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."