Proposed US federal legislation that would allow banks, brokerages and insurers to merge would mean business opportunities on Wall Street and potential hurdles for IT.
For IT executives, especially at banks that are expected to drive a lot of these deals, there would likely be a lot of work ahead to ramp up customer information systems to cross-sell new insurance and investment products, observers said. That could mean developing new applications or using new technologies to analyse customer data. And any new law is likely to include consumer privacy protections, although critics say they aren't strong enough.
Compared with brokerages and insurance companies, banks historically haven't been as adept at selling their products and services because "they have been more transaction- and product-oriented, not customer-focused," said Bill Bradway, an analyst at Meridien Research.
The opportunity - and challenge - for banks as they move forward will be to apply CRM and data mining technologies to help them determine who their most profitable customers are and transform their service-oriented call centers "into sales-based call centers," said Bradway. Banks that have begun making progress with their call centers include The Dime Savings Bank of New York and Fleet Boston, said Bradway.
Advances in CRM systems have made it easier to cross-sell products to customers from different business units, said Jonathan Vaughan, vice president of information systems at The Prudential Insurance Company of America.
The thornier challenges for financial institutions, said Vaughan, are in resolving compensation conflicts among competing business units (for example, who gets credit for selling a customer an annuity).
Cross-selling products "is not a big technology problem unless your organisation faces scale issues," said Vaughan. Still, Vaughan, who prior to joining Prudential was an IT executive at The Chase Manhattan Bank in New York, agreed that banks are generally behind brokerages and insurers in transforming their call centers to customer-centric, sales-oriented operations.
One bank that has had success in cross-selling its products to new customers is First Union. For example, after First Union acquired First Fidelity in January 1996, the bank was able to identify and cross-sell mutual fund products to First Fidelity customers, in part by analysing and targeting those customers using its customer data warehouse, said Austin Adams, executive vice president of the bank's automation group. That helped the bank generate a 30 to 50 per cent increase in mutual fund sales per salesperson, Adams said.