An Outsourcer Rides to the Rescue

Thanks to advances in data warehousing technology, moving data out of the back office and into the hands of the people who need it is a reality at Provident Bank in Baltimore.

"What's happened in so many banks is that managers and business line people don't have control of the information they need," said John King, vice president and manager of information services at Provident.

"In the past, if managers wanted a report modified or an additional field added to a query, they would have to turn to the systems people. The process gets bogged down. The bank gets flooded in paper," he said.

To get better control of the information on their 200,000-plus customers, $2.5 billion-asset Provident Bank turned to its systems outsourcer, M&I Data Services of Milwaukee.

Provident had been an M&I customer for four years and was privy to M&I product development initiatives. When M&I executives mentioned their interest in developing a set of Windows-based data warehousing tools that would give end users both speed and flexibility in creating their own reports, Provident was eager to help.

In January 1995, Provident, along with nine other institutions, signed on as a test site for M&I's new data warehouse. "Partnering with M&I on this project was ideal," said Mr. King. "It enabled us to get a product that we actually needed, versus what someone in a data processing shop assumed we wanted."

Data warehousing, a hot concept in banking these days, is a term that people on both the systems and banking sides toss around freely. Loosely defined, "a data warehouse is a common repository of information from many sources that then serves a decision support and analysis function," said Rick Roy, a vice president of information services at M&I.

"What many people accept is the first half of the definition without focusing on the second half."

According to Mr. Roy, one of the primary reasons data warehousing was developed is that while the volume and types of data about customers and business lines have increased, the value of the information has not kept pace. "At many institutions, it's almost a case of data overload," he said. "If warehousing is done correctly, it can help decision-makers sift through the data and get down to the relevant information."

Today at Provident Bank, hundreds of users from commercial lenders to chief financial officers have access to more precise customer information.

The M&I warehouse pulls together all of Provident's deposit and loan information - data that M&I already processes as the bank's outsourcing partner.

"If someone needs a management or a statistical report, they can go in, rearrange a field, delete old fields, add new ones, and get the information they need," said Mr. King. He added that the system can break out information by cost center, transaction, customer, or any variable thereof.

"With the ad hoc reporting and query tool, users can browse the information and create what-if scenarios," said Mr. Roy.

"In the past, a user might articulate what he or she needed and a programmer would translate those queries into Cobol. This took time. An added problem was that the programmer probably didn't have a deep understanding of particular business issues and concerns facing the user."

At Provident Bank, the benefits of data warehousing ripple out in many directions.

First, the bank has cut down on the size of the reports it had been printing, reducing paper costs and processing time. Mr. King, in fact, estimated that the bank will save $200,000 on paper costs alone this year.

For example, Provident used to run a new account report daily. In the days before the data warehouse, the standard report was 303 pages long. Today the information is consolidated into 64 pages.

Customers also benefit from more efficient reporting. "The insufficient- fund report that is generated every night has been cut down from 777 pages to 31 pages," he said. "When it's a question of an unpaid check, the first problem a customer service representative has to deal with is an unhappy customer. The second problem the representative faces is looking through the huge report. With more streamlined reports, the employee can get the information more quickly. Time is saved. The customer is better served. "

"The soft savings are considerable too," he said. "If the report comes out the way someone asks for it, there will naturally be a reduction in errors. With fewer fields or more specific fields, training will be minimized. There is less difficulty in understanding the reports."

Mr. King reported that plans are in the works to use the warehouse to target products and services to Provident's customer base. This is a critical consideration for Provident, which has a reputation as an innovator in retail banking. The bank, for example, pioneered supermarket banking in the Maryland market and currently runs nine branches in Metro Supermarkets. These outlets are open in the evening and on Sunday.

"Anytime you can micromarket to a segment and reach a customer based on what his behavior has been and what he is inclined to use, you have a better chance of getting him to do more business with the bank," said David C. Stewart, a consultant with Global Concepts Inc. in Atlanta.

According to Mr. King, Provident aims to expand its presence in alternative channels of delivery, particularly home banking via TV or the Internet.

"Like supermarket banking, a move into home banking represents a significant initiative," said Mr. King. "We need to have an accurate understanding of which customers might be open to alternative channels. To target indiscriminately would be a waste of time and money."

This is where the data warehouse fits in.

Mr. King said the bank will undertake a "trending study to determine which customers are most likely to use telephone banking as well as ATMs, because this group represents a logical segment to target for other forms of electronic off-site banking."

In addition to undertaking new marketing initiatives, Mr. King said Provident Bank is going to broaden the scope of the warehouse itself. Right now, the system only pulls together loan and deposit information - data processing that is outsourced to M&I. In the coming months, M&I will accept data from non-M&I systems, including Provident's mortgage processing system.

"We will pass a file to M&I from CPI every night, and that way we will have a more complete and accurate picture of customers, from their deposit and loans to mortgages," said Mr. King. "Having access to this information will help us on all fronts." v

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