Retail banks promised their customers multi-channel access to their accounts many years ago, so why has this not progressed beyond the preserve of the wealthy? Angus Hislop reports.

In 1997, Coopers&Lybrand’s international banking practice produced some seminal research (Tomorrow’s Leading Retail Bank) predicting that the effective management of multiple distribution channels would be the key challenge for retail bankers in the first decade of this century. They foresaw an era in which all customers could gain access to the right financial expertise “anytime, anywhere, anyhow”. Yet in 2004, only the wealthy with 24-hour access to their private banking team benefit from such a vision. The rest must put up with unanswered phone calls and e-mails, constant handovers to see the mortgage or investment expert, and waiting to be put in touch by phone or e-mail with “somebody who can help”. Why has there been so little progress towards joined-up, “anytime, anywhere, anyhow banking” – and is it about to change? Are retail banks about to move from strategic management of multiple channels to real cross-channel collaboration aimed at meeting customers’ growing expectations? Multi-channel progress Progress has been slow for a number of reasons. Customers have taken to multiple channel banking faster than expected but have hardly reduced their use of the branch – more than 50% use three or more channels (in particular branch, ATM, call centre and web) on a regular basis and only 10% never use the branch. But the infrastructure and applications supporting these channels across the various products are different and expensive to link together. These difficulties have been compounded by an obsession with cost reduction, which has driven a wave of domestic mergers, adding further complexity and shunting service enhancements further down the agenda. Three things are now changing. First, service quality is back at the top of the CEO’s agenda as the ‘easy’ sources of cost reduction disappear and the potential for large, transformational domestic mergers recedes in most countries. Leaders [Wachovia among them] are making customer satisfaction and loyalty key drivers of their future investments as they gain more information on the strong link between such measures and incremental revenue. Second, there is a growing realisation that more and better customer contact translates into improved satisfaction and loyalty and can thus drive customer revenues. For example, BNP Paribas estimates that an increase in proactive customer contact from annual to quarterly leads to a six point improvement in customer satisfaction ratings. Furthermore, recent data from US research firm Portland Research Group shows that customer purchase intentions plummet from an average of 64% to 48% once more than one hand-over is made either in the same channel or between channels. Unfortunately, experience with two major UK banks reveals that about a third of calls are not dealt with immediately or at first hand-over and branch staff estimate that some 40% of leads are lost if customers are asked to return to see a specialist or are promised a follow-up call. Better communications Third, a new communications technology has emerged which, when combined with changes in process, enables more effective customer contact both within and between channels. Called IP (internet protocol) telephony, it allows convergence across networks – voice, data, video, storage, etc – at a cost that can make anytime, anywhere, anyhow banking a reality for most customers. It is often referred to as converging digital technology, in which telephone, computer and TV/video functionality come together in the same piece of equipment and are linked across the same network. The most modern mobiles already show how this works – albeit with rather basic quality – at the consumer level. Service quality for corporates in converged networks is now up to virtually the same standard as individual standalone networks. Linked to these developments is the rapid take-up of broadband, whose speed makes the wider use of functions that demand high bandwidth, such as video, more practical than in the past. Network power As a result of these changes, retail bankers across the world are beginning to recognise that networks matter. In the past, business leaders did not care much about the networks used as long as they worked and IT managed them at a low cost. Now they are beginning to realise that policy decisions on future networks can have a great impact on the functionality – hence revenue potential – and complexity – hence costs – of their operations. As a consequence network decisions are too important to be left to IT or the outsourcer (see chart).

Banks throughout the world are at various stages of implementation, conscious of the need to prove robustness, scalablity and security before full roll-out. In the US, JPMorgan Chase is at the forefront, in the UK, Abbey is investing most heavily and in France, BNP Paribas and Crédit Agricole are taking the lead. In practice, how does this help banks to manage multiple distribution channels more effectively and ultimately achieve full multi-channel collaboration? Now if a customer asks for advice about a mortgage or investment, they are asked to make an appointment, probably in another branch, or are promised a call later. But if the bank was enabled with IP telephony and the processes adjusted, the teller could simply patch the customer through to an expert who could speak to them on video in a private room with all the relevant data at their fingertips. And particularly valuable customers would be allocated the most experienced adviser. Credit Suisse is already using this technology to great effect to support credit sales in car showrooms, and Credit Agricole uses it in country branches where access to face-to-face expertise is difficult or expensive. Service enhancements There are other ways in which service can be hugely enhanced. Cameras in branches linked to the same single network can be used to observe queuing patterns and adjust staffing or to support sales training, as is common among retailers. Call centres need no longer be the same monolithic, conveyor belt operations with high staff turnover and generally poorly paid, inadequately trained staff that are typical today. In future simpler queries may be directed to offshore centres with other calls and e-mails dealt with by better trained staff who are able to provide answers immediately or at one hand-over in virtual contact centres. These “centres” can be networks of smaller units or operators working partly from home or the branch – all using the same converged network and with access to the same customer data. When a call is received at the branch, home or call centre, the phone rings and displays relevant customer data. Calls need no longer go unanswered; the customer is always dealt with in a manner consistent with the priority that has been assigned. Compliance can also be enhanced because more sales and service conversations will be digitally recorded, allowing easier and less expensive retrieval and access. Retrieving details of conversations – who said what to whom, when and with what data – will be no more difficult than retrieving old e-mails. As banks typically are unable to provide incontrovertible proof of correspondence or conversations in 30%-40% of complaint cases, there can be considerable benefits in reducing the cost of complaints or proof of compliance with regulations. The areas where converged networks can have the biggest impact on reducing costs and improving sales productivity in retail bank branches are summarised in the table.

Behind the times Not all banks understand the critical importance of such communications technology. Many have only recently invested in traditional PBX networks or are locked into leases and baulk at the cost, even when recognising that total cost of ownership is 10%-20% less than the old separate networks. Others have vested interests in the different channels and networks fighting to retain their independence; in such cases there will be references to service standards and uncertain reliability in IP telephony. As experience is gained, such concerns diminish and it is now generally recognised that voice quality is similar to traditional standards and that flexibility and resilience is higher. Some banks are concerned about the cost of training staff and re-engineering processes that are required if the business wants to reap the benefits of this improved telecommunications capability. Or they may have lost much of their ability to influence outcomes because network management has been outsourced without due regard to safeguarding innovation potential. However, banks that realise that strategic management of multiple and separate distribution channels is insufficient for today’s customers are finding ways to overcome these challenges. They realise that real cross-channel collaboration in the interest of the customer can only work when converged communications networks are in place. They are becoming an essential prerequisite for success in retail banking. Angus Hislop is head of European financial services at Cisco Internet Business Solutions Group


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