Bank's network competes with industry's biggest and best.
The divestiture of the Bell operating companies (BOCs) by AT&T has fanned the flames of a trend in banking communications. An increasing number of banks, large, medium and some small, are installing proprietary data and voice communications networks. The incentives are cost and convenience.
Rising utility rates, changing service levels, non-standard operations procedures and uncertainty regarding the future of BOC utilities are forcing more and more banks to seek alternatives. Rather than leasing lines, modems and multiplexers from AT&T, many banks are now buying network hardware, software and transmission equipment from independent vendors. The objective is to internalize and control the communications function.
An additional incentive is competition. The banking community is facing aggressive competition from brokerage firms, insurance companies, and even from non-traditional competitors such as Sears and Shearson American Express. The focal point is increasingly on delivering service, as well as on financial products. Thus, the need for more-effective, cost-efficient communications.
National Westminster Bank USA (Nat-West) has decided to compete by creating a multifaceted private communications network. We've installed a state-of-the-art network control and management system, a proprietary microwave transmission network and a proprietary voice communications network, plus built-in redundancy for fail-safe operation. Together, these networks make NatWest nearly independent of the utilities and ready to compete on a network service level with some of the largest financial institutions in the world.
With total assets of $9 billion, NatWest is a medium-sized US bank whose communications network rivals those of the 10 largest banks in the world. The network command center houses an Infinet 90/10 Network Control and Management System, as well as Infinet modems, multiplexers and other communications network devices. In addition, we've purchased Northern Telecom SL-1 PBXs, dedicated parallel Tandem computers and extensive peripheral equipment to support these systems.
The Merger of Voice and Data
Traditional data and voice communications are structured on separate networks. The two areas of communication were developed separately, and are perceived as having different system requirements. However, NatWest has merged these two network capabilities and controls them from one command center that uses common facilities and, where possible, common hardware to achieve tremendous efficiency and economy.
The installation of proprietary voice-related hardware alone has resulted in voice-transmission-equipment cost reductions of 50 percent. The ability to predict and control future costs further enhances these savings. For example, the previous phone company annual rate increases were in the double digits, while the PBX operational costs for 1984 increased only six percent, with a projected decrease of 16 percent during 1985. Voice and data use the same lines, circuits, common communications hardware and personnel for even-greater economies.
Data communications at NatWest are characterized by many of the usual banking requirements, including ATM, EFT (electronic funds transfer), teller and "back-office' networks. It's the way in which these services are accommodated by the communications system that makes NatWest unique.
The teller system was designed to increase productivity, but the installation has some hidden benefits relating to service and competition. Banking is a transaction-oriented, volume-driven, people-intensive business. Customers tend to stay with a bank that provides value, convenience and efficient service. The personal interface between the customer and the bank is the teller, and perceptions at this level are critical. NatWest tellers at 140 branches now perform more transactions, in less time, through on-line terminals served by a nearly nonstop network. At the touch of a button, they can determine an individual's total financial relationship with the bank. The problems of leafing through papers, making phone calls to check balances deposited in other branches, or even worse yet, failing to complete a transaction, have been virtually eliminated.
When calls have to be made, NatWest personnel use the SL-1 PBXs, which have been integrated with a proprietary microwave system linking the bank's major population centers in Manhattan and on Long Island. The decision to install as microwave system was prompted by the need for tighter control of escalating costs from New York Telephone (Nynex). NatWest selected Farinon, a subsidiary of Harris Corporation, to supply a microwave system configured to its needs. ITT supplied the switching equipment, and Data General supplied an Eclipse computer on which NatWest developed a system to log all traffic in order to monitor and allocate costs. As might be expected, the system is totally redundant. Primary voice communication is through the microwave system via rooftop digital radios. Redundancy for part of the network is provided by a backup fiber-optic cable network. This system is computerized to automatically switch in the event of malfunction.
To NatWest, its personnel and customers, the advantages are convenience and efficiency. Whereas the addition of a conventional telephone line might take 30 to 60 days, we can expand our own microwave system in one or two days, and can thus be more responsive to customer needs. Further, the cost of a telephone circuit is approximately $6,000 to $12,000 a year, whereas a microwave circuit has a one-time cost of $1,000 to $2,000.
Now that data is being transmitted over the microwave system, the advantages are compounded. Essentially, the ATM and teller-terminal traffic are operating on a proprietary utility 24 hours a day. Through equipment segregation and enhanced backup capabilities provided by dial backup modems, downtime associated with communications components has been reduced to approximately four-tenths of one percent. On-line teller traffic is operating at 98-percent availability, including scheduled downtime, while the ATMs being used are operating at 99-percent efficiency.
Perhaps the electronic-funds-transfer application places the highest demands on the system but benefits most from the proprietary features built into the data communications network. The NatWest system supports a wide variety of EFT transactions worldwide. Of primary importance is the daily domestic and international transfer of more than $11 billion, which requires a fail-safe system. To prevent failures of enormous consequence, NatWest has installed multiple Tandem computers for redundant transaction processing. Additionally, the 90/10 network control and management system provides the ability to monitor the entire communications network and detect deteriorating performance from any component. In the event of malfunction, the 90/10 system will enable NatWest personnel to respond in a controlled manner to recover the system, rather than react to a technical and financial crisis. In fact, the system provides automatic monitoring of the network so that hard failure can be completely diverted. In operation, the EFT network has achieved an uptime rate in excess of 99.5 percent.
Through built-in diagnostic routines, network maintenance has been totally automated. In addition to providing a large measure of security to the EFT network, the control system reduces the need for and the cost of service. The system operates through intelligent modems to monitor and test the entire network. Built-in diagnostics make each of these modems a remotely controlled sensor continuously reporting the results of automatic tests back to NatWest's command center. In this manner, the bank can identify potential problems through alarm and trend analysis.
In turn, even a component problem can be identified and traced back to the vendor for replacement or for an escalation in service. System reports of vendor response and restoral time to outages, mean time to repair and other parameters are maintained in a historical data base. Color-graphic management reports can be generated for trending information at a glance.
All diagnostic data is transmitted over a dedicated, frequency multiplexed, low-speed side channel. In effect, the diagnostic network is overlaid on the main data channel for comprehensive monitoring, but does not impair the transmission of data in any way. In operation, the system will alert NatWest's command center with audio-visual alarms, then enable bank employees to evaluate the problem and prioritize service. At present, the system has reduced network downtime to less than one-half of one percent.
The side-channel feature of the 90/10 system has been put to an important strategic use--security. Currently, a growing number of NatWest's 140 branches are connected to a side-channel security system monitored, controlled and managed from the central command center. Eventually, all branches will be connected to this security system. The security information flows transparently on the same circuit as the data. This feature allows nonstop security transmission on existing teleprocessing facilities, thereby creating a value-added on-line network.
Availability Plays a Key Role
Many factors were responsible for NatWest's decision to establish a proprietary communications network. A key factor, however, was availability. The bank that can best offer the full range of its services to geographically dispersed locations at low cost has a competitive advantage. When those services can be provided in a way that's transparent to the average customer, the image of the bank is greatly enhanced.
Properly defined, installed and maintained private networks actually reduce costs when compared to traditional telcodependent communications. The reduction in line costs alone can usually pay for a network control and management system in less than a year. Further, the ability to predict and control costs with extensive system flexibility is perhaps the greatest value of a proprietary network.
As installed, the entire system of proprietary networks has a projected payback of less than three years. More important, when voice and data communications are fully integrated into the microwave system, NatWest will be using only a portion of its capacity, leaving room for future growth.
To help manage that future growth, NatWest is currently installing the Infinet 90/60 Network Information System, which integrates network control and performance measurement into a relational data base. The automated trouble-ticket system of the 90/60 will speed problem recovery and provide the ability to customize reports to reflect the specific NatWest management style.
The performance-measurement module of the system will enable NatWest to measure network performance and will provide the necessary information to reconfigure the expanding network as needed. The integrated EMS-II network control module supplies diagnostics and quality measurements for the analog network as well as digital diagnostics essential for maintaining NatWest's microwave funds-transfer application.
Overall, NatWest's concept is to provide comprehensive, quality service on line. That concept is broad enough to include regionally and even nationally distributed services such as point-of-sale check cashing or generic ATMs. And by insulating themselves from the utilities, NatWest is in an even-better position to control communications costs while offering a higher level of service. In fact, with the integration of PBXs, fiber optics and microwave, National Westminster Bank USA is well on the way toward its long-term goal of maximum communications independence.
Photo: Jeffery Speight, vice president of communications at NatWest.
Photo: Through enhanced backup capabilities provided by dial backup modems, on-line teller traffic is operating at 98-percent availability, including scheduled downtime.
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|Date:||Apr 1, 1986|
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