With a 98% retention rate, USAA Federal Savings Bank seems to have little room to improve customer service. But it's spent the past two years and millions of dollars overhauling systems to do just that.

The reorganization included extensive training and retraining of USAA's customer service representatives, installation of "intelligent routing" technology in the call centers and a website redesign that centralizes customers' financial lives. USAA has also built out its mobile channel, giving users access to a full range of financial products and services by smartphone.

USAA relies heavily on remote technology to serve its 8.3 million customers. Many of its customers are military members and their families, who frequently require special hours for banking as they are often deployed in far-flung time zones. The company has just one branch and 10 "financial centers" with videoconferencing links to advisors.

Part of the upgrade could make the company seem less distant to customers. Callers will soon talk to a state-of-the-art "natural language" interactive voice response system which, according to USAA, not only recognizes spoken words (as previous generations of IVRs do) but also picks up on subtleties. Saying "I want to buy car insurance" would get the caller routed to a salesperson; saying "I got a question about my car insurance bill" would lead one to a representative who can field queries about existing policies. USAA would not disclose how much it spent on this project.

"Intelligent routing, such as USAA is doing, is one of the frontiers, and it is very cutting edge and still in its infancy," says Orkun Oguz, a managing partner at Peppers & Rogers Group, a management consulting firm in Stamford, Conn. (Oguz is not a consultant for USAA.)

Wayne Peacock, USAA's executive vice president of member experience, says it uses a routing engine from Cisco Systems Inc. called Cisco Intelligent Contact Manager, and has been testing the new IVR from Nuance Communications Inc.

"We are getting more intelligent about our members and mapping them to the representatives we send them to," he says. "The initiatives will help us better understand [customer] intent, and then in a more precise way route the call to the most appropriate agent."

USAA has also retrained many of its call center employees so they are knowledgeable about more than one product silo.

Generally speaking, representatives from the banking unit are now trained on insurance products, and insurance teams are trained on bank products, Peacock says.

Even within the various product sets, USAA has taken a broader approach.

Some representatives are trained to address questions with a horizontal knowledge of products, while others are taught to answer vertically.

"If you are talking with a representative about auto insurance from one state, we will route you to someone licensed and experienced in this state," Peacock says.

By contrast, if the customer indicates she would like to do a more thorough review of his insurance portfolio, that customer will automatically be put in touch with a representative with a broader knowledge of products, including life, property, and casualty.

Numerous third-party vendors have piled on in recent years to enable financial institutions to deal intelligently with call center and website data and turn it into comprehensible marketing information.

These companies let financial institutions integrate their growing data warehouses with internal customer systems, as well as manage, analyze, and interpret that data for on-the-fly marketing purposes.

The vendors include Acxiom Corp., Allant Group Inc., SPSS Inc., SAS Institute Inc. and Alliance Data Systems Corp.'s Epsilon.

At the same time, financial institutions have more data than ever before, including from digital transactions and social networks.

"[Data] 'listening' platforms are very relevant." says David Frankland, vice president and research director for customer intelligence at Forrester Research Inc. "The challenge is bringing this to the database,"

And as financial institutions such as USAA shift resources to technology to handle and interpret rote communications, they free up remaining call center representatives to have more complex and meaningful conversations with their customers. That in turn builds relationships.

"Sophisticated customer interactions take a while and require a serious amount of employee maturity," says Darryl Demos, a partner at Novantas LLC, of New York. "Part and parcel of investing in these activities is to automate and provide self-service for simple things."

That includes automating the most basic teller transactions, by allowing customers to check balances and transfer funds online, through call systems and through automated teller machines.

USAA has been a pioneer of such technologies as remote check capture and deposit by mobile phone and computer, as well as video conferencing with representatives at the financial centers.

By automating such functions, Demos says, financial services companies can hire fewer, but more skilled call center representatives who can become better partners in their customers' financial lives.

At Forrester's Customer Expectations Forum in New York last month, Peacock said USAA's customer service representatives are trained to look more holistically at their callers' lives, and to make decisions that are correct for the customers.

Those decisions may often go against the grain of hardened sales cultures, because they may not lead directly to sales.

"The goal is to meet the member's needs, and then provide a meaningful solution," Peacock told attendees. "The answer may be to not buy that product, if that is the right thing to do for the member in that situation."

Frankland says that what USAA has accomplished "is easier to talk about than to do. [The bank] puts the processes and technology in place, and they structure the business differently to put the member at the core."