Today, the front- and back-end systems are more tightly integrated than they had been, and banks are starting to look at investing more in the back office. "In the back office, it used to be about doing what you needed to get volume through," Landis says. "Now lenders want to streamline things and are investing [in the back office]."
Vince Rogusky, CEO of Wayne, Pa.-based Epitome Systems, which specializes in enterprise productivity software, also sees a growing interest in back-office operations and processing among banks. "The back-office is a consolidation of all the lenders' information," Rogusky explains. "It's the biggest value to the bank, the place where all its information comes together from the front end. This is a place where you can drive real value to the bank and to customers. It's like a hidden gem."
According to SAS' Abrahams, data will be the key to a lender's success in creating efficiencies in the lending process. He believes that the information lenders possess can be transformed into intelligence that they can exploit to grow their business. However, doing so on an enterprise level is never easy given all the silos involved.
"You need an integrated data store before you can optimize and innovate," Abrahams states. Once this is accomplished, however, there is "a great deal lenders can do with data mining early in the loan application process. You will have plenty of time to determine the opportunities related to that loan before it closes. You can understand in advance the risk position of the loan. You can apply analytics to help you decide which loans to sell off or which ones to price more aggressively or less aggressively."
Lending as a Platform for Cross-Selling
Lenders can use such information not only to gain new customers, but also to retain and grow the relationships they have with existing customers. In fact, cross-selling off the lending relationship is growing attractive to banks as a way to boost revenue.
"Retaining customers and doing well at cross-selling seem to be the biggest challenges for lenders today," states Lisa Nelson, VP for scoring solutions with Minneapolis-based Fair Isaac. "Lenders are working to find new customer segments to pursue to build their client base. Growth is becoming more challenging as the market becomes well-served. So lenders have to differentiate and target the right customer segments."
Most important to the process of cross-selling is understanding the relationship with the customer and finding logical product pairings to present to the customer, says Mike Poulos, head of MOW's North American retail and business banking practice. "Every product pairing is different. If you're selling a home equity loan to someone who was also a first mortgage customer, that's a powerful thing because you already have the information on that customer," Poulos explains. "If you're selling a deposit account to a loan customer who's out of your footprint, that's not likely to happen. At a minimum, you need to know the relationship you have with the customer and have that information available at the point of sale."
Again, however, efforts here are often hampered by bank system silos, Poulos notes. "It isn't always the case where all the systems are talking to each other."
Doug Dolton, global CEO with person-to-person online lending network Zopa (London), acknowledges that banks can deliver on service, but that the jury is still out on cross-selling. "Getting real cross-selling to work is a challenge because you need to get disparate groups and systems to work together. It's a catch 22 for banks -- if you're big enough to cross-sell, it's not easy to do."
However, some banks are finding success in cross-selling on the lending side. Central Mortgage jumps on cross-selling opportunities at the time a loan application is taken, according to the company's Klatt. "We work very hard to cross-sell. We get a lot of information on the borrower at the time we take the loan application. We can sell them checking, savings, CDs, credit cards," he relates. "A key reason we're in the mortgage business is to cross-sell." Klatt notes that this ties in with the lender's single statement policy, in which customers can view all their accounts in one place.
National City's cross-selling efforts in the lending area are centered on a program that ties together rewards for all its products -- cards, checking and HELOCs, explains the bank's Lamba. "We've been doing this for more than a year, and it's doing very well," he says. "It makes the customer feel rewarded, and it makes it easier for them to do business with us."
Of course, success is not without its obstacles. "The pain is in the application process around enterprise data integration," Lamba says. "You don't want to ask the customer the same thing five different times."
Still, there are those who are more cautious about cross-selling. TowerGroup's Focardi notes that it's important to remember just how complex the lending application process is on its own. "A mortgage lending transaction is complex enough without having to add additional products to the mix," he says. However, if a bank takes a more focused approach to cross-selling, such as offering to consolidate customers' existing loans into one or helping them open a checking account where payments can be made directly to their mortgage every month, then the concept can work, Focardi adds. "Cross-selling can be done with selected consumers, depending on their situation. There's no one-size fits-all approach."