Cash management operations are shaping up to be the early beneficiaries of banks' investments in data mining technology, according to a recent survey.
Treasury Strategies Inc. of Chicago said 62% of the 55 large banks in its poll are using data mining techniques in cash management operations. Another 11% have plans to do so soon.
The surveyed banks account for a combined 51% of U.S. commercial banking deposits.
Data mining-the process of analyzing customer information to improve sales and profits-is in vogue throughout financial services. All of the top 25 commercial banks have begun building data warehouses, the information repositories central to the mining function.
According to Mentis Corp., a Durham, N.C.-based research company, banks will spend $1.2 billion on information management and data warehousing this year.
Expenditures are expected to rise to $1.75 billion in 2000.
Though few, if any, of the major banks' data base projects are complete, many institutions have built smaller-scale systems called data marts that feed data mining applications in specific business areas.
Cash management is one of the proving grounds for these data marts, bankers said.
It is not unusual for banks to test a new technology in the cash management area. When the leading commercial banks began using check imaging technology, for instance, they rolled it out first to corporate cash management users.
Since it typically has fewer customers and lighter transaction loads than retail operations, cash management provides a setting in which the consequences of glitches are less severe.
According to Treasury Strategies, a treasury management consulting company, more than half its survey respondents are using data mining to determine customer profitability.
The second most popular application was measuring product profitability. Other efforts boosted by data mining include cross-selling and customer segmentation.
