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How Internet Technology Can Deliver 21st Century Banking?

Bankers who dismiss the Internet as last year's hype risk missing a major opportunity for improving their operation and nurturing their customers.

Lately, bankers have been known to heave a weary sigh when the Internet is mentioned. At this point, they are experiencing disillusionment about the Internet as a business channel, because the savings once promised from "e-banking" have largely failed to materialise.

To paraphrase Mark Twain, announcements of the death of the branch network have proved to be greatly exaggerated. Banks have found that, attractive as their Internet banking capabilities may be, they in no way replace the branch network. Meanwhile, "virtual" Internet banks - those with no bricks-and-mortar element - have struggled to establish their presence. Some have capitulated and set up branches or at any rate ATM networks of their own to create a physical "footprint". Others, such as Wingspan.com of the US, and First E in Europe, have closed down or significantly scaled back their operations.

Bankers who have seen Internet technology as simply another way of getting new customers are understandably disillusioned. But this disillusionment could play into the hands of their competitors who have realised that this same technology provides the architecture for giving better, more targeted and more effective customer service .

Through astute use of internal IP (Internet Protocol) networks, retail banks now have an opportunity to transform themselves into "virtualised banks": organisations which transcend geography to optimise their use of all their resources, but particularly of information and human expertise, for the benefit of both themselves and their customers. The virtualised bank can offer each customer a service tailored to their needs, whether they choose to make a phone call, go on the web, or drop into their local branch. This way, customers will feel valued, because at last they really are being treated as individuals.

Why virtualise the business?
What do we mean by virtualising the business? Using the same IP technology that underlies Internet banking services, but deployed within their existing organisation, traditional retail banks can link all their resources together electronically. Geography becomes unimportant because resources can be made instantly available at any location where they're required. A customer needing advice on a particularly obscure type of mortgage, say, can be put straight into contact with the bank's expert on that product, who is instantly provided with all the background to the customer's enquiry. The fact that the customer is in London and the expert in Aberdeen doesn't matter a jot.

In this way, banks remove the barriers to providing customers with the best possible service, and do so at the lowest possible cost. Every member of branch staff becomes part of a "virtual call centre", and every call centre employee is part of a "virtual branch".

Banks are already getting a small taste of the benefits of virtualisation with their existing contact centres. These allow customers to access the bank's; its agents and advisors; regardless of where the customer is at the time. Instead of duplicating those resources at every branch, the questions and requests are fielded by those at the centre.

The disadvantage of today's contact centres, though, is that they tend to place too many resources at the centre. It's notoriously hard to retain call centre staff: annual attrition rates there can be 30-40% or higher, whereas in branches it can be 3-4% or lower. So staff in branches are typically not just more loyal, they're also more experienced. In fact, they're the type of people that customers love to deal with. But, at the moment, customers are usually discouraged from speaking to these people, certainly on the phone. Typically, the only time they're allowed to speak to them is when the call centre agent can't answer their call; perhaps because it concerns a regulatory or international matter. Then the customer is sometimes given contact details of someone at the branch, with whom they have to place a separate call. All of this can create the impression that the bank puts its own convenience above the customer's.


Meanwhile, resources at the branches are not being optimally used. Personal bankers in branches often spend less than a quarter of their time dealing with customers, and the rest either in administration or, more likely, in waiting for their next client. Yet these are highly-trained and well-paid people, employed specifically to deal with clients. What a waste.

How virtualisation makes the most of resources
The solution to this conundrum of misplaced and underused resources lies in virtualisation. Imagine that you have attached all the bank's locations and resources to your IP network. Now you have the ability to move around not just phone calls or e-mails but both, together with any associated documents, images, and video traffic, to wherever they can best be dealt with. Instead of simply routing all calls into the call centre, and all the in-person customers into the branch, as happens at present, you can then route either to the person who's best equipped to deal with their need.

The strength of virtualisation is firstly that it gets work done by those best equipped to do it, and secondly that it avoids waste when resources are idle or used inappropriately. You can still have your contact centre fielding basic enquiries and transactions, but more challenging ones can be passed directly to a branch staff or product specialist without the need for the customer to call in again.

Making it easier for the customer to buy
Extending IP networks throughout the bank makes it easy to give on-line customers, too, access to all available resources. That's significant when you consider that even the most enthusiastic on-line customer is unlikely to complete a purchase of high-value or complicated product on-line. They will often research their mortgage or insurance policy on-line, but in the majority of cases closing the deal only happens when they go into the branch or phone up an independent financial adviser.

That barrier to closing can be removed by integrating web services with telephony. Suppose that after researching the product, the customer can press a button and hold a telephone conversation with an expert adviser: they are then much more likely to buy on the spot. This technology can already be seen in a non-bank context on www.landsend.co.uk where you can click a button on the web page and get a call from an operator who is looking at the same page as you. The operator can manipulate the web page and even send new information to the customer in real-time over the web.

Financial institutions will soon be adopting similar modes of "web collaboration"; and IP networks make it much more feasible to have the right person on the end of the phone. This technology already exists; and as bandwidth prices come down it will be feasible to substitute a videoconference for the telephone call; more persuasive still. Offering web site users the possibility of human interaction is a critical weapon in making customers feel that their individuality is recognised and valued by the bank.

The beauty of virtualisation is that customers can "come in" whichever way they like; in person, by phone, over the web; and still be given access to the same knowledge and capabilities. Allowing them to use multiple channels simultaneously, such as the phone and the web, makes for an intrinsically preferable experience, since customers are known to like mixing and matching channels. And integration between channels allows the bank to show it knows exactly what business the customer has done to date, regardless of what channel they used, leaving the customer with a much better impression; delivering, in fact, some of the benefits promised, but not always delivered, by CRM.

Why it has to be IP
It's clear that Internet technology holds the key to virtualisation; in fact there is no other candidate. What makes Internet technology so powerful is its ubiquity, and in particular its ability to carry any type of traffic over a single network. Accustomed as we are to separating voice and data, this idea takes some getting used to. But the fact that Internet telephony; "voice over IP"; can deliver substantial cost savings over conventional telephone networks through allowing the rationalisation of separate data and voice networks makes it well worth trying. And that's before we even consider the immense customer service benefits of virtualisation.

Summing up the benefits
Virtualisation makes for happy managers, secure in the knowledge that their resources are being used optimally. It makes for happy workers, putting their hard-won expertise to appropriate use and with all the right information on hand.

And most of all, it makes for happy customers. They no longer feel they are being fobbed off with a call centre agent when someone in their branch would deal with their query more efficiently: they automatically get to talk to the best-qualified person for any given topic. And because their query is accompanied by all relevant information about them and their dealings with the bank, they feel they are being treated as human beings.

It's also possible to differentiate the level of service that a customer receives according to their importance to the bank: technology makes it possible to ensure that if there should be a telephone "queue" to reach a particular resource, the high-value customer goes to the front of it.

Time to act
Branch networks are here to stay; the Internet is obviously not going to put branches out of business. But Internet technology, too, is here to stay. It's time to think about how the two can work together to the benefit of the bank and its customers.

So why aren't banks already taking action on virtualisation? The early adopters are, in fact, just starting to, with US banks like Wells Fargo and American Express actively developing integrated IP networks, and a number of large European banks also in the early stages of deploying the basic infrastructure required. The Spanish giant BBVA is rolling out internet technology throughout its 9000-branch Spanish and Latin American network, whilst in France BNP Paribas is installing Cisco's intelligent routing software Intelligent Contact Management (ICM). ICM will work with the bank's CRM systems to send customer calls over its IP network to the most appropriate agent, whether this agent is located at the local branch, in a specialised group within a call centre, or even in an outsourced service provider.

It's understandable if other banks are hesitant: they have a lot invested in the last generation of telephony equipment and may take some convincing that upgrading to IP is worthwhile. This is a reasonable stance if you think of an IP network as just a "better mousetrap". It's only when you realise how far virtualisation is going to transform business that delay starts to seem less reasonable.

The trouble is that installing an IP network takes time. To stay abreast of the competition, banks need to get started now. This time, they can't afford to wait and see what everyone else is doing.


Graeme Hosking
Retail Financial Services
Cisco's Internet Business Solutions Group




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