It's 2009: Do You Know Who Your Customers Are?

By Dr. Leonard Shaefer, Chief Scientist, IBM's Global Name Recognition unit, and Edward Lull Jr., VP, Virginia Commerce Bancorp

For professionals in the international financial markets, these are indeed "interesting times", as the Chinese expression goes.Continued corporate turbulence, political uncertainty and rapid, seismic shifts in the legislative and regulatory substrates have combined to cause a spate of sudden mega-mergers and acquisitions of boutique banks whose effects are immediate and profound, not only for executives and employees of these consolidated firms, but also for the many millions of customers and shareholders that they serve. Key players in these markets are now fewer and generally much larger. More than ever, size matters.

While pooling of assets and financial resources in such circumstances is often seen as vital for continued corporate survival in harsh economic times, rapid consolidation of accountholders can also create a range of new operational challenges, as merged institutions struggle to absorb, understand and service new segments with a wary and concerned customer base. Handled well, these "growing pains" can reassure nervous investors to help deliver a level of new intelligence that can create new business opportunities or tap into new markets; handled poorly, these challenges can inadvertently provoke customer and capital flight at the worst possible time.

While many forms of executive skill and leadership are required to navigate effectively in a post-merger environment, there is one type of software that has not yet achieved full appreciation for its ability to mitigate risk and to build more effective customer relationships: name analytics.

As big enterprise applications such as CRM are no longer the center of the IT universe, more attention is being focused on the information itself. Banks today have now become more reliant on customer information-independent of applications and business processes to make faster and smarter business decisions in response to changing market conditions.

But why does a newly-formed financial services giant with many billions in assets and many millions of customers need to care about names? Because it can. Following are some reasons why having a detailed understanding of customers' names is especially crucial now more than at any time before. Compliance. Taking over the customer portfolio of an acquired or merged-in company means inheriting all the judgments that were previously made about the legality and riskiness of its customers and associated parties to transactions. Client screening and risk-assessment procedures vary substantially from one financial organization to the next, and a thorough vetting against applicable internal and government-supplied lists will turn crucially on effective name-matching. Sophisticated anti-money laundering (AML) and know-your-customer (KYC) solutions now allow the same high quality name-matching and list-searching capabilities as those long in use within national-level intelligence and counter-terrorism offices. As public support, in the form of taxpayer monies, flows into many financial institutions, it is of paramount importance that none of these funds is found to be at the disposal of prohibited entities, so governmental vigilance can be expected to remain strong across the board in this regard. Superior performance on compliance issues will rely heavily on effective name analytics.

Customer data consolidation and quality. When large organizations combine, large merge-purge operations are sure to follow. External, persistent national IDs such as SSN or EIN values are helpful, but not always available and not always sufficient. In multinational organizations, names take on a particularly prominent role in the consolidation and de-duplication of customer information. These necessary processing sequences are also an invaluable opportunity to identify, verify and correct errors in customer names, to drive CRM and customer communications improvements. An effective data-hygiene regime for customer accounts can now incorporate name-validation routines that identify anomalous data at the moment of capture, so this important and emotionally-charged category of information becomes as verifiable and trusted as address and phone data have become. In a similar regard, new profiles of the combined customer base may provide new opportunities to address traditionally underserved groups and communities.

CRM assets review. Abruptly adding millions of new accounts can have a profound impact on existing CRM tools and HR assets deployments. In particular, it is important to understand the ethnic make-up of the combined customer-base, which may have shifted significantly from its previous state. In order to anticipate problems to existing back-office systems (example: sudden need to properly handle long, complex names arising from large numbers of customers with South American or Middle Eastern backgrounds), and to plan for optimal deployment of cultural and linguistics assets in customer-facing roles, there is a need for ongoing name analytics. New commercial name analytics software can provide reports, giving immediate trend assessments of the ethnic and gender composition of a diverse, globally distributed customer census to provide a firm, empirical basis for staffing and training decisions.

Continuity of service. Customers absorbed into a large institution from smaller, more personal banks that tailored their services to specific ethnic communities may find the transition too jarring and opt to leave the new, larger bank. A well-informed merger team that has access to information about the specific populations that they had acquired as new customers could better educate staff to these expectations. Special transition teams could be fielded to provide the proper personal touch necessary to welcome this new-and valuable-asset: happy customers.

The current M&A surge in the financial services sector has posed many problems and prompted much fresh thinking among leading executives, regulators and politicians. As always, churn and struggle on such an unprecedented scale will also beget a fair share of new opportunities. Among these is the renewed interest in name analytics software to bolster and protect the image of integrity for financial firms who seek public support and funding, and to increase the effectiveness within these firms for understanding, serving and communicating with those who provide their assets and hold their equity.

Not only is this an opportunity to retain an institution's existing and merged client base, but it also allows us to leverage existing relationships and to cross-sell to others of similar cultural heritage thus sending the important message that we value the cultural heritage of our client relationships. Dr. Leonard Shaefer is chief scientist with Armonk, N.Y.-based IBM's Global Name Recognition unit, and Edward Lull Jr. is VP of Virginia Commerce Bancorp (Arlington, Va.).