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Retail revolution

State-of-the-art information technology is transforming the experience of retail banking in Russia. Michael Imeson outlines the latest developments.
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Bank branches of today are almost unrecognisable from those of a few years ago. Their design has changed, their functionality is greater, their efficiency is better and, perhaps most importantly, the technology inside them is revolutionary.

Whether it is a self-service terminal, a bank clerk conducting a transaction on a computer terminal or invisible off-site processing, branch customers are being dealt with in a whole new way. Outdated technology is being replaced, the focus is shifting from transactions to selling, and branches are being slotted into a multi-channel delivery strategy.

What is more, surveys prove that customers like the new branch experience, while figures produced show that branch revenues are rising and costs are falling.

Branch renewal

Research firm Celent says that branch renewal, including upgrading technology, has been building momentum for a few years, but has taken off in the past 18 months. “There are long-term trends driving a revival in branch banking,” says analyst Anjalee Davis. “This will drive continued investment in next-generation branch applications and enterprise technology for the next five years.”

Most banks are phasing out their IBM OS/2-style branch operating systems and monochrome teller workstations and replacing them with Windows client-server technology. But a few – such as Citizens Bank in the US and Canadian Imperial Bank of Commerce – have leapfrogged the Windows stage and gone straight from OS/2 to internet-based architectures and branch applications.

Web-based systems allow full data and voice integration between branches, ATMs, call centres, internet and other parts of the bank. “Banks almost universally agree on the value proposition of a web-based architecture,” says Ms Davis, “but most are waiting for a few large banks to successfully implement such a system before they launch their own.”

Traditional branch systems consist of a variety of platforms and applications for data, teller transactions, lending and call centres, all of which have to be accessed separately. “These were sufficient when the branch’s role was almost entirely transaction-focused, but as branches become a key element of multi-channel delivery they are no longer up to the task,” she says.

New branch technology – whether client-server or web-based – allows the integration of customer information across all channels, quicker transaction processing and more effective cross-selling.

One of the leaders in this field is Florida-based Fidelity Information Services (FIS), which last autumn acquired WebTone Technologies, developer of the TouchPoint suite of software for the integrated management of teller workstations, call centres and internet. FIS combined this suite with its own Service Delivery application to create a new TouchPoint Solutions division this spring.

“These sorts of multi-channel solutions feature straight through processing for new accounts, full service capability for payment transactions, and they help the teller become a member of the sales staff,” says Ed Cano, a channel solutions product manager at FIS.

TouchPoint is a market leader in the US, with 35-40 bank customers. Although TouchPoint has yet to be sold outside the US, FIS is using its position as a major provider of core banking systems to banks around the world to promote it in other countries, including Russia.

Carl Rossey, a partner in Capco, the technology solutions provider, believes one of the biggest trends in branch technology in the next year or two will be “the seamless integration of product offerings, and an elaborate split between processing and selling”. Staff will find it easier to conduct a transaction for a customer and, armed with a CRM system on their display, will have a clear view, in real-time, of the customer and be able to sell them insurance or other products.

“Some banks can already do this, but most are still working on it,” says Mr Rossey. “But it is important that the teller be given proper guidance, and simple sales scripts.”

Self-service terminals

ATMs and other self-service terminals are becoming an important part of the branch. “ATMs are not only dispensing cash and providing basic account information, such as balances, but they are also accepting cheque and cash deposits, carrying advertising, selling bank products and allowing people to load up their mobile phone cards,” says Uwe Krause, marketing director, banking, for Wincor Nixdorf, the German provider of IT retail banking solutions.

Wincor Nixdorf launched a cheque and cash deposit module last December for its ATMs, which allows them to be upgraded to take cheques and/or cash. Customers need never pay cheques or cash over the counter. The amount of each cheque is displayed on the screen for the customer to confirm, and a receipt is issued showing the cheque image. The rest of the cheque processing is carried out electronically, all the way to being credited to the customer’s account within the bank’s normal timescales. With cash, the amount is credited immediately, as the module has built-in counterfeit testing.

Local partners

“We do a lot of business with Russian banks in conjunction with local partners,” says Mr Krause. Among the top 20 banks it counts as its customers are Sberbank, Rosbank, PromStroi-Bank (St Petersburg), Avtobank-Nikoil, Bank Baltisky, Gutabank, MDM Bank, Vneshtorgbank, TransKreditBank, UralSibBank, Masterbank, ZenitBank and SurgutNefteGas Bank.

US ATM manufacturer NCR, which supplies equipment to most of Russia’s largest banks, witnessed a sales boom last year and forecasts healthy growth for the years to come. “In 2001 we sold about 500 ATMs in Russia and the former Soviet Union, and in 2002 about 700,” says Konstantin Slashchev of NCR Russia. “But last year we sold 3500. It was unbelievable. For the next few years we think our sales growth will continue at around 15% to 20% a year.”

Russian banks first started installing ATMs 10 or 11 years ago, and there was steady growth until the 1998 financial crisis. From then until 2001, the banking industry as a whole stagnated.

“The first signs of improvement were seen in 2002. That was the first successful year for NCR in Russia and the former Soviet Union,” says Mr Slashchev. “But most banks still do not realise the full potential of self-service terminals.

“The public use them mainly as cash machines to withdraw their salaries. However, I’d say 10 or 15 banks can now see the incremental revenue benefits of ATMs as an interface between bank and customer, especially when they put them in airports, railway stations and department stores.

“They’ve just started to install ATMs that can take cash deposits. The branch infrastructure is still under-developed. There are not enough branches to serve all the customers, so ATMS are useful. There has been a growth in consumer loans, and people are starting to make repayments through self service terminals,” says Mr Slashchev.

Branch design

NCR is involved in projects with several Russian banks to install networks of its “integrated self-service branches”. Charlie Rohan, head of design at NCR Financial Solutions’ Design Centre, says the technology used is very similar to that in Western banks.

“As in most emerging markets, Russian banks don’t have a big legacy infrastructure,” says Mr Rohan. “It’s therefore easier for them to install new technology as it doesn’t have to fit with 15 years of earlier infrastructures and networks. They can leapfrog and get to a modern solution quicker.”

NCR’s integrated branch concept for Guta Bank combines traditional cashiers (not necessarily behind a screen), sales and advice consultants in open customer areas, and self-service terminals.

In banking hours all parts of the branch are open, with staff in the open areas directing people out of queues to ATMs or sales advisers. After the cashiers close, the sales areas may stay open until after normal business hours to cater for customers visiting after work. When they’ve gone home, the main part of the branch is cordoned off with doors, leaving the self-service terminals accessible from the street 24 hours a day.

Traditional branches in Russia look like those to be seen anywhere else in the world – big glass screens between customers and staff for security reasons. Alfa Bank Express, the new retail division of Alfa Bank created for private clients and small enterprises, has designed 40 branches without these screens. This not only breaks down physical and psychological barriers, but frees up more space for other uses, such as advising, meeting and greeting.

Tellers sit behind open counters. The money security aspect is dealt with by keeping the cash in teller-operated machines located in vault walls behind the teller. Express branches are open 8am to 8pm every day expect Sundays. Outside those hours customers use an access card to enter a self-service lobby, which contains two ATMs, a cash drop-box (particularly useful for retailers), a post box for documents, a telephone and an information terminal.

Networking technology

A number of technology vendors specialise in using the internet to network branches’ voice and data communications with a bank’s other delivery channels. Such solutions typically consist of internet telephony between branches and call centres delivered over wide area networks (WAN), internet ATMs and kiosks, e-learning programmes for branch staff, internet video surveillance, and wireless computer and phone networks within branches.

US company Cisco has developed a “Branch of the Future” concept which uses the internet in this way and which is being promoted in Russia and around the world. Jordi Ferrer, business development manager, Financial Services, EMEA, Cisco Systems, says the benefit of having both branch and call centre telephony on the same internet-based system is that it creates a seamless network where all calls are recorded and customers are less likely to get lost in the system or cut off.

Wireless internet phones for staff have benefits over conventional or mobile phones. “The phone moves with the employee, who can use it in any bank location, so customer service goes up,” says Mr Ferrer.

“Conversations with customers can be recorded and checked with the customer relationship management database, which they cannot do with mobile phones.”

Another development is the increasing provision of wireless laptops to bank staff. Laptops installed with GPRS or Wi-Fi cards, and with advanced security systems to protect them from hackers, can be used to access bank voice and data systems via mobile phone or wireless network connections.

Networking technology also allows promotional material and advertising to be placed on large plasma or LCD screens in banking halls, which can be changed throughout the day, reducing the need for paper leaflets.

Security options

Banks traditionally have their security cameras linked to video tapes or a digital data recorder, and then have to keep the storage device in a physical location. With internet camera surveillance, the cameras can be monitored from anywhere, the data stored on computer automatically and be easily retrieved. In an emergency, the images can be beamed instantly to the police station or the patrol car over the voice and data network.

“You can take internet protocol security even further, and use it to control access to doors, alarms and safes,” says Ferrer. “Employees have a card instead of a key, which allows them access to all they are entitled to. Once they leave the company, the card can be made invalid instantly, which gets round the problem of keys being kept or copied.”

Cisco has had an office in Moscow since 1995, its 100 staff being almost entirely Russian. It has a number of Russian bank clients for its branch networking technology. It also has offices in Ukraine and Kazakhstan.

“I was in Moscow a few weeks ago when we gave a presentation to 80 Russian bankers on the Branch of the Future,” says Mr Ferrer. “We offer the same technology there as in western Europe and the US. But in Russia they have the opportunity to advance further because they have fewer legacy systems.” Lagging behind in branch technology has proved to be a blessing for Russian banks, says Mr Ferrer.

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