Banks are not yet in the elite company of financial services firms in terms of managing customers, but the circle may be broken soon, and by community banks, no less.

A report by technology analyst Meridien Research, released last week, shows the evolution of Enterprise Customer Management (ECM) at 500 large global financial institutions in four stages, with banks lagging in the highest class of integration.

That stage is referred to as enterprise customer management, and is defined by Bill Bradway, research director at Meridien and author of the study, as when an institution is "really engaged in thinking and acting to deliver intimate, personalized and compelling levels of service that create customers for life." He added that the trick has only been pulled off so far by insurance company USAA, and a brokerage firm Charles Schwab.

Bradway said the feat is harder for banks because their businesses are more complex and they have more products to keep track of, requiring more expensive and complex technology.

He added that to reach that level requires a high level of commitment and vision from management that has been in place for a long time, and for large banks that often requires a cultural change from prior organizational philosophies. Bradway said, however, he thinks within the next couple of years a very large commercial bank may qualify for that category. But, he added, smaller banks might be more likely to get to that stage because it is easier to coordinate the activities of 100 employees than 70,000.

"Technology gets you in position to do things, but financial services is still a people business," he said.

The next highest stage, the use of behavior-based interactive marketing, was attained by only 15 out of the 300 banks surveyed. This system allows banks to view the customers against the depth and breadth of relationships–checking accounts, IRAs, mortgage–so the bank staff can use data mining to predict the next service or product the customer might need.

Although the survey is of companies worldwide, Bradway said four U.S. banks make up about 5% of the banks ahead of the game in this stage, Wachovia being one of them (see other Wachovia technology story, p. 3)

Then comes database marketing, which 60%-65% of the banks were using. In this approach, customers are segmented once a month or quarter using demographic and lifestyle data, and the relationships between them and their services are examined. However, it is a cumbersome process for the largest banks, which often have separate core processing systems for financial products ranging from credit cards to IRAs. The number of systems that must be integrated for effective database marketing can easily be 20 and as high as 50, Bradway said. Further, because the examinations are not very frequent, this kind of marketing, which is in its infancy, is not very dynamic. "A lot can happen in a quarter," he said.

The most basic stage is list pulling. For example, lists might be generated of all the CD holders with instruments maturing over the next 60 days, and letters mailed to those customers.