Banking On The Bleeding Edge of Customer Service

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No business relationship is changing as fast as the one between customers and their banks. For a generation, the way American consumers transact financial business has steadily evolved through a series of deliberate technological changes imposed by banks. Alongside that trend, alternate financial companies have burst into the consumer consciousness -- and make their case to the consumer based on transactions that are faster, easier and cheaper. They are striving to win the "Can-you-top-this?" game played by an increasingly finance-savvy consumer base.


From the networks of ATM machines in the late 1970s to the call centers of the 1990s, banks have tried desperately to reduce foot traffic in their branches, reduce tellers, and reduce the cost of the very low margin transactions that most customers generate by the hundreds every year.


Banks reduce access to branches and charge high fees for so-called "personal" service. At the same time, mid-sized banks build huge networks of call centers to service the increasing numbers of credit card customers. The call center is a much more cost-effective way to handle low margin transactions; it can manage a much higher volume at much lower cost per interaction than a branch.


But at the same time, customers are using the Internet and voice-activated systems to manage their mutual funds, retirement accounts, and other non-bank alternatives. The Fidelitys and Schwabs of the world are siphoning off customers who often maintain higher balances than they do in their traditional banking relationships. These alternates have built their customer bases by offering the stripped down, automated services in call centers that banks pioneered, but have added elements like speech recognition, Internet access and Web transactions to the mix.


Datamonitor reports that in 1997 insurance companies and securities firms bought $29 billion worth of information technology. That will hit $38.5 billion by 2002, they predict. U.S. firms spend more on this than do firms in any other country. Datamonitor predicts that call centers in those sectors will grow at a compound annual rate of 12 percent over the next five years.


Banking was one of the first industries to adopt call centers on a large scale. As was typical for many years in the call center industry, vertical markets like banking "created" call centers which were independent of other sectors like retailing or travel. Building call centers in the early days was complicated business because bank data was mainframed and often separated into distinct piles.


Often what happened was that a bank would create a call center for each separate customer application, and then write custom software to make each application work. Information was isolated into islands, and the call centers weren't optimized to provide a seamless interaction for a customer who wanted to do several things at once, but it was progress, of a sort. Banks were (and still are) also heavy consumers of outsourcing services, particularly for credit card services.


Research by Meridien shows that 11 percent of the 78 billion contacts that occur annually between retail customers and financial companies are handled by telephone. Meridien sees this growing to 16 percent by 2001.


According to their research, most customers interact with financial companies either through automated teller machines or physical branches. Electronic (non-telephony) interactions were slim, at just 1.4 percent of the total. It's likely that this number will increase as well, though not as fast as call center interactions.


In other industries, call center technology is pushed (or hindered) by the presence or absence of competition among companies. Among banks, however, the trend has been complicated by competition from "un-banks" -- brokerages that offer checking and credit card lines, for the most part. In response, banks have taken a three part strategy.


First, they continue to try to drive down the consumer cost per transaction. That is why they push things like PC banking and higher fees for using tellers.


Second, as an industry they lead in installing advanced call center front-end technologies. These are things that speed up the customer interaction when it occurs by phone, things like voice response units that ask for a customer account number, Web-based account retrieval, or more futuristic things like speech recognition to get through an automated phone menu faster.


Both banks and un-banks lead other industries in implementing these systems. Schwab was one of the first to install a working speech recognition system for delivering stock quotes several years ago. And the regional banking and credit card companies, like Providian and NationsBanc, have been for some time building more -- and better -- centers.


These are usually equipped with the latest computer/telephony technology, for integrating the customer data that exists behind the scenes with whatever application the agent is using during the call. So that if a call comes in about a customer's credit card, the agent can see the full customer history and offer (or decline to offer) a product based on that history.


Which leads directly to the third part of the banking strategy: creating a better way of coordinating between the caller and agent on the front end, and all those isolated pools of information that exist on the back end. There is a new category of software being created called "customer information systems." This is an amalgamation of several older kinds of software for telemarketing, customer tracking, customer support and workflow systems.


What it does is cull all the information about customer histories and interactions that exists in multiple databases behind the scenes (and usually outside the call center) and make it available to the agent's desktop application.


That way, an agent who deals with a customer who is calling about a credit card also knows that the customer has a mortgage and a savings account. Or that the caller complains every year about the high fees associated with the credit card account. Or that the customer pays (or doesn't pay) on time. All of these variations are important in crafting an intelligent interaction, but more often than not, extended information on these subjects is missing from the desktop.


These systems are frightfully expensive, and until very recently were really customized applications built to the specific needs of their database, application and platform needs. (This was a consultant's dream.) Now it is getting more off the shelf, but these are still extremely complicated systems that attempt to gather all of a company's business rules and apply them to customer interactions across the board. Thomas Cook, in the UK, recently installed one from Chordiant (with the help of consultants at MCI Systemhouse), and it apparently went well and on time. That's a sign that the days when it took an army of systems integrators a year or more to build a multi-application call center network may be over.


Banks gain with these systems because they keep costs down (by shortening calls, or allowing the same number of reps to handle more calls), and because they turn more of the routine calls into revenue generating opportunities through cross-selling and up-selling.


The banking and financial services industries have shown a willingness to pilot new technologies long before other sectors. They experiment with new technologies like video kiosks, and push the envelope with old ones like outbound predictive dialing.


They have been ahead of others in bringing out new ways of performing routine transactions through the web or phone. This makes sense, since their business is so heavily weighted to transactions that are informational rather than product-based. Giving the customer the means to help themselves to information saves them an incredible amount of money. And it doesn't hurt that every transaction is also a data-gathering opportunity too.


They recognized, long before other industries, that call centers were about more than just cost-reduction. They are about improving the quality of the interaction, and creating chances to generate revenue.
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