BIG BANKER IS WATCHING
In the brave new banking world, "unprofitable" customers will find that bankers don't want them -- or their money
By Lynda Edwards . Bankrate.com

Las Vegas looks like neon gold in a bowl of dark desert mountains. But the gamblers seeking gold in this conference room are not carefree vacationers. Here, CEOs of mega-banks sit clutching plastic-cupped cocktails. You can hear them sweat.

"You're in a war," says Chief Creative Officer John Groman of Epsilon, a

marketing software designer. "The battlefield is the Internet. Banks, retailers, news organizations are moving online fast. Executives that have 100 meetings before innovation, they'll be destroyed."

And they laugh. It's the light laughter of guys with talents so rare that they'll survive any economic upheaval. They have a product every bank in America wants: customer relationship management software. It will change how you interact with your bank -- or whether you interact at all.

Major players -- AT&T, IBM, Unisys, Diebold, Fair, Isaac (which authors half of the 4.5 billion annual credit reports in the United States) and Microsoft -- demonstrated CRM products at this Banking Administration Institute summit in December.

In their vision of a CRM-ruled future, consumers will bank almost entirely via phone and the Internet. What branches remain will operate like car dealerships, staffed by "sales reps," not tellers. This new breed of bank employee will get a commission for each mortgage, loan or investment portfolio landed with a profitable customer.

Sales reps will spot these profitable customers using CRM software to analyze an array of factors, including the customer's salary, age, marital status, debt, number of job and residence changes, education and property owned. Customers will be required to supply the data to open an account.

No more welcome mat
Customers identified as losers by CRM might get checking accounts -- at a price. "You charge them higher fees because you don't want them -- make them know they're not welcome," executive vice president Seamus McMahon of First Manhattan Consulting Group says at another Vegas seminar.

Unprofitable customers will pay an additional price in terms of service. Each time a customer calls or e-mails a bank, the sales rep need only type his name to view his CRM profile. "You answer the cash cows first," said McMahon. "The losers can wait 20 minutes if they call in a question. The losers will just make you drown."

The inspiration behind CRM is fear. What safety net do banks have if they're invested in a wild stock market, a chaotic Asian economy and, if the Senate passes a financial reform bill, they must conquer a new banking frontier like insurance? The answer was obvious to CRM designers: Fat-cat customers.

Even then, there are risks. "An upper-middle-class customer can be a financial drain on a bank if he wants the wrong products or is in a field about to be hit with downsizing," McMahon warns. Banks will require customers to update personal data so CRM can track their changing luck.

Follow the potential
The scrutiny actually begins on day one: the financial formative years.

"If you have a big college town in your bank's territory, CRM can evaluate which students will become profitable customers," Epsilon's Hozrath continues, as the bankers scribble notes. "A French lit major, you don't worry about courting. But your sales reps should establish warm relationships with computer geeks or biotech majors."

Ten years ago, bankers made such judgment calls based on their intuition and observation. But in megabanks, a customer is one of millions. And the software serves another purpose for bankers pioneering on the Net.

"CRM data is what you show at shareholder meetings, what you show CEOs who can fire you, so they blame the numbers and not you for decisions," Groman tells his paranoid listeners. "The first one out of the gate with an innovation during corporate restructuring is the one that's shot when the CEOs get nervous. Point to CRM numbers, not your intuition, or you're going to get fired."

CRM isn't flagging the rich customers so banks can gouge them with fees. Banks want to make a profit off them through cross-selling a slew of bank products from car loans to personal investment managers. For example, CRM alerts bank sales reps when a profitable customer buys a new business, so they can pitch employee insurance, pension plans or corporate credit cards.

Bundle of joy -- for banks
Fair, Isaac, known for its credit bureau rating system, has developed software that notifies the bank reps when a profitable customer has a baby. It e-mails a balloon-festooned Congratulations! while the bank mails out home improvement loan applications with photos of nurseries attached.

Oracle Corp., a leading Internet consultant for bankers, suggests collecting more than demographic and geographic data about customers. It recommends a CRM that warehouses "psychographic" data: hobbies, political opinions, magazine subscriptions and "actions," including clubs joined, recent purchases, restaurants and designer boutiques frequented. This allows banks that own unrelated businesses such as casinos or hotels to market those ancillary services as well.

The attending bankers were so giddy about these possibilities that Oracle CEO Lawrence Ellison warned them that mailboxes crammed with electronic or paper junk mail still alienates recipients.

Fourteen CRM vendors attended the banking conference. None would reveal exactly what factors identify the customers who cost banks money. That's information bank clients pay big bucks for, they demurred.

No-frills customers get bum's rush
Off the record, most were blunt. Banks don't want a no-frills checking account customer whose average balance is less than $1,000 and who pays his low interest credit card debt in full each month. Unless he's paying off a loan on a Lamborghini or a mortgage on a mansion, he'll be treated like an unwelcome poor relation.

"Raise his ATM, credit card and account fees till he leaves" is McMahon's advice.

Many large banks prevent such troublemakers from opening accounts at all with computer systems such as Debit Bureau, according to a recent Economist article. The Debit Bureau database tracks consumers' check-writing histories.

A serial check-bouncer often will be rejected by a bank. But according to its own press release, Debit Bureau also downgrades a customer for reports of lost or stolen checks. Debit Bureau also produces what it calls "household-specific demographic data." Consumer advocates worry that's a device for identification of low-income neighborhoods.

The human factor factored out
Bank tellers who ignore Debit Bureau's bad grade and open an account for such a customer anyway now may pay with their jobs. On Dec. 1, Debit Bureau added Audit Report to its repertoire. Audit Report notifies a bank teller's boss when an account is opened despite Debit Bureau's identification of the customer as a high risk.

Where are no-frills customers to go? Well, biometric ATMs may be an option. They identify users by fingerprints, facial dimensions (Mr. Payroll) or distinctive marks in the iris of the eye (Sensar). Once a person is in the database, he can cash his paycheck at a biometric ATM for a fee of 1 percent to 3 percent of the check total. Biometric ATMs are being upgraded to issue travel checks if a customer doesn't want to lug a month's cash earnings home on the subway.

"Hey, I had friends at American Express who lost their jobs because they couldn't identify the profitable customers," Groman says. "I liked them. They were good people who cared about people. But in the global economy no one cares if you're a nice, good institution. Well -- maybe they would if you knew how to market goodness."