Banks have not distinguished themselves in using customer information to obtain a competitive advantage, but neither have most other companies and industries jockeying for position on the Internet, according to the co-author of a best-selling book on Net strategy.

John Hagel 3d, who with McKinsey & Co. colleague Marc Singer wrote "Net Worth: Shaping Markets When Customers Make the Rules," said at an American Bankers Association conference that the financial industry will probably be one of the first to see the emergence of infomediaries-companies that gather and use information in ways that inform and empower their customers.

Banks may have vast quantities of customer and market data at their disposal, increasingly in data warehouses designed to yield analytical insights about sales opportunities and profitability. But Mr. Hagel said these storehouses may be too unwieldy, leaving banks no better off than others vying for an infomediary role.

Mr. Hagel said the race is far from over, given that "no one is making money" pursuing the strategies recommended in his book and "no clear winners" are in sight. He contended that there will be room for only a small number of infomediaries but that their emergence will require all financial companies to reassess how they do business.

"Electronic commerce is fundamentally about empowering customers and enabling them to extract more value from the vendors they deal with," Mr. Hagel said. "It turns the old model (of) vendors selling to customers around."

The data warehouses on which some of the larger banking companies have spent hundreds of millions of dollars may be too big to manage at Internet speed, Mr. Hagel warned, because they were built to accumulate all sorts of data, without first thinking through the purposes.

"The data warehousing idea will be difficult to sustain," he said. Bankers "will drown in information" unless they home in on what is "most economically valuable."

He said the focus should instead be on "gathering" and "giving back" to customers information that serves such useful purposes as establishing trust, supporting financial decision-making, and helping them find "relevant vendors at appropriate times."

Joel P. Friedman, who heads the worldwide banking and capital markets practice at Andersen Consulting, used slightly different terminology to make a similar point at the ABA-Business Week "E-Customer Forum" this week. He spoke of the evolution to buyer-driven from seller-driven markets, pointing out that banks "have not fared well" even under the old rules.

He said he accuses data warehousing proponents of "terabyte machoism," claiming superiority on the sheer sizes of their data bases.

Formulas for success should be based on acquiring accounts at lower cost, selling more products to existing customers, and retaining customers longer at higher profit levels, Mr. Friedman added. Data warehouses have not proven their worth, he said, and in fact have been "destroying shareholder value."

Mr. Hagel said the coming battle will be over client information profiles and how they are turned to the customers' advantage. "Any bank interested in holding on to them has to be concerned about the rise of new infomediaries," he said.

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