Technology Makes Convergence a Reality
Fasterthan you can say Gramm-Leach-Bliley, the fault lines separating banking, brokerage and insurance are being ruptured by tectonic shifts in technology. So profound are these shifts that technology has become one of the principal drivers of convergence, right alongside deregulation, globalization, shareholder pressure and the euro.
Information technology is both spurring and facilitating convergence, according to a report by the G-10 central banks. "Technological advances have changed the competitive functioning of the financial sector at both the production and distribution levels," according to the G-10's Report on Consolidation in the Financial Sector.
The battleground for convergence is being fought over distribution, particularly in the channel area, said Bill Bradway, research director at Meridien Research. The click-and-mortar, multi-channel business model is likely to prevail over "the virtual-only business model that is basically limited to e-channels and call centers," he said.
Financial institutions have to support an ever-widening distribution network, including branches, call centers, integrated voice response systems, automated teller machines and PC Internet access. Banking and brokerage firms are scrambling to add wireless delivery through PDAs, pagers and cell phones. New channels are being invented almost daily. Fidelity Investments recently entered an alliance with General Motors' OnStar subsidiary to provide in-vehicle access to quotes, watch lists and market information to all OnStar subscribers. With the launch of OnStar's hands-free, voice-enabled Virtual Advisor product, Fidelity will expand the service with account balances and holdings and wireless trading to Fidelity customers.
E*TRADE--among the most zealous of online-only brokers--is carrying out "an experimental kiosk entry" in Target department stores. Through its acquisition of Telebank, an Internet-only bank, E*Trade is in a position to offer integrated banking and brokerage services.
Brokerage firms, especially larger ones, are finding themselves under pressure to offer traditional banking services like bill payment, bill presentiment and cash management, while banks are similarly adding brokerage services, said Glen Bloom, vice president of brokerage sales at Brokat Technologies.
Yet with each new channel, the internal "plumbing" connecting front-end devices, data servers and back-office systems becomes more convoluted, threatening financial firms with gridlock if not extinction. The success of convergence, observers say, largely rests with three technologies--customer relationship management (CRM), account aggregation and middleware.
The CRM Umbrella
The term "CRM" covers a spectrum of products and vendors: sales force automation (Siebel), customer analytics (Epiphany), real-time marketing solutions (Xchange), customer behavior modeling (Epiphany, Xchange and Microstrategies) and real-time decisioning (Black Pearl).
Because of the fragmented nature of CRM products, no single package delivers all functionality. "For all its virtues, CRM is easily misunderstood as to the technologies that can make up a CRM environment," said Meridien's Bradway. Yet the mission of CRM is clear: to develop a "seamless integrated architecture that will allow the customer to view, access and interact with the complete set of services that the organization is offering," Bradway said. Firms see CRM as a win-win for customers and themselves. "Everyone is looking at how to move any transaction to the lowest cost channel possible and still satisfy customer needs," said Joseph Kulak, head of the financial services CRM practice at Cap Gemini Ernst & Young.
ABN AMRO got CRM religion after a survey of corporate banking customers revealed that its technology was superior but its customer service was not. The Chicago-based banking giant quickly brought in eGain Communications, a Sunnyvale, Calif. provider of Web-based customer interaction software, to service its CashProWeb online cash management service.
ABN AMRO chose eGain over such well known names as Siebel and Oracle because of its expertise in customer interaction, according to Milton Santiago, first vice president of e-banking at ABN AMRO Services Company. "The top ten banks offer the same products." eGain, he said, would allow ABN AMRO to "rise above the noise."
In addition to e-mail and chat capabilities, eGain offers co-browsing or "escort functionality," that enables an agent to interact with the customer's screen and input information. And its Web-based software means that customer service agents can "man a chat line from home," Santiago noted. But the centerpiece of ABN AMRO's customer service initiative is RITA (Real-time Internet Technical Assistant), a "bot" similar to Ask Jeeves that can answer "quick hit, nuisance" type questions, said Santiago. Built using eGain's Assistant component, RITA appears as a female assistant, complete with varying emotions and facial expressions. RITA will soon be joined by a male bot, Santiago said.
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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