Business and IT leaders in the financial services industry are early adopters of IT as their product is in essence information. Their early adopter learnings and feedback to IT vendors usually prove in or out solutions for the rest of the economy. So it is with an eye toward the future that we report on how the financial services industry is using communications to add operational value and competitive differentiation. We find that these leaders have a broader view of IP telephony and UC, and are starting to wrap their minds around Communications-Enabled Business Processes (CEBP). This is not a Lippis Report solely for the financial services executive but for any business and IT leader.

What Counts to Financial Service CIOs

While all CIOs cycle between IT projects, which reduce cost and increase revenue, in the financial services industry CIO’s are expected to and are bonused on the latter. Most board members of financial institutions take it for granted that the CIO is going to figure out a way to reduce costs; it’s expected. Therefore, if a CIO reports to the board that she completed a new IP telephony deployment which saved the firm money, the board would wonder why she’s on the agenda. She’s not going to get a big bonus or promotion with a cost reduction project, that’s table stakes. However, if she positioned the IP telephony deployment as a platform which reduces cost, provides unified communications and communications-enabled business processes which will increase competitive differentiation over the next business cycle, she would have peaked the board’s interest and put her on track to bonus and promotion. The board is interested in projects that deliver transformative properties, which contribute to increasing customer experience; that’s where the win is.

As the financial services sector is an early adopter, these business and IT leaders know that the payback on IP telephony can be absolutely huge, depending upon starting conditions, which reduce operational, capital and facilities cost. They have moved on from the thinking that IP telephony is a PBX replacement toward IP telephony as a platform to deliver strategic value rooted in increased competitiveness that delivers better service and customer experience.

It’s All About The Experience

Increased service and customer experience is fundamental in the financial services industry to the point that the customer experience is designed to delight the customer and not just meet their needs. The reason why this is important is that customer loyalty has disappeared in the financial services sector. There is no customer loyalty. If the financial institution is not delighting the customer or worse if it’s doing something that irritates the customer then they’ve lost that customer and most of the time they’ve lost them for life.

It’s essential that whatever communications platform the financial services firm embraces it delivers a consistently good customer experience and occasionally delights the customer. Good customer experience is well beyond communications; financial services firms need to design excellent customer business processes starting at the very first contact with the customer. For example when a customer opens an account the process needs to be smooth. In the retail banking industry, as many as 30% of new customer accounts close within the first 90 days due to an irritating problem with the account opening process. Consistent high quality is key to reducing this 30% loss. Further, if there are known difficulties in the opening process that can be addressed with Communications-Enabled Business Processes (CEBP), which notifies banking executives to reach out to customers during the first 90 days to either avoid or fix the problem and communicate to the customer how much they are valued, then the Bank salvages a potential loss and turns it into a win.

Let me be very clear about this business perspective; right now we’re in a time where if customer questions can’t be answered or a problem can’t be solved then the customer will leave the bank and going to another bank, or the customer will leave your trading company and go to another trading concern. This lack of loyalty is systemic in the financial services sector. Hedge fund managers have no loyalty. If your firm can’t help that Hedge fund now, fund managers are going to take their accounts someplace else where they can get the service they require.

Increased service and customer experience is at the heart of the concept that IP telephony is a platform not a product and that unified communications (UC) and CEBP software are of strategic value. In the financial services industry many IT projects are top down derived from a strategic initiative, be it a new wealth management system, increasing customer service at branch offices, empowering high revenue producing mobile executives, etc. It is for these reasons that many business and IT leaders in the financial services industry are expanding their view or framework of UC beyond a single desktop communications launch point. Let me explain.

Circuit Riders, High Margin Mobile Revenue Generators and Branch 2.0

There are many financial service executives who can be characterized as low volume, high margin mobile revenue generators. Executives such as John Mack, Chairman and CEO, Morgan Stanley travel around the world conducting business. There are brokers, research analysts, asset management executives, etc., especially in the Wall Street area who are low volume but high margin mobile revenue generators. These executives need simple and secure access to communications and data independent of geographic location to deliver the service their customers expect and demand.

A Circuit Rider is another class of low volume but high margin mobile workforce executive who often travel between branch offices within a city or region. A circuit rider could be a broker, a wealth management executive, an insurance sales expert, etc., who are selling high end and margin products. Many banks are now offering a range of products targeted at affluent customers/families. Circuit riders seek to up and cross sell customers who may have substantial checking and/or savings account deposits. Circuit riders will introduce these customers to a brokerage account as well as a range of other high margin banking products. Circuit rider executives also need simple and secure access to communications and data independent of geographic location to up and cross sell affluent customers who may have need for a wider range of banking products.

During the late 1990s a Scottish bank bought into the concept that branch offices would go away, thanks to internet access. But the direct opposite occurred; branch office openings are at an all time high and we may be at point saturation soon. Wachovia and Bank of America are good examples as they have both significantly expanded their number of branch office locations. Many banking business thought leaders are now exploring how best to leverage this asset to up and cross sell customers while improving their experience in the branch office. These thought leaders are collectively thinking in terms of Branch 2.0, which from a real estate and staffing point of view is a smaller footprint but rich in IT. Intelligent video is one of the key IT attributes of Branch 2.0. Intelligent video supports a customer selecting the products that meet his/her needs out of a possible 100 to 200 possibilities. It’s impossible for limited branch office staff to be experts in all 200 products so intelligent video assists the customer in their product education and selection process.

Intelligent video is manifest in a video solution, video platform, or digital signage platform, which explains products and with the press of a button or click of a mouse the customer can be connected with a product expert. The product expert will be able to answer the customer’s questions quickly, accurately, and fully. After the right banking product is selected either the local staff or product expert can assist with the appropriate forms to procure the service. Intelligent video is in response to customers who have a -right here, right now- banking appetite, which is an attribute of a new generation of consumers.

The right here, right now banking concept is not just unique to banking, it extends to all financial services concerns such as brokerage and insurance. But I think what I just described, isn’t that Unified Communications?

Some Branch 2.0 executives are deploying what is called communications- enabled digital signage. Consider a branch office customer in a teller line making a deposit where a plasma screen is painted with marketing material targeted for that particular branch, community and customer base profile. The customer may step over to the plasma screen after they complete their deposit to get more information on the advertisement. Maybe they’ll use a touch screen or a phone that’s associated with that screen and connect with the subject matter expert who can give them the latest rates, information, answer their questions, and close them on a new product. That’s a huge opportunity for banks as most banking customers are unaware of the range of services offered by their financial institutions.

For example, many get their auto loans from the auto dealer where they purchased their car. They may be unaware that their bank sells auto loans, but they can be reminded or made aware of the fact thanks to communications-enabled digital signage. Bank of America conducted a survey which asked their customers if they knew that Bank of America sold insurance. Over 50% of their customers said -No, you don’t sell insurance- when in fact Bank of America does sell select insurance products. In short, banks sell many products, of which the majority of their customers are unaware. The hope of these business leaders is to exploit communications- enabled digital signage to increase consideration and the close rate.

The concept of Branch 2.0 and how it leverages communications and IT to increase customer experience and product education for competitive advantage is a great way to think about this distinction between IP telephony and UC. IP telephony is the platform that enables a wide range of communications-based applications such as UC and a wide range of yet unforeseen CEBP-based process improvements. Business and IT leaders in the financial services sector seem to have a broader UC framework that extends beyond desktop and mobile phone communication launch points to a UC that is tied deep into business process which satisfies a competitive business requirement.

Posted 19 November 2007 at 1:36 pm under Lippis Report, Unified Communications & Comm.-Enabled Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.