Capital One Financial Corp. of Falls Church, Va., shuns outsourcing, preferring the flexibility and control that come from doing things itself.

The monoline card company has about 5,000 product combinations and last year performed about 14,000 product tests. Targeting card offers to specific customers, it believes third-party vendors are not nimble enough to match its pace.

"We have an incredible amount of variation and customization," said Marjorie M. Connelly, senior vice president of domestic card operations. "A lot of our business strategy is to test and find new opportunities, and sometimes those opportunities have very short windows in which they can be exploited."

Ms. Connelly was recently promoted from vice president to senior vice president overseeing Capital One's operations, which include call centers, correspondence processing, and other back-office functions.

She has been with the company since 1994, before its February 1995 spinoff from Signet Banking Corp., when it had five million customers and $7 billion in managed loans. Today, Capital One has 12.7 million accounts and $14 billion in receivables.

Capital One-which reported first-quarter earnings of $65.7 million, a huge leap from the $42.5 million reported in the same quarter last year- attributes its rapid growth to its reliance on gathering customer information and offering specialized products based on consumer demographics.

It used to rely on outside vendors but found they moved too slowly and could not tailor offerings specifically enough, Ms. Connelly said.

"You need technology to support the kind of volumes and rate of growth that we are able to achieve," she said. "There is almost no way you could accomplish that and still live with the development-cycle time that is inherent in most third-party processes."

When Capital One became independent, it took in-house some data processing and programming that had previously been handled by outsiders. Other such efforts followed.

"We have vertically integrated management of every one of our primary systems," Ms. Connelly said. "It has given us the ability to respond to opportunities so much better."

For instance, in a mail solicitation, "we may be testing 20 or 30 different combinations of a single strategy at a time," she said. "We may need to program some of the rules within our client/server system to accommodate these minor changes and to allow folks who service those accounts to get the right information."

Capital One expects to handle 30 million to 35 million customer service calls in 1998, and is trying to hire 2,000 people to help with the load. About 68% of customer inquiries are handled by an automated voice-response unit, which Ms. Connelly said is one of the highest ratios in the industry.

She said growth of the company's staff has been accompanied by "a complete overhaul" of technology. "Spinning off created a wonderful opportunity to start from scratch," she said.

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