CIO — CAPITAL ONE FINANCIAL OF FALLS CHURCH, Va., has built an entire business on the savvy use of information technology. In the U.S. market, sophisticated software tools?many of them developed in-house?trawl terabytes of demographic data, looking for consumers to target with finely judged offers of credit, each offer complete with customized interest rates, conditions and fees. In contrast to the scattergun approach adopted by most of its competitors, Capital One has long trumpeted what it terms its "information-based strategy" to credit rating and product development.
Most recently, Capital One’s proprietary data-mining and credit-rating tools have been deployed to identify profitable borrowers, or "super prime" consumers, who are smart enough to see through the introductory teaser rates offered by other credit card issuers bombarding their mailboxes, yet still want a better deal than they were getting from their mainstream card issuer.
Enter Catherine Doran, CIO of London-based Capital One Bank Europe. Her mission: First, pull off the same locate-and-lure trick with European consumers and then repeat the performance on the global stage. It’s a peculiar challenge, she admits. Clearly, the European offshoot can’t stray too far from Capital One’s highly public commitment to its tried-and-tested information-based strategy without making investors nervous. But how do you go about applying an information-based strategy when, for example, the information you need either doesn’t exist or is protected by tough European data privacy laws?
"Cautiously," says Doran, with an Irish lilt that betrays her origin. Capital One took little risk by launching its first global foray in the United Kingdom in 1996. It was the European country closest to the United States in terms of credit card usage, availability of demographic data and good, consistent credit-rating information?with several credit bureaus (France, by contrast, doesn’t have any), credit data cross-referenced to the electoral roll (illegal in some countries), and both positive and negative data available (some countries allow only certain categories of data to be stored).
Initially, Doran says, the IT function was outsourced to the Bank of Scotland, a move that both reduced risks and setup costs, while speeding time-to-market.
That was always a short-term measure, though, because Capital One’s information-based strategy calls for a constant stream of new products to attract customers. "When you must respond quickly to changes in the marketplace and when you’ve outsourced that capability, you’re at the mercy of other people’s prioritization decisions," she says. "We needed to become masters of our own destiny."
Backed by the stream of new products tailored to U.K. consumers, Capital One’s soft approach to globalization has paid off. The U.K. business currently employs 2,400 people, split between London and an operations center in Nottingham, and boasts more than 2 million customers?not bad from a standing start.
