A legend has built up around Capital One Financial Corp. It is about how two consultants bounced from bank to bank, vainly hoping somebody would buy in to their unusual ideas about credit card management.

Finally, Signet Banking Corp. of Richmond, Va., took them on, and their program became so successful that it outgrew the parent and was spun off in an initial public offering.

The two consultants, Richard Fairbank and Nigel Morris, did not exactly come from rags - they met in 1985 at Strategic Planning Associates, which later became Mercer Management Consulting - but they have definitely come to riches.

The Capital One stock price, at $16 in 1995, has been well above $100. Returns on assets have exceeded 20% each year and the Falls Church, Va., company, now one of the Standard & Poor's 500, is gunning for 40% earnings growth this year.

Perhaps most astonishing of all the statistics is that Capital One claims to sign 10,000 new customers a day and to maintain relationships with one out of every eight U.S. households.

"Part of the excitement has come from doing what so many banks said couldn't be done," said Mr. Fairbank, chairman and chief executive officer.

Mr. Fairbank, 48, and Nigel Morris, 40, the president and chief operating officer, talk in extremes. Both cite a "passionate" belief that the "technology revolution" has paved the way for a "marketing revolution of extraordinarily profound magnitude." Capital One is "really a marketing company" that happens to sell credit cards, according to Mr. Fairbank.

The underlying idea is that computerized data bases are so vast and detailed that they can be viewed as ingredients of "mass customization." Products can be nuanced so finely that they can be made to fit just about anyone's unique circumstances.

At any given time, Capital One is testing about 12,000 products and delivering customized service on each.

"We have so many thousands of variations in our products and how we service and manage our customers that we can barely even count them up any more," said Mr. Fairbank. "We are, literally, managing to a customer segment of one on a massive basis."

In their view, competitors by and large continue to offer cookie-cutter credit products in just a few sizes and shapes. Capital One's continual testing and adaptation lets it tailor various offers and assess over time how customers respond, building on what works and discarding what does not.

With everything from secured cards to platinum cards to gourmet variations like the Mercedes-Benz Visa, Capital One attempts to stock something for everyone.

Mr. Morris described the testing process as a series of questions: "Which people want an annual fee? What should the annual fee be? Should it be contingent upon something? Should the annual percentage rate be fixed or should it be variable? If it is variable, should it be Libor or prime?"

Most issuers' answers are too arbitrary, Mr. Morris said.

"You can't a priori figure those things out," he said. "Focus groups and quantitative research methods have significant downsides. Our testing platform gets people to behaviorally demonstrate what they will do."

This is easy to say but expensive to execute in terms of infrastructure investments and marketing dollars.

Capital One spent $86 million on marketing in the second quarter this year, nearly double the 1997 period's $45 million. Founded on the notion that information is its greatest asset, the company is fanatical about controlling its operations and processing in-house.

Other credit card executives may talk about the importance of customer information, but at Capital One it is an obsession.

"Over the last five or six years, many a money-center banker has said, 'We would like one of those information-based strategies too, please,'" Mr. Morris said. "They have tried - valiantly perhaps - but have not been able to achieve the destiny of a real information-based player."

The Capital One duo can sound a bit cocky as they assess the competitive advantages they have opened up. Mr. Morris and Mr. Fairbank boast that no other card issuer has matched, for example, their 37% account growth last year. They claim to be the only ones to achieve mass customization, a term they relish "because it's so in-your-face as an oxymoron," Mr. Fairbank said.

Undifferentiated mass marketing, he said, "became very blunt and never had the ability to work back from a customer's needs and target things to them uniquely and individually."

Mr. Morris said Capital One moves forward where others have stumbled because the problem is "inordinately complex. It requires the integration of oh-so-many functions. It requires commitment from senior management that is nothing short of totally resolute."

He added, "The fact that this is so hard to do gives Capital One an incredible competitive advantage. We believe that the longer we're in this information-based strategy game, the more advantage we build up."

Credit cards were the first products these partners identified for their special treatment, but Capital One has moved on to others - such as cellular telephones and vehicle loans.

The wireless business, America One, is now available in 37 states and aims to be in 48 by yearend. "We are the largest retailer of cellular phone services in the United States, and the only direct marketer," Mr. Fairbank said.

In July, Capital One announced a deal to purchase Summit Acceptance Corp. of Dallas, a subprime auto finance company with $260 million in managed loans. Capital One agreed to pay $55 million for Summit, which has 180 employees, and hopes to take it national.

Automotive finance "has been relatively unsophisticated in terms of credit risk management," Mr. Fairbank said. "We feel we can bring the capability of risk management and more sophisticated marketing methodology into an industry that right now is in a depressed condition, with a lot of companies having run into credit problems."

Wall Street has been smiling, with analysts almost in unison saying they "like the story" of Capital One. Morgan Stanley Dean Witter did downgrade the company in July to "neutral" from "outperform," saying that an economic downturn or "attrition in the second-generation card business" could cause trouble.

Michael J. Freudenstein, an analyst at J.P. Morgan Securities Inc., said there was "a lot of logic" to the company's expansion strategy. He pointed to the informal motto that "the cellular telephone is a credit card with an antenna on it."

"At first blush I think people were skeptical about a credit card company reselling wireless services," Mr. Freudenstein said. "Once you listen to their story, you say 'Wow, that's a unique way of thinking about what areas they can apply their expertise to.'"

Though the new ventures are dwarfed by the credit card business, management has lofty ambitions. Mr. Fairbank views the credit card operation as a "massive scientific laboratory" in which to prove his and Mr. Morris' hypotheses.

The diversification "is the culmination of a decade of following the technology-based dream we laid out," Mr. Fairbank said. "This same revolution is waiting to happen in other industries. The only issue is whether Capital One will be at the forefront."

The two men have watched their card portfolio grow in four years to 13.6 million accounts, from five million. Receivables have reached $15 billion, from $7 billion. The company has gone international, establishing a presence in Canada and the United Kingdom, Mr. Morris' native land.

Trent House, the first operations center in Europe, opened in July in Nottingham, England. Capital One hopes it serves as a springboard to continental Europe where, Mr. Morris said, the "macro trends" are similar to those of the United States. These include deregulation, the unbundling of financial services that creates openings for monoline specialists, and consumer interest in electronic delivery channels.

"The longer-run destiny of Capital One overseas is to duplicate what we've done in the States," Mr. Morris said. "We see the opportunities being way beyond credit cards."

James Shanahan, a credit card consultant in the Newark, Del., office of Business Dynamics Consulting Inc., said Capital One "could be a significant force in Europe - if it stays independent."

Rumors have swirled that Capital One is takeover bait, but Mr. Fairbank pooh-poohs them.

"Capital One has already been there and done that with respect to being part of a financial institution," he said, referring to its years with Signet. "As we became independent, our trajectory of success accelerated - as we were able to build a focused, high-technology company with a unique culture of excellence."

Before joining Signet, Mr. Morris and Mr. Fairbank were all-purpose consultants with no particular cards expertise. Their notion of mass customization came out of information technology and they came to see the card business as an ideal testing ground.

"We couldn't understand why, in a world where human beings are so unique in their interests, credit risk, and financial circumstances, the credit card industry took a one-size-fits-all approach," Mr. Fairbank said. "It was just so obvious in a risk-based business that homogeneous pricing for everybody didn't make any sense."

It was not so obvious to the senior bank executives to whom Mr. Morris and Mr. Fairbank originally shopped those ideas. "They felt it was operationally too complicated," Mr. Fairbank said. "Many people felt they were already sophisticated in terms of technology because they used computers and bought information."

Signet, in the 1980s "a totally traditional player with a single product that they sold to everyone," bought the concept and hired the duo away from Mercer Management.

"We warned them that this would require virtually starting over, rebuilding a very different company," Mr. Fairbank said. "We had to create a culture that was very nonhierarchical and challenged everything."

In the early days, Mr. Fairbank said, Signet was suffering from real estate loan losses and management came close to axing the credit card renegades. In 1991, they saved their hides by inventing the balance transfer offer. Customers who had been paying 19% interest at other banks were invited to consolidate their loans at low teaser rates.

"We found we could get low-risk revolvers to join us in droves and collapse the massive price umbrella the money-center banks had been perpetuating," Mr. Morris said. But the big banks "didn't take us very seriously. They didn't believe we could target the right customers and they didn't believe their customers would leave them because they had branded relationships with them."

Starting in 1992, Signet's card portfolio began to double annually.

"Signet moved from being a very established regional bank with a credit card business, to a credit card business that had a regional bank franchise attached to it," Mr. Morris said. The initial public offering took place in 1994, the spinoff became total in 1995, and Capital One was already a top- 10 credit card issuer. Signet was eventually taken over by First Union Corp.

"We were able to advance Capital One from a credit card company into an information-based marketing company that cut through different businesses and different geographies," Mr. Fairbank said.

Independence allowed the partners to implant their New Age organizational philosophies. Employees are called associates and earn liberal stock options that give them a stake in the mission. Senior managers are asked to forgo some compensation voluntarily in favor of stock options that vest if the company hits ambitious earnings targets, and 96% of them have gone along. "Executives can make millions of dollars preserving the status quo at a company, and I don't think that's right," said Mr. Fairbank, who practices what he preaches, compensation-wise.

Mr. Morris said Capital One is "classic entrepreneurism. You can't import people who read it in a book and say, 'This is what we're going to do.' You have to believe it with your mind and your body and your soul, and you have to be relentless about achieving it."

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