Juggling customer access channels will be crucial in a competitive world. Joy Macknight finds that there’s a need for innovative approaches
Many, if not most, financial institutions have been talking about the multichannel approach and the need to improve the whole customer interface for years, but very few have really done anything about it because most have found that a lot of their applications were channel specific. The difficulties lie in bringing together the business silos, not just the technology silos.
“On the business side, the biggest challenge is historically different channels have been owned by different business players and different products have been owned by different lines of business within the bank. So achieving the vision of multichannel has got political aspects to it within a bank in terms of who owns it, and if it is owned by someone who works across the teams, how do they get buy in, etc, from the different teams,” says John Knightly, vice president of industry marketing at BEA, an application infrastructure software company.
From the IT perspective, the biggest challenge mirrors the business challenge for the IT systems have also grown up in a silo fashion. Banks managing multiple channels face major technological challenges such as coping with inflexibility of their legacy core systems and integrating the channels from the front through to the back end.
Chris Skinner, associate director of payments and retail banking at TowerGroup, believes that the discussion surrounding multichannels is the same as the debate around core systems. “The core renewal discussion is exactly the same thing as saying we’ve all got this legacy, multichannel application networking. What you really should be doing is cleaning it out, refreshing it, making it sound smooth, agile — that is the challenge that most of the banks are taking on right now.”
Over the past 18 months, there has been a resurgence in attempts to transform multichannel approaches as banks started to look at point solutions to improve what they had, and others started working to a wider implementation around the whole technology front to channels at the other end of the spectrum. The resurgence came after the ‘end of branches is nigh’ hype when most banks woke up to the fact that, as they open new channels, old channels do not just fade away to nothing. Adding another channel does not necessarily, by default, generate the bank more business.
Michael Engel, director of products and solutions development of the banking division at Wincor Nixdorf, says: “Existing channels will not go away. With internet banking, most of the analysts said this is a death for branch banking. The reality is that the branch is back. So you have added an additional channel and the question is: what have you gained? Especially if you have channels that are not connected with each other — they are not allowing you to do cross-selling or cross-channel communication.”
Landesbank Baden-Württemberg is using Wincor Nixdorf’s ProClassic/Enterprise solution to bring together direct sales channels, such as the non-cash area, internet banking and its stock brokerage system, which had grown separately over the years. It is also taking the opportunity to replace the IBM OS/2 operating system. A basic principle was to return all bank-specific functions from the middleware back to the host where the account systems were already located. The bank’s “Account Manager” self-service terminals are now connected via Wincor Nixdorf’s PC/E.
Hubert Jörg, deputy director of IT and organisation at LBBW, says: “We have reduced operating costs mostly in our daily operations. The level of required support has dropped by around 40% thanks to higher stability and more efficient distribution of maintenance costs for central components on two direct sales channels. Applications are developed only once and can be used not only for the direct sales channels, but also for self-service.”
Ultimately, the business case stems from whether the bank can get a productivity gain from the strategy that its IT division is executing. Nigel Pinches, retail banking branch transformation executive, IBM Financial Services Sector, says that this is about getting a bit of space at the customer interface, whether that’s the traditional counter, the call centre, self-service, or the internet, and inject into that space some sales time. “There are a few words that have cropped up in the last six to nine months around ‘smart banking’ — smarter banking, profitable interactions, a more powerful customer experience,” he says.
Smart banking is about greater customer control, or more accurately, customer segmentation — grabbing the customer, increasing the wallet share of each customer and making better use of the customer’s data across the operating divisions and across the products. “I think what is cutting edge at the moment is the ability to segment your customers and effectively provide them with products and services in the way that they want at a price that you can afford,” says Simon Kent, head of retail banking, Troika, a UK financial services consultancy. He believes that the issue is if the banks price a product to go through a direct channel and that product ends up being sold through a face-to-face channel, then the cost model is wrong and the product will not be profitable.
But smart banking is also about retaining customer loyalty in a climate where most consumer customers bank with at least a couple of banks and corporate customers can bank with more than 20. Phil Head, UK business development manager for financial services, BEA, likens it to a leaking pipe. “If a customer applying for a mortgage, which must be one of the biggest transactions over the website, gets stuck and drops off, then that’s a big loss. If you give them the ability to punch a button and have someone to talk to them who is looking at exactly the same screen, suddenly their half a million dollar mortgage that they are just about to walk out of can perhaps be rescued,” he said.
Marchai Bruchey, vice president of marketing and alliances at Kana, describes the process as an escalation pathway. “The question is how do you integrate all these channels so that when you do have a customer that uses multiple channels, that you have an agent that has a view into what they have done across the enterprise - so that the interaction that they have with you is a seamless interaction. So if I am in one channel and I don’t get an answer, then I escalate to another; but when I escalate, the advisor knows what has gone on before.”
US retail giant Wachovia provides mortgage customers the ability to use on-line chat while going through the mortgage application process with Kana Response Live. This integrated system provides customers with the personal assistance they need to get their questions answered without having to abandon the website and make a phone call. It has led to a more productive experience and therefore leads to less customer abandonment, less customer frustration and higher transaction completion, says Wachovia.
The channels and the channel extensions haven’t finished. TowerGroup’s Skinner says that the key is having a clear plan that’s aligned to the business objectives, so the bank knows what to keep, what to throw away and what to outsource. “The worst thing is inactivity and that is the major challenge I find in the industry, the inertia and the cynicism that means look and see, but don’t do anything. They just need to do something because if they don’t others will change them, such as regulators and customers — customers will hit them over the head with a baseball bat.”