01 October 2005 Features

 

Small fish, big pool

Competition to capture and retain retail customers is intensifying. Sherree DeCovny reports on how technology can help

Most retail banking customers today started out as an accountholder at a small bank and ended up as a customer of a mega-bank. Our banks have consolidated in the hope that scale will deliver extra profitability. But let’s face it. Unless we are shareholders, we couldn’t care less about our bank’s bottom line. In fact, we probably struggle to understand why our banks should be making such huge profits in the first place. We just want consolidation to result in better interest rates, lower charges and improved customer service.

Here is what really happens when the sign over the door changes. Our experience as consumers tells us that things that are bigger tend to be more impersonal and more difficult. We have to learn to deal with new layers of people we did not have to deal with before who may or may not, by the way, be located in our country much less our city. If we are lucky, we can understand what they are saying on the other end of the phone.

Banks of all sizes have benefits to bring to the table. Smaller banks have more of an opportunity to know their customers — often by sight. But as Ian Benn, chief marketing officer at Misys Banking Systems, points out, the downside is in rapidly emerging markets like Central and Eastern Europe, where customers can only do business with their branch. “You can’t withdraw money from any other branch. You can’t get any information about your account. You certainly couldn’t borrow any money,” he notes.

Customers of megabanks, on the other hand, have access to multiple distribution channels and a much larger branch and ATM network. Theoretically, that should result in more convenience and better customer service. On the negative side, banks start dealing with trends rather than people. They have to be much sharper on analytics, because if they get it wrong, they start targeting people inappropriately. That causes real barriers because people stop wanting to hear from them.

In short, the challenge for banks is to find a way to maintain personal relationships with their customers while building the economies of scale that make sense on paper for Wall Street. They need to explain to customers how the changes brought about by consolidation affect them. Most importantly, customers need to believe they are being delivered a better service as a result of consolidation.

That is no easy feat considering they are probably operating on a range of different systems. The longer a bank has been around, the more likely it is it will have different generations of infrastructure ranging from technology to buildings. That makes it difficult to present one face to the customer. It also increases the cost of delivering customer service.

There is no shortage of horror stories illustrating that phenomenon. For starters, one bank created a new product to sell credit insurance. The marketing department defined the target audience as people who are planning to take out a loan, have a particular income and a regular salary. The system that they used for selling the loans worked on a data warehouse, so they had a lot of information about customer history and behaviour. But the credit insurance system was not connected to the bank’s live transaction system. The bank was lending money to people who had lost their jobs and did not have an income anymore, because they were using data that was a few weeks out of date.

“It doesn’t sound like very much, but when you’re looking at a national campaign, you can imagine that translates into quite a lot,” says Benn. “And if you just lost your job and somebody’s offering you a loan, why wouldn’t you take it. So the take up was high.”

Another large bank has completely separate systems for credit cards, loans, current accounts and mortgages, and there is no link between them. The bank has a CRM system that tries to interact with the four systems, but it only does so on an informational basis. A customer service representative can look at the CRM system and see that a customer has a credit card, a mortgage and a savings account, but she has to go into the individual systems to retrieve the balances on those accounts.

When banks have multiple systems that perform the same function, call centre agents must be trained to use each one. That increases the capacity for getting it wrong the first time and contributes to additional calls, letters and complaints. “First time resolution is a really important objective for anybody who has interaction with a large number of customers,” says Alastair Bathgate, managing director at Blue Prism. “Costs increase as a result of poor customer service.”

No bank is going to replace all of its IT systems in one fell swoop because the costs and the risks are too high. But that does not mean all is lost. They can leverage Java-based enterprise platforms, service-oriented architecture and the compute power of packaged software to analyse real-time data from all the channels and understand who is likely to buy a product. Then they can deliver that information to the teller or call centre agent who can then maximise those few seconds with the customer. If they get it right, they have an opportunity to build a better relationship with the customer, who may come away feeling that the bank knows who they are and what they need.

Technology also exists that enables banks to take a tactical platform approach to business process automation. Blue Prism wrote macros for the collections division of one large UK bank so the software replicates what a user does without making any mistakes. For instance, it automatically sweeps the current or savings accounts of customers that are in arrears on loan payments. If funds are not available on one day, it will check again the next.

This approach was quick and inexpensive to implement. The bank is collecting an additional £4 million a year by doing this process repetitively, and it is offering more efficient customer service. “The software’s pre-determined,” says Bathgate. “It doesn’t take toilet breaks, and it doesn’t go home at 5:00. So you’ve got so much more production out of it. And also, you can manage the peaks and troughs better.”

Some banks are using automated contact solutions. Instead of having humans attached to an autodialler making calls to millions of customers, banks can automate that communication. The computer can speak to the customer by name using a combination of pre-recorded text to speech interactions. “The computerised interaction may be a cyber agent, but they can interact with you just like a very tightly scripted human agent,” says Vytas Kisielius, president of Adeptra, which offers such solutions.

Adeptra’s integration capability can draw the data from a few different bank systems. The company works with banks to find out how they segment their customers. It scripts the auto resolution interaction so it does not make an offer to somebody that should not get it.

Admittedly, most customers would prefer to talk to a human instead of a computer. But customers’ tolerance of an automated system increases if it is delivering something of value. Adeptra’s market research indicates that around 97 per cent of consumers fully accept a computer-based system that is used to combat fraud and protect the integrity of their credit card account, for instance.

“Our hang up rate is incredibly low,” says Phil Wilson, chief executive of Adeptra. “The first five seconds is incredibly important in getting the information across that this isn’t a sales call. This isn’t a nuisance call. This is something of value to you as the listener.”

One also could argue that automated solutions make it easier for banks to comply with regulations than if they are using live systems. “Our computer can’t ad lib, can’t have a bad day, and can’t have a bad attitude,” Kisielius adds. “Even if the customer wants to yell at us, our computer doesn’t take offence. So in one sense we’re better because we can’t break the rules.”