Front and centre.

Technology Puts Customers at Centre of the Banking Relationship

Technology continues to drive a fundamental transformation of the financial industry in Canada and globally. The key to this revolution is not technology itself, but how it enables changes in the way that customers perceive and use financial services.

Today's customers know more and demand more than ever before as they look for the best value and for increased choice, control and convenience in how they access financial services. This trend will continue as tomorrow's consumers obtain even more sophisticated networking tools that will offer them more options for exercising their growing power in the marketplace. In addition to empowering consumers, technology is also making it easier for new financial service players, both domestic and foreign, to target Canadian banking customers.

To succeed in establishing and maintaining long-term relationships with customers, Canadian banks are in a race to become increasingly more consumer-centric. They are using technology to deliver low-cost, high quality, hassle-free products through easy-to-use, feature-rich channels that are consistent across delivery methods.

Leading the way

Canadians are world leaders in embracing electronic banking. Consequently, Canadians today have more convenient ways -- Internet banking, telephone banking and bank machines -- than ever before to manage their financial affairs. And while Canadians have been cautious about embracing other e-commerce applications, we have become the world leaders in embracing electronic banking.

The Canadian Banking Association (CBA) estimates that more than 85% of all banking transactions are conducted electronically through bank machines, debit cards, telephones and personal computers. According to the Interac Association, in 1999, card-based payments, such as Interac[TM] Direct Payment (IDP), surpassed paper-based payments for the first time as the preferred method of payment among bank ABM cardholders. As well, an Angus Reid study has found that Canadians are the leading Internet banking users at 17% per capita, while U.S. residents are in fifth spot at 13%.

The challenges and opportunities presented by the rapidly changing financial service landscape are forcing Canadian financial institutions to closely examine their electronic offerings, and continually evaluate and invest in new applications and infrastructure in an effort to offer the highly reliable and value-added services customers demand.

Enhancements to Internet banking

With the exception of depositing or withdrawing cash, Internet banking offers most of the daily banking services available at a branch, with the convenience of 24 hours-a-day, seven days-a-week access. Current online banking features include viewing balances and transactions histories, future and recurring bill payments and funds transfer between accounts. And bank Web sites offer one-stop resource centres providing convenient, anytime access to continually updated information on products, interest rates and online applications, as well as a range of calculators and interactive tools that can help customers make better financial decisions.

Although Internet banking offers a variety of services, it has yet to gain wide acceptance with consumers. Many analysts, including financial market researchers PSI Global of Tampa, Florida, predict that new features such as electronic bill presentment and payment (EBPP) will increase adoption of online banking. EBPP will allow customers to view and pay bills online. Currently, customers receive their bills by mail and then log on to a bank's Web site to arrange payment.

Until now many banks have been reluctant to invest in the technology required to provide electronic bill presentment because of a lack of a standardized system. A consortium of six major Canadian financial institutions called e-route, along with Mouvement des caisses Desjardins (a unit of Groupe Desjardins), is poised to overcome the lack of EBPP standards in Canada. With e-route, bills will be posted to a customer's bank Web site rather than mailed to their home. As customers log on to the site, they will be able to view their bills online and pay them instantly by moving funds directly from their bank accounts. By 2005, PSI Global estimates that one-fifth of all bills issued will be paid this way.

Banks will also soon offer applications to personal banking customers that were once reserved only for commercial clients. For example, many large commercial companies have an outsourcer process and scan their cheques. The companies then have the option of receiving images of the cheques on paper or a CD-ROM. Similarly, credit card sales slips and payments can be scanned and delivered to commercial clients. Modular upgrades will soon allow this same information to be delivered online to personal accounts.

New developments in imaging technology will allow customers who view their bank statement online to click on entries and link to exact images of cheques written on their account. Transaction histories will be available as soon as the transaction is processed, and images of statements will be available at the end of the process cycle. Customers will also have the ability to view credit card transaction slips and point-of-sale (POS) purchases online.

Telephone banking goes wireless

Over six million people are currently taking advantage of the anytime, anywhere banking access provided by telephone banking. Once customers register through automated telephone systems, they can access balances and transaction listings, pay bills, transfer money, place a stop payment on a cheque or a host of other services. Sales and service specialists are also available around the clock to help customers open an account, apply for a mortgage, apply for a credit card, set up an RRSP, purchase a GIC, or simply answer questions or provide information.

These functions are no longer limited to traditional phones. Wireless Web access on cell phones and palmtops will completely change the way we think about banking. According to a recent study by Strategy Analytics, by 2004 there will be almost 14 billion mobile transactions each year.

Bank machines -- not just for banking

With over 26,700 bank machines located across Canada, customers can access cash from any machine displaying the Interac[TM], Plus[TM], or Cirrus[TM] logo, regardless of the bank responsible for the machine. Most machines are located in areas with 7/24 access, allowing customers to access services well past regular banking hours.

In addition to standard banking functions, customers are increasingly being given the option to conduct additional services through bank machines. For example, soon customers will be able to examine all accounts -- self-directed RRSPs, mutual funds, and life insurance -- on the screen. As well, messages could appear reminding users of an upcoming birthday and provide the opportunity to purchase a gift. The cost of the gift would then be automatically debited from the account.

Such services are only advantageous to customers if they are available. The costs associated with network downtime can be enormous. The Yankee Group, a global research and consulting firm, estimates that the February denial of service attacks that plagued companies such as Yahoo, Buy.com, Amazon.com, E-Trade and eBay could end up totaling more than $1.2 billion US in lost revenue. Beyond the dollar figure, however, many banks are much more concerned with the damage such an outage would do to their reputation.

Maintaining such high availability networks requires specialized infrastructure, process and tools. Robustness is required in order to ensure high availability. This means rigorous change management processes, availability to deal with problems immediately, backup and redundancy capability, high security, and business recovery planning. It takes a huge amount of resources to offer all of these applications. By outsourcing their networks, banks are able to concentrate on the business process and customers while leaving the IT solutions to trusted partners.

Future trends

Financial institutions are continually exploring new technology developments in order to provide customers with the world class choice, convenience and reliability they expect. Future electronic banking services will continue to be customer-driven and technology-enabled.

Over the next decade, the biggest technology driver in electronic banking will be broadband, high-speed Internet access through an array of devices beyond the PC, including hand held devices, bank machines, phone screens, digital television and household appliances. Simultaneous voice and data transmission will enable consumers to talk to financial service specialists, while receiving and sending information displayed on the screen. Among the first services consumers are looking for on today's new Internet enabled wireless devices -- providing anytime, anywhere access -- are time-sensitive services such as banking, trading and investment services.

Web sites will become more customer-centric than product-focused by offering a customized experience and interactivity supported by enhanced customer care services provided by Web-enabled call centres. A first step in this direction is personalized e-mail, which will provide customers with product/service offers that are timely and tailored to individual needs. Customer relationship management (CRM) capabilities will enable banks to provide customers with the information and financial products that are relevant to their phase of life, making marketing programs significantly more effective.

Voice recognition technology will improve the client call experience and the speed of response by allowing customers to speak simple voice commands into their telephones. Customers will soon be able to access call centre automated response systems through these new voice-activated services to retrieve account information, pay bills, access real-time stock quotes and place trade orders.

Security will remain a key issue in the implementation of new technology applications. Biometrics -- computer recognition of distinct human characteristics, such as iris recognition technology -- could eliminate the need to remember passwords, PIN numbers or the need to carry a bankcard. New security solutions will include both encryption of data transmissions and authentication, so all parties in a transaction know for certain that the people they are doing business with are who they claim to be. Canadian banks are contributing to the development of secure e-commerce by offering businesses digital certificate trust services, which are becoming the standard e-commerce security products.

However, in the world of e-buzz, and in the future of electronic and mobile banking, it should be noted that paper is not disappearing. Paper financial transactions still represent a significant portion of both the volume of payment transactions as well as the value. According to the Canadian Payments Association, in 2000, paper transactions are projected to represent 36% of all transactions, in excess of 1.5 billion pieces of time-sensitive paper. In an effort to better service customers, banks need to remember that customers still use paper and need to implement the infrastructure to support both options.

The challenge for banks is to stay on the cutting edge of technologies that can reduce costs and add value, while staying in step with customer's needs as the convergence of communications technologies opens up a host of new options for customers to do most things differently. And, to offer the latest leading-edge banking solutions, financial institutions must continue to pursue effective strategic partnerships with IT industry leaders -- or risk losing their competitive edge.

Mike Somerville is the vice-president of INTRIA-HP Corp.