IBM Extends DecisionEdge to Finance

IBM has added another member to its DecisionEdge family of customer relationship marketing solutions with the release of DecisionEdge for Relationship Marketing, Finance. IBM released the first DecisionEdge product suite, for insurance, last year.

DecisionEdge for Finance includes a comprehensive set of application suites, analytical tools, methodologies, a data warehouse or data mart, an industry-specific data model, and consulting and services needed to allow companies in the banking and financial services industry to make better strategic business decisions. It is designed to provide the foundation for an enterprise-wide data warehouse solution with quick-start data marts offering integrated marketing capability.

Several pilot customers helped IBM develop the solution, including First National Bank of North Dakota. The Grand Forks, N.D.-based community bank, which uses the AS/400 in a mixed platform environment, has 13 branches throughout the state with 40,000 customers and $500 million in assets.

Banks can use DecisionEdge, Finance to change their business model to focus on the long-term interests of the customer rather than on their individual product lines. They do this by analyzing customer behavior, then using that knowledge to assess the risk of losing a customer; classify customers with seemingly unrelated characteristics into segments; predict demand for products and services and the channels through which they should be delivered; and manage marketing campaigns.

First National is using DecisionEdge to try to wring more profitability out of its accounts. The bank makes 150 percent of its profits out of the top 10 percent of its accounts, according to Mike Winkel, CFO of First National. It loses money on the other 90 percent.

"We want to find accounts that should be profitable, but for whatever reason aren't," he says. "We want to get precise information on who should be profitable that we can fix [as well as] who can't be profitable."

In the meantime, First National wants to protect, if not enhance, its high-end, profitable customers. The bank uses DecisionEdge to take a customer-focused, rather than product-focused, approach to its marketing.

"We ID the customers we want to prospect to and look at what pieces [of our product portfolio] they don't have," Winkel explains. "In our previous system, we weren't able to see the entire customer relationship." He recounts a story about a customer who was charged an overdraft fee for bouncing a check, when that same customer maintained a $3 million trust account with the bank. "Most banking systems are like a stovepipe. They only look at one area, not the whole [customer] relationship," explains Winkel.

First National uses DecisionEdge tools to analyze the customer account, then determine what products to offer that customer -- such as managed money accounts, lines of credit and home equity loans -- products normally marketed to the higher-tier customers.

"We determine which mass-market customers are candidates for our higher value-added services," he says. "Our whole strategy is for the clients; we're not a product-push organization. We serve the higher-end customers and ID the people we want to have in the higher end."

Winkel adds that First National is still looking for a way to target all its mass-market customers, rather than just the candidates for high-end services. The bank also intends to buy third-party customer data and use DecisionEdge to do prospecting outside its account base.

"It's all about getting to the right customer and selling them what you want to sell," he says. "We're not taking an approach from the product perspective, we're taking an approach from the customer perspective. This technology allows us to get beyond the product area and look at the entire customer relationship."

People's Bank and Trust Company, which has nine branches in Indianapolis, also uses DecisionEdge, Finance with AS/400s -- a Model 620 transactional system and a Model S10 server for the data warehouse. The company has about 45,000 customers and $659 million in assets.

"It's enabled us to look at our business and, for the first time, know what's going on from all different perspectives -- the customer, the product, the branch office," says Bob Connors, senior VP for information services at People's Bank and Trust. "We can deliver better products and services to the right clients."

Harry Kolar, manager of strategic and emerging technologies, global business intelligence, at IBM, says DecisionEdge can be used by any size bank or financial institution. Customers can buy into DecisionEdge at different tiers and work their way up as their use of the product -- and their business -- grows.

"The technology is following a trend in the industry towards customer-centric applications," says Kolar. "The whole idea is to understand customers at their level and how they see your product mix."