In the 1990s, many financial institutions invested in costly systems for collecting and storing customer data, but they didn't reap many benefits from the static systems. The good news is channel integration will fix that. The bad news is it's not cheap.
According a report by Celent Communications, FIs will spend between $5 million and $70 million on integration projects that may take as many as five years to complete, depending on project scope and existing infrastructure. But with channel integration, Celent estimates FIs will be able to achieve a 10 percent to 25 percent reduction in their annual IT and operations costs.
Channel integration is getting easier
Integration is becoming more feasible. Many banks are moving their branches and ATMs from OS/2 to Microsoft Windows and other newer, more flexible technologies. They are also updating their telecommunications networks with TCP/IP, a feature that Bill Waugh, Wincor Nixdorf's vice president of engineering, calls "critical." "Without it, you can't access the back-end," he said
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To integrate channels, FIs can take an incremental approach or adopt an enterprise-level strategy. According to Celent analyst Isabella Fonseca, an incremental approach yields immediate financial improvements, while the enterprise approach results in larger cost reductions over time. The enterprise approach also yields a better balance between IT and operational savings.
Sean Jevens, a product manager for software developer CR2 Group, said that because many FIs are intimidated by the complexity of integration projects, it makes sense to tackle a single channel at a time.
"A phased delivery is vital (because) it enables the entire project to evolve in a cost-effective manner, so at each stage of the process the business benefits can be recognized and realized," said Jevens.
Many of CR2's clients begin with the Internet, said Jevens, since its technology tends to be newer and more flexible than other channels. "The bank can use it internally as well, so that staff can pull up a single view of the customer," he said.
FIs using CR2's BankWorld Internet application automatically acquire CR2's Channel Management technology, which is implemented alongside the Internet application, Jevens said. "This means that, over time, new channels can be added quickly and easily to the channel manager, bringing new hosts online at the same time while reusing existing integration efforts."
Taking the ATM step
Waugh said ATMs tend to be at the bottom of the list for most FIs when it comes to channel integration. Because ATMs are part of a message-based system that has traditionally communicated with proprietary protocols, they are inherently more difficult to integrate with other channels. "It's a truly siloed channel," he said.
Though they may lag somewhat behind other channels, Waugh believes FIs will ultimately make ATMs part of integration strategies. "If you move your other channels to a client server architecture, it only makes sense to bring the ATM into the same environment," he said.
Jevens would like to see FIs move the ATM higher on the priority list because it is such a heavily used channel and one that shares natural synergies with other channels. For instance, he said, cardholders could register online to be notified when their cards are used to withdraw more than a specified amount from an ATM, which would help allay fraud concerns. "(Customers) might even be willing to pay for that type of a service," he said.
"Traditionally, banks have isolated the management of their ATM network through different business units," Jevens continued. "But now banks are starting to view this infrastructural network as part of their enterprise-wide solution. Banks are becoming aware that this powerful communication channel needs to be completely integrated into the channel mix, and that its self-service capabilities should and can be further exploited."
