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IT Could Save Banking from Itself

 
 
 
 
 
 
 
 

By Samuel Greengard

Business and IT leaders tend to be smart people. So it's shocking how dumb they can be, especially when it comes to understanding and managing customers.

Even well-reasoned rules and policies have unintended consequences. Yet many executives remain entirely oblivious to this concept.

Consider this: Last year I deep-sixed a Chase United Mileage Plus Visa card after the bank refused to waive the finance charges on a payment that was essentially one hour late. Let me get this straight, I thought: I charge tens of thousands of dollars a year on your piece of plastic and I have a long history of paying it on time. But when I ask you for a one-time pass I'm told "no" and that I can't speak to a supervisor?

Unintended consequence: you get your measly $100 but lose a couple of thousand dollars in annual revenues, multiplied over however many years. Brilliant! Oh, and predictably, as quickly as I could utter the words "cancel the account" Chase began stuffing my mailbox full of offers for, what else, a United Mileage Plus Visa card! With customer acquisition costs sometimes running into the hundreds or thousands of dollars per person, it's remarkable to think that a company can be so completely discombobulated.

And I am not alone. Los Angeles resident Tracie Breiter recently laid out a similar scenario in an L.A. Daily News Op-Ed piece titled "Being Responsible Has Its Rewards." It turns out that AIG ultimately forfeited $1,100 in interest over a puny $10 late fee.

I'm not trying to pick on financial institutions here although they seem to have a pretty big bull's-eye painted on their butts lately. The problem is endemic across industries. Poorly conceived policies and an inability to differentiate customers are as common as text messages among teens.

Here's the truly amazing part: as I mentioned in my November 2009 CIO Insight article, Keeping the Customer Satisfied, consulting firm Bain & Company has found that as many as 80 percent of senior managers believe their companies provide excellent service, but only 8 percent of their customers agree. This isn't a mere disconnect; it's a complete detachment from reality.

There's no excuse for this situation. It's beyond shameful. It's beyond shortsighted. In an era of sophisticated business intelligence and analytics tools, there's no reason to toss all customers into the same bucket and make myopic decisions.

Financial institutions and others already screen customers up front. They tap into analytics to determine whether they should provide credit and how much of it to prospective customers. So, why not use these tools for existing customers and throughout the customer lifecycle? Someone with a single late payment isn't on par with someone else who is chronically tardy. Someone who charges $50k or $75k a year isn't the same as someone who uses a card once or twice a month.

Business leaders need to stop slapping themselves on the back and IT executives need to become far more proactive about deploying analytics tools that provide a complete customer snapshot. Just remember that if you fall down nowadays, a smarter and savvier organization will pick your pocket and trample right over you. In the Information Age, unintended consequences prove costly.