings plans next to focus on how to use its improved visibility to cross-sell. For example, it plans to target customers using just one checking account to upsell other products and services, Robel said.
"We were able to do it before, but we had to clobber a lot of stuff together," he said.
Having more immediate access to information also is important for banks in deterring customer attrition.
Banks want to know "what is the propensity of my customer to leave my bank," said John Macaluso, the chief technology officer for Fiserv's Bank Solutions unit.
Banks already can spot telltale signs that a customer may be getting ready to switch providers — declined card use, the cancellation of a recurring bill payment or direct deposit, declining account balances — but often that happens after the fact, said Jim Sizemore, the chief information officer for Fiserv Bank Solutions.
That's because to solve the data reporting problems that come with using multiple software systems, many banks turned to developing data warehouses to house information.
"The challenge with that model is the latency of that view," Sizemore said. "It's no longer real-time."
Virtualization has eliminated barriers to how much information banks are willing to store and their ability to access it when they want it.
"We are no longer handcuffed by the total cost of ownership of hardware," Sizemore said.
With its core systems, Fiserv uses what it calls an "enterprise service framework" that makes data openly accessible to other applications that a bank is running, he said.
Banks are also under pressure to make their data more accessible because of demands from customers, who are used to receiving customized service based on their experiences in other channels, said Lars Skari, a partner with the banking and capital markets practice of Infosys Technologies Ltd.'s consulting arm.
The Indian vendor has been pushing Finacle, a suite of banking programs that overseas financial companies have been using for several years, in the U.S. market more recently, touting its service-oriented framework.
The core system that is part of Finacle enables a bank to get one view of a customer, Skari said. The framework also allows a bank to more quickly develop new products and enter them into their systems.
"It allows you to enhance the sales process beyond the current capabilities and also develop a very unique customer experience across channels," he said.
Paul Schaus, the president and managing partner of the Phoenix bank consulting firm CCG Catalyst, said banks he works with are interested in improving their ability to use, organize and view their customer data. Actually taking the steps to do that, though, is another story given the amount of work involved in bringing systems up to speed, he said.
"Those core systems that are out there to support them have … pluses and minuses," he said.