Banks Get the Message

The U.S. financial services industry has steadily increased spending on its call center services over the past five years, according to a study conducted by Cutting Edge Information, a business research organization based in Durham, N.C. That growth is being driven by increased activity in the call center-both inbound and outbound-as customers move toward a multi-channel relationship with their banks and as banks identify opportunities to improve both service and sales to customers.

The study further indicates that, at the same time that investment is increasing, corporations are saving money on salaries by outsourcing call center operations overseas. Many companies have chosen India, for example, where the cost of labor is about one-eighth of what it is in the U.S.

In fact, notes Elio Evangelista, senior analyst at Cutting Edge, call center growth in Europe has been greater than in the U.S. because many U.S.-based financial institutions are outsourcing to Europe. Also, "a lot of companies are outsourcing within Europe, so even if there is a non-European company, I think the figures are representing companies also spending in Europe," says Evangelista.

Additionally, a number of European banks have been spending significantly more on call centers than their counterparts in the U.S. "There are a number of key financial institutions based in the U.K., for example, and Germany that are represented in that spending," according to Evangelista. "I think the United States is following the U.K. trend, and so spending in general has increased in Europe before the U.S."

Evangelista says the lag is due partly to the fact that U.S. financial services companies are relying mostly on branches as a channel, rather than call centers. Additionally, he suggests, non-U.S. institutions, specifically European banks, seem to be more willing than U.S. companies to take risks.

Bigger Budgets

According to the Cutting Edge research, which profiled 47 financial services institutions, including Capital One, Citigroup, FleetBoston, Merrill Lynch and Wachovia, the respondents expect to spend about $364 million on their call centers this year. The study also concluded that the overall growth in call center-related spending over the past five years for U.S.-based financial institutions has been about 118 percent. In 1998, these institutions spent $167 million on call center technology.

Evangelista attributes this growth to the recognition that call centers not only answer caller queries and troubleshoot problems with individual accounts, but also enable banks to strengthen their relationships with customers and offer new products.

"The financial service companies are recognizing the ability to expand services to existing customers through their call centers," says Evangelista. "What they are doing is taking [advantage of] the opportunity when they are actually in touch with their customers.

The growth in call center activity and volume is happening even as there is an increasing number of bank customers using the Internet as a channel. The reality, Evangelista says, is that the two channels actually complement each other. "When people are calling a call center, they have already looked at something on their account on the Internet," Evangelista says.

Dialing Up and Logging On

Accordingly, strategies to leverage this relationship include improving up-selling and cross-selling techniques. Managers are training call center representatives to be more alert to customer needs, rather than focusing mainly on answering customer inquiries and solving problems, the Cutting Edge study found.

Financial institutions, Evangelista says, "have begun training reps on how to recognize customer needs and to try to recognize where their needs fit in with the products the company has to offer. But they're able to realize that that's where they can do a lot of business without really expending much more effort-and that's where they start to profit."