Automated Cross-Selling Anticipates Members' Needs

Rich Barfus, MindBox LLC
October 19, 2004

Thinking they were going to apply only for a home-equity line of credit (HELOC), a couple walks away from their credit union's website not only with an approved HELOC but with a refinanced first mortgage, a mutual fund account for their college-bound daughter, and smiles on their faces.

Welcome to the world of automated cross-selling. As financial products have proliferated and consumers have become more sophisticated, it's not uncommon for borrowers to require complicated, multiproduct loan packages to meet their needs. The challenge now is for lenders to become "coaches" who expertly and quickly guide borrowers through the maze of choices and options-or risk losing impatient members to other financial institutions. A new breed of automated cross- selling technologies, which are both coach and underwriter in one, are rising to meet the challenge.

Industry research shows that automated cross-selling will continue to be an important way to fuel financial institution growth. "Financial services companies have turned their attention over the past two years to organic growth," says Susan Landry, vice president and research director for GartnerG2 Financial Services, Stamford, Conn. "Organic growth includes cross-selling products and services to existing members to further develop core markets. We expect this trend to continue through 2004."

As financial service products become increasingly commoditized, it becomes more difficult for providers to differentiate themselves. It's imperative for lenders to structure holistic packages of loan solutions that include products from across the institution, including many nontraditional loan products. Financial institutions must create member-tailored packages, rather than merely presenting "off-the- shelf" loan products.

But few loan officers have sufficient tools or experience to accurately and quickly cross-sell a lender's entire range of loan products. Senior loan officers may have the experience to evaluate a borrower's complex needs and design an appropriate mix of loan products. But rates and policies fluctuate daily, making it difficult to quote payments and qualification requirements accurately. And loan officers still need to wait for answers from their underwriter.

Automation technologies that can understand and anticipate borrower needs-and then use the institution's rules and policies to structure and underwrite loan packages advantageous for both members and the credit union-are critical to continued profitability in today's competitive lending environment.

While-You-Wait Service

Consumers today increasingly are impatient. Therefore, today's automated cross-selling technologies-whether as an expert system to assist a loan officer or teller in a branch office or call center, or as a stand-alone Web system-can structure product packages and automatically underwrite each one almost instantly. Decision-making for loans and other products is brought to the point of sale, when and where the member is ready to buy, and before they grow impatient and seek a different financial institution.

Ideally, automated cross-sell technologies free loan officers to focus on a more consultative role with borrowers, while at the same time selling larger loan deals and speeding more deals through the system.

Policy-Driven Deal Structuring

Combining multiple product lines into one proposal leads to increased complexity in the sales process and the need to simultaneously adhere to policies and portfolio preferences while satisfying member demands. Cross-sale automation technologies, therefore, include the ability to apply business rules and policies to the loan structuring, underwriting, and approval processes.

In the opening example, a couple approached their lender for a HELOC. The cross-sell automation technology generates a few short questions for the borrowers about their new loan request, and about their current loans and account balances with the credit union. The borrowers explain their desire for access to cash for home improvements, their savings needs for college, and their budgeting requirements in terms of monthly cash flow. Automated cross-sell technologies can look at the entire member profile, plus the credit union's lending criteria and preferences, before deciding how to respond, weighing the best interests of both the member and the lender.

The ultimate loan package proposal in this case includes a HELOC to access cash for home improvements, a combination of brokerage and mutual fund accounts for college savings, plus a mortgage refinance-which qualifies at a lower rate because of the other loan products packaged together with it-to reduce the borrowers' monthly payments. This lender has cross-sold and underwritten five loan products across three company divisions to meet the members' needs-and has done it all according to current rates and lending policies.

With policy-driven deal structuring, a change in rates or portfolio balancing requirements can be applied globally, and will be instantly reflected in every underwriting decision from that point forward. Institution policies are applied centrally and fairly throughout the entire organization and its channel partner network while ensuring the best interests of both borrower and lender.

As financial products continue to innovate and proliferate, and as consumers continue to experience greater complexity in their banking needs, cross-sell automation technologies offer welcomed efficiencies and allow financial institutions to become trusted coaches that apply the human touch to guide consumers through today's many choices.

Rich Barfus is president of MindBox LLC, a Greenbrae, Calif., technology company. Contact him at rich.barfus@mindbox.com.