Banking on Big Green

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Financial services (FS) companies operate on razor-thin margins and have burgeoning compliance costs; customer retention is critical to their profitability. Even as FS companies attempt to control their cost of servicing customers by relying on the Internet, call centers, and remote services, they're using CRM strategies and technologies to track customer information and interactions. This lets FS firms provide high touch and high tech. Price may initially attract prospects, but FS firms have found that high-touch service is what converts prospects into customers and provides lasting relationships.

In the past, FS firms have fallen victim to a narrow view of CRM programs and technologies, one that limits them as a business cure-all that would only help firms to attract and keep customers. Mortgage companies, banks, and other FS companies have tried CRM, but found that much of it either didn't produce the promised results, was not scalable, or was obsolete by the time it was installed. Compounding the problem was the fact that some of these FS companies had not always taken the important first step toward a smooth integration: aligning their technology investments and uses with their business practices. Now, FS companies have again begun to examine CRM programs and install CRM technologies, but this time in a more complete effort to help solve a wider range of specific business challenges.

There will always be price shoppers, but most FS companies have found that price can be a fleeting advantage that another firm can undercut, even if it means losing money. These firms are looking for customers that they can serve profitably through contact centers, ATMs, and the Internet, providing product and service delivery, ongoing communication with customers, and improved internal efficiencies.

The Powerful Benefits of a Single View
One of CRM's biggest payoffs is the ability to have a single, updated view of a customer across an enterprise, a rewarding but hefty achievement, especially among sizeable organizations. The direct lending division at Sterns Lending, which closes about $250 million a month in mortgages, was running loans through five different systems from application to closing without any linkage between them. There was no simple way to view applications to tell where they were in the process, a frustrating situation for borrowers waiting to see if they were going to get their loan.

"When I was hired in January, that's the first thing that I saw," says Josh Lewis, first vice president of the company's consumer direct division. Though the division represents a very small part of Sterns' overall business, Lewis knew that better customer relationship management capabilities would help attract more customers, improve working conditions, and increase efficiency in a meaningful way. "The customer expects simplicity in the process. There are a lot of competitors out there. A good portion of potential customers are shoppers. They don't buy on price; they buy on relationships and service. If they don't get them, they'll go to another lender."

Lewis looked at different offerings, choosing Mortgage IQ from CRMNow. It offers a dashboard for a single view of all aspects of prospects/customers in a central repository. All schedules (calls, meetings, activities) are linked to contacts and borrower files, as well as to all loan files. The software has a single dashboard to manage all communication and correspondence with loan prospects, customers, and agents. "It's much better from a functional standpoint," Lewis says. "Our employees used to need five passwords, one for each different system. Now all they need is a single password for Windows sign on."

In addition to gaining a single view of customer activity, a single view of project effectiveness can reveal problems previously undetected. With mortgage rates up and the demand for loans down, lenders need to be ever more vigilant in marketing their loans as well, Lewis adds. Mortgage IQ, which tracks the effectiveness of marketing campaigns, showed that one Internet marketing effort was losing money while the other was making money, with the same investment for each. Lewis cut the money-loser and invested those marketing dollars in the moneymaker. "We were using multiple products to help get leads," Lewis says. "We needed a better handle on our marketing and needed everyone in the company on the same page."

Also, the single dashboard enables Sterns to immediately see the productivity of each agent as well as any communication between agents and other employees. So there's no misplaced blame if someone drops the ball between loan application and closing. Additionally, it's easier to tell if agents are near their production goals or just making false promises. A few people have left the firm as a result, but the Mortgage IQ tracking feature showed they weren't doing their jobs, Lewis says. "We've increased the caliber of people we have on staff."

The direct lending division has also doubled its production since the beginning of the year while increasing the staff only 20 percent, which Sterns attributes to better business processes, including Mortgage IQ. Sterns expects to double its production again in 2006 with another 20 percent increase in staff even though the mortgage industry as a whole is expected to decline for a second straight year. The next step will be to roll out Mortgage IQ to the lender's (traditional) retail and wholesale divisions, according to Lewis.

Chat Adds a Personal Touch
As an increasing number of people turn to online banking, financial institutions stand to lose the benefits of human interactions if they are not careful with customers. Wachovia witnessed several of its potential mortgage clients slip away and saw an opportunity to convert more prospects with online chat.

"Customers are going to the Internet, doing their research, but buying offline, because they wanted some kind of human validation that this was a good path for their needs. We thought chat would be a good next step to build their confidence up to complete the transaction," says Joan Sommerer, vice president of strategic solutions in the direct lending group for Wachovia. "We saw an opportunity within the mortgage space to convert more customers because 20 to 25 percent of the customers who started an application were abandoning it without completing it." The company started a pilot chat program using KANA Response Live in September 2004 and added a cobrowsing component in October 2004.

"If you've ever filled out a mortgage application, you know it's a daunting task to complete. That's not the world's greatest experience," says H.A. Schade, KANA vice president of product management. "When you have a high-value transaction on the line, you want to make sure you have the ability to close the transaction. You want to be able to do what you can to assist the customer to move forward, ultimately toward the close. [Chat] is an excellent way to provide customer service."

The cobrowsing piece enables customer service reps to see what customers are typing and highlight or circle specific fields to help them. "It's almost like sitting down with someone and working with them to fill out a form, but in this case, you're doing it over the Internet," Schade says. KANA also provides a complete transcript of the chat session that is stored with the customer's profile. It can be emailed back to the customer or used for compliance or agent training.

Training is essential, Sommerer says: "You need to have the right combination of skills, someone that knows the products, the mortgage process, and is very comfortable with the technology and could communicate clearly in this mode. We selected some of the most highly qualified people from our current staff and backfilled their positions. We really wanted this to succeed. We wanted these people to be experts on our Web site and know how to communicate via chat."

Wachovia noticed a 25 percent increase in close rates within about four months of implementing KANA Response Live. "We feel that's because they have human interactions and people are advising them from the very beginning of the process," Sommerer says. Lead to application rates are at 25 percent (with a lead being an initial chat). Wachovia also measured success based on online surveys following chat sessions and found 86 percent of customers were "extremely satisfied." Chat feedback enabled Wachovia to refine and enhance the Web site experience, adding information and changing the process flow and navigation of the site. "It's been a learning tool for us," Sommerer says.

Currently, chat is not available around the clock, only from 8 a.m. to 6 p.m. Eastern, but the company plans to widen that range as Wachovia grows comfortable with the channel and expands on license agreements with KANA. The firm is also starting a pilot in home equity products for customers in remote areas to make sure they feel comfortable with the process.

"[Wachovia] wanted to enhance customer service beyond the phone and email. They wanted real-time customer interactions on the Web site," Schade says. "[It's] an example of an institution that's looking to maximize the online channel."

Banking for the Unbanked
About 50 percent of the U.S. Hispanic population is unbanked, according to marketing research firm Mintel. Citigroup offers services specifically for this market, which is helping the bank increase and retain its Hispanic customer base, according to the research firm. To target Hispanics living in the United States, Citigroup has leveraged its relationship with Banamex in Mexico, which it acquired in August 2001, and which has had a presence in Mexico for more than a century. It has roughly 1,500 branches. "We realized we had a unique position in the U.S. to serve the Hispanic market, because of our presence in Mexico. The 2000 U.S. Census had just come out and suddenly people realized the Hispanic population was the largest growing segment in the country," says Rebecca Vargas, director of Hispanic markets for Citigroup.

Citigroup wanted its divisions to come up with initiatives to better serve Hispanics. Improving and enhancing the infrastructure to ensure bilingual capabilities was important: The organization wanted all information available in Spanish, including financial statements, Web sites, call center help, and student loan applications. It also improved its training efforts to make sure employees understood the specific needs of this segment and that these customers come from different countries, have different levels of acculturation and income levels, and cannot all be thought of the same. "The one common need is language," Vargas says. "When it comes to finances, they prefer to do it in Spanish and like the financial institution they're dealing with to think about their community."

The company developed new products, including the Citibank Access Account in October 2003 to address some of the financial needs of this demographic. The unbanked believe they need a lot of money to have a bank account, the financial institution won't welcome them, they need many forms of ID, and they'll be charged many fees, according to Vargas. Also, most immigrants don't know how to manage a checkbook because they've never had a checking account, so they get more fees for overdrafts. The Access Account costs $3 per month and only requires one form of ID and one proof of address; there is no minimum balance (customers can open an account with $1); there is no checkbook because it is a direct deposit account. Customers immediately receive debit cards.

Citibank Global Transfers allow customers to send money to a Banamex account in Mexico or to arrange for someone to pick up cash at a branch of their choice for a $5 fee. Citibank also launched a secured credit card to enable the unbanked segment to start building a credit history with the Credit Bureau. Customers put money in a CD account and are provided a credit card with the line of credit being the amount in the CD. The bank studies their payment behavior for six months and if they've been good customers, they receive an unsecured card. "It's [about] the possibility for these customers to access financial services and to start building a better future for themselves and their family," Vargas says.

The Hispanic segment now represents 24 percent of Citibank's total net acquisitions and 19 percent of the total portfolio, and it's growing faster than the general market.

The Bottom Line
FS firms will continue to employ CRM strategies and technologies as they seek new ways to maintain and strengthen relationships with customers who increasingly want more from their banks and lenders than simply the best price. There is little difference in price, so customers want better service. These firms will also continue to look for quick, real returns on their CRM strategy and technology investments in increased revenues, decreased costs, or both. Soft benefits of improved efficiency or improved customer satisfaction will need to be backed up by actual results such as more production without a corresponding increase in full-time employees, improved customer retention, or a higher percentage of closed sales.

Contact Senior Editor Alexandra DeFelice at adefelice@destinationCRM.com; Phillip Britt is a freelance writer
based in Chicago

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