Integrating the Channels
http://www.banktech.com/printableArticle.jhtml;jsessionid=XWF44MCHDKT04QSNDLRCKH0CJUNN2JVN?articleID=193402868
Nov 01, 2006
URL: http://www.banktech.com/showArticle.jhtml?articleID=193402868
Channel Management
The development of banks' overall channel strategies has been anything but deliberate. Delivery channels have grown from need and technological advances, and banks' channel strategies have evolved in response. But now that financial institutions are juggling numerous channels and the multitude of ways in which they touch customers, many banks are actively looking to integrate those delivery channels more strategically.
According to an August survey from the American Bankers Association (Washington, D.C.), usage of the major delivery channels is decidedly split. When 1,000 consumers were asked what banking method they used most often, 32 percent said the branch, 26 percent said online, 26 percent said ATMs, 5 percent said the telephone and 5 percent said traditional mail (6 percent said other/none). But statistics on channel usage -- by age, gender and wealth, for instance -- abound.
Generally, current research indicates that the branch and the Internet are the key buying channels for banking products. A recent survey from Framingham, Mass.-based Financial Insights reports that the branch remains the most utilized channel, with almost 75 percent of consumers visiting a branch at least once a month. However, according to the survey, customers who use the online channel tend to have more interactions per month with their financial institutions: 25 percent log on more than 10 times per month.
According to research from Cambridge, Mass.-based Forrester Research, 82 percent of consumers still prefer the branch for opening a new account. Yet there is a strong difference in channel preference by age. Younger generations overwhelmingly prefer the online channel and are more likely to adopt online banking activities, Forrester reports.
The bottom line is that no channel is an island unto itself, says Karen Massey, a senior research analyst with Financial Insights' consumer banking and credit practice. "All channels are important to consumers for the specific purpose each serves," she writes in a new report from the research firm. As a result, Massey urges banks to invest in a consistent customer experience across all channels, including integration of real-time cross-channel data.
Seamless Customer Experience
The current focus in banking is on customer-centric, rather than product-based, strategies. And customers have strong demands. Consumers want to bank on their own terms -- they want access to their money anywhere, and they want it now, said Bart Narter, senior analyst, banking, Celent (Boston), during a recent BS&T webcast, "SOA for Multichannel Integration." "That has been a challenge for the banks," he noted.
Customers are spoiled by general retailers, says Jerry Silva, TowerGroup (Needham, Mass.) research director for retail banking and delivery channels. Some large retailers allow customers to order products online and then pick them up at the nearest store location, for example. But because of the way bank channels have been set up, with different products maintained in different silos and with no real interface to unite the systems, many banks haven't been able to deliver this level of service to their customers, Silva says.
"It's important for customers to feel like a bank really knows them," says Alex Hart, president and CEO of online banking solutions provider Corillian (Hillsboro, Ore.). The customer should get the same information at the ATM, the branch and online, Hart stresses -- there has to be consistency across those channels. At too many banks, he contends, that is not the case. "[Channel integration] is really designed to create a better user experience; it creates preference and differentiation," Hart says.
SOA for Multichannel Architecture
"Firms need to build integrated channels that facilitate customer information and process flows," said Peter Tebbenhoff, product marketing director for Palo Alto, Calif.-based business integration and process-management software provider TIBCO Software, during the BS&T webcast. "Only then will banks be able to achieve the operational efficiencies they had hoped for," he added.
But most banks must overcome legacy architectures that have been built piecemeal as the result of the emergence of new channels and products, as well as M&A activity, Tebbenhoff said. Maintaining legacy systems is time-consuming, prone to error, expensive and inflexible, he noted.
The best approach to achieve multichannel integration, according to Tebbenhoff, is a service-oriented architecture (SOA). "Enabling channels to interact with core applications allows banks to pull out the detailed data embedded deep in core systems spread across the enterprise, translate it into comprehensive, meaningful information, and enable its consistent availability across all of the delivery channels to internal and external constituents," according to a TIBCO report, "Using SOA to Cash in on Multichannel Integration."
A trailblazer in this area is The Huntington National Bank in Columbus, Ohio ($36 billion in assets). According to TowerGroup's Silva, "Huntington is the poster child of multichannel integration."
Dan Vermeire, SVP and chief technology officer for the bank, says a determination to improve the customer experience motivated Huntington to integrate its sales and service channels. "Huntington is incredibly focused on customer service -- on making sure that the things we do end up in positive experiences for our customers," Vermeire says. "We want to see things done consistently and accurately [across channels]," he adds.
"Banks have an intense number of ways in which we touch our customers. ... As those technologies evolved, it was not easy to integrate [them]," Vermeire continues. "Delivery channels exploded and customer experiences were starting to become disjointed. They weren't always receiving the same information or the same approach in service and delivery from one channel to the other." To clear up any customer confusion and create a more seamless experience, Vermeire says, he wanted an integration architecture that was designed specifically to deliver consistent information and experiences across the bank's channels.
Forrester senior analyst Mary Pilecki echoes Vermeire's sentiments. "The consistent customer experience is more targeted toward getting the same answer to the same questions," she says. Customers all have a preference for a particular channel, but no customer base will be homogeneous in its preferences, Pilecki observes. Therefore, banks should aim to provide a common experience across channels. The common experience can be delivered through a business process management (BPM) suite, Pilecki says, and SOA can enhance the BPM.
Huntington partnered with Columbus, Ohio-based software provider Synoran for its SOA platform. The Synoran solution enables Huntington to see a real-time picture of all of its customers across all of its channels, leading to a total view of the customer, according to the bank's Vermeire.
After Huntington's initial investment in SOA, the bank first integrated its self-service channels and then began to focus on the platforms used by its associates for sales and service capabilities, Vermeire explains. "We look at it as an overall business strategy and journey," he says. "[It's] a road map that's focused on customer needs and business changes."
A multichannel integration platform provides three major benefits: customer responsiveness, operational efficiency and a huge degree of savings by reducing errors, according to John Knightly, VP, industry and partner marketing, for San Jose, Calif.-based enterprise infrastructure software provider BEA. The banks that want a "walk-before-you-run approach," he says, start with a specific channel and specific goals. They build modular components and then realize that they can use those in other channels. "A more visionary bank" wants to do it all at one time, Knightly says.
Preparing for Growth
Waterbury, Conn.-based Webster Bank is an example of such a visionary bank. In early 2004, Webster ($18 billion in assets) decided to replace all of its core banking systems to support future growth. "We wanted an IT infrastructure that would support a bank double or triple our size," explains John Kershner, the bank's CTO.
In conjunction with the decision to upgrade its core infrastructure, Webster decided to implement SOA, Kershner says. When the bank selected Jacksonville, Fla.-based Fidelity National Information Services for most of its core banking applications, it was with the agreement that the vendor expose its mainframe systems to Webster through SOA, he says. "We require all of our strategic partners ... to expose their systems to us through Web services for easier systems integration," Kershner explains.
The bank evaluated a number of vendors for its SOA platform, including IBM (Armonk, N.Y.), TIBCO, WebMethods (Fairfax, Va.) and BEA, and then constructed a proof of concept for which the vendors came into the bank to design and develop an application to the bank's specifications, according to Kershner. Webster eventually chose BEA. "What set BEA apart was ... the fact they could bring in a small, knowledgeable team [that] could develop the code within the two-week time frame we allotted," Kershner says.
The BEA WebLogic Enterprise Platform is an open platform that integrates all customer touch points to deliver a consistent customer experience, BEA's Knightly says. The benefits of the infrastructure, he asserts, include obtaining a single view of customers, more-successful channel updates, integrated contact centers, streamlined account creation and improved cross-sales rates.
Over a 15-month period beginning in early 2004, Webster replaced its core banking systems, put in a new ATM system, installed the SOA platform and then integrated all of the bank's front-end delivery channels -- including ATM, branch, call center, Internet banking and voice response unit platforms -- back to the core systems through the SOA. "It's provided us the foundation and infrastructure to easily integrate new applications, to add cross-application functionality, and to add products and services more rapidly," Kershner says. "It has improved IT's ability to turn around projects much quicker by utilizing services that may have been developed for one channel or system to another. It's reduced the complexity of managing hundreds of point-to-point interfaces and has made us more operationally efficient by just managing one integration layer."
But Webster's channel integration efforts aren't complete just yet. "Our vision for multichannel integration is to enable customers to begin a process like a loan or deposit application in one channel and complete the process in another," Kershner says. "Our next steps are to do more business process refinements that improve our customer interactions," he adds.
"SOA is something that you implement because you plan to grow and change," Kershner says. "It helps you quickly adapt to business changes and business demands." Customers experience the benefits of SOA, he adds, in Webster's abilities to provide new products to the market faster than before, to provide more customer information to service representatives and respond more quickly to service requests, and to offer consumers more and easier ways to interact with the bank.
Kershner acknowledges that the path Webster took to integrate its channels is not likely to be emulated by many institutions, as it's not often that a large bank replaces all of its core banking applications at one time. Still, he recommends that banks tie an SOA implementation to the purchase of one or more new business or channel applications. "It is much easier to demonstrate the business case for SOA when you package it with other business functionality that can be delivered directly to the business lines," Kershner explains. "Spending money to integrate new business applications into an old point-to-point architecture is a waste."
Seattle-based Boeing Employees Credit Union (BECU) had a slightly more modest goal for its SOA initiative and multichannel integration, according to Kyle Welsh, director of technology services for the credit union. "We wanted to get to a hub-and-spoke architecture just so we could be more efficient, so when we rolled out products and services we didn't have to do redo interfaces all over the place," he says.
BECU replaced its core system and integrated its channels in November 2002. As a result, Welsh says, the credit union is able to greatly speed up its time to market for new products.
Welsh offers some pointed advice for other banks. "Don't try to boil the ocean," he says. "When you are implementing SOA, don't try to do it all at once." Only integrate the systems that make sense and those that will deliver the most "bang for the buck," he says.
The Payoff
Ultimately, regardless of the path taken to get there, multichannel integration pays off in higher customer satisfaction, says Frank Florence, VP and chief marketing officer for Chordiant Software (Cupertino, Calif.). "Consumers ... are more than ever prone to switch banks," he says. Integrating delivery channels creates a more-seamless cross-sell atmosphere, he says, promoting growth.
By making delivery channels user-friendly and seamless, banks will encourage customers to do more business with them, Forrester's Pilecki says. But banks also will incent staff by streamlining the process, she adds, as it will be easier for them to open new accounts, for example.
Channel integration also creates cost savings, Pilecki points out. Rules change a lot, particularly from a regulatory perspective, and a big expense is tied to that, she relates. But those costs can be cut if you only have to make the change once and it then can be applied across all the delivery channels, Pilecki notes. "Just by enabling a common process and being able to change that in one place reduces IT costs tremendously," she explains.
Still, multichannel integration really is about creating a better user experience to drive growth, says Corillian's Hart. It creates preference and differentiation, two holy grails in the financial services industry, he asserts.
Organic growth is driven by selling more to existing customers, TowerGroup's Silva adds. If a bank gives its customers consistent service that other banks can't deliver, "that will be the wow factor that will differentiate [it]," he says. *
Multichannel Integration: The Next Steps
Imagine that an online banking customer has a question late one night when checking his or her accounts. If that customer had the option of instant messaging a contact center representative and getting an instant answer to the question, that would make for a contented customer. Integrated multichannel platforms enable banks to implement such next-frontier technologies -- when their customers are ready.
Dan Vermeire, SVP and chief technology officer for The Huntington National Bank in Columbus, Ohio, says his bank's IT infrastructure is well positioned to support collaborative technologies, such as instant messaging, voice chat and ad hoc customer video conferencing. "We've got some small-scale chat capabilities in use," Vermeire says. When Huntington's customers demand those features to improve their interactions with the bank, Huntington is prepared to deploy them. "Stay tuned," Vermeire says.
While Huntington is preparing for the future, a small bank in Arlington, Mass., may be ahead of the pack. This spring, Leader Bank ($197 million in assets) began providing its customers with their bankers' AOL Instant Messenger screen names, The Boston Globe reported in an Aug. 12 article. Customers "can ask about anything from certificate of deposit renewal rates to mortgage quotes to information about their accounts," the article said.
Video conferencing, which is in use internally at many banks, also will morph into another customer touch point, many experts say. According to a Financial Insights (Framingham, Mass.) white paper, international banks are beginning to implement video conferencing for specific business purposes. For example, Banco Comercial Portugues (Porto, Portugal; US$95.6 billion in assets) uses video conferencing to discuss complex products with its customers, Financial Insights notes. --N.F.
November 1, 2006 at 07:23 PM in Financial Services | Permalink
| Top of page
| Blog Home
