JUNE 2009

yldneirf oce

ethe Banking & Financial Services -newsletter from Wipro Technologies

Volume VII Edition XIX

the Banking & Financial Services -newsletter from Wipro Technologies e

Feedback & Suggestions aremost welcome. Please email to

thoughtline@wipro.com

Editorial Team

Anirudh JayaramanAbhishek Gupta

Volume VII Edition XIX

Index

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2the Banking & Financial Services -newsletter from Wipro Technologiese

For Wipro internal circulation only

..................................................................................................� Foreword

?Demystification

?Technology Drivers

?Market Watch

?Fun Corner................................................................................................

3

- “Re-inventing the Futuristic Branch”:

The changing phenomenon to keep pace with US Consumers.....................4

- Bank Branch in the 21st Century..............................................................7

- Branch 2.0 – How Unified Communications will shape the future .............8

- Branch 2.0 – A Service Oriented Approach..............................................10

- Branch 2.0 - An Algorithmic approach to Branch Network Optimization..12

- Personalized Banking Experience Using Smartcards................................14

- Banking Services Mobilization................................................................16

- Evolution of Bank Branches......................................................................17

19

Foreword

1`The branch is dead. Long live the branch'. Or is it? According to a recent study , ̀ the Generation Y go online for most basic transactions with their banks, such as viewing an account balance (74 per cent) or paying bills (70 per cent). But crucially, when it comes to complex transactions – such as opening a new account (57 per cent) and applying for a loan (52 per cent) – they prefer to do it in person'. So let's put such dooms day predictions to rest. While it may serve as good fodder for discussions, research and technology trends do suggest otherwise and there is still hope for the branches.

In this edition of Thoughtline, we have an eclectic mix of articles that will throw more light into the bank branch of the future, what we would popularly term as `Branch 2.0' - a futuristic branch that achieves customer-centricity through advanced technology; a branch that is low on real estate and resources but caters to a wide range of transactions that were hitherto time consuming or involved significant costs. The demystification section seeks to demystify this very concept.

We then delve deeper into the various technology trends that are responsible for this branch (r)evolution. Some of the key buzzwords that are doing the rounds include virtualisation, cloud computing, cashless branches and surface technology. If Unified Communications is redefining the way we do business using video conferencing and instant messaging, middleware is the one bringing all this together to work as a single unit and the first couple of articles help us understand how. We then look at how the service oriented approach is reshaping the technology landscape for banks. Analytics is not far behind in the technology race and the article on branch network optimization corroborates this claim. How can we forget security when we talk of financial transactions; well we haven't and we take a look at the evolving role of security with focus on smartcards. We wrap our technology section with a brief discussion on the role of mobility and follow this section with the evolution of the branch.

A little fun never hurts and we conclude this edition with the usual suspect ̀ Fun corner' to test your bank branch quotient.

The banks have a choice today – to either do away with investments on branches altogether and focus on other technology intensive cheaper channels or try to leverage their investments in the branches to ensure that the customer is engaged in a consistent fashion across all touch points. Research suggests the latter to be a prudent choice and to that end we are seeing significant developments.

Branches have no need to compete with the other channels; instead they must learn to exist with the other channels and carve a niche for themselves.

Happy Reading!

The Thoughtline editorial teamAnirudh Jayaraman

Abhishek Gupta yldneirf oce

3the Banking & Financial Services -newsletter from Wipro Technologiese

The Wipro editorial team compiles this newsletter with contributions from Wipro's staff members. The views and opinions expressed in the articles / other contributions by individuals are strictly those of the authors. The content of these articles has not been reviewed or approved by Wipro.

1 Sourced from “Finance on Windows” article, 2009

Demystification

Rajesh Stephen

Senior Domain Consultant, Banking & Financial Services

merican consumerism and outlook on industry services have been changing over a period of time and it has changed all the more with respect to banking services during the last one year. Banking industry in

the US currently has been focusing largely on two fronts, one to maintain a positive operating leverage and another to maintain the trust of its customers amidst the financial crisis. A spate of acquisitions and emergence of a new financial services landscape has also added to the furor. All this has led to changes in priorities, strategies and spends for the banks in the US. All long term discretionary projects have either been put off or sliced down. `Futuristic Branch� that was being envisaged by banks at various stages has again moved back seat but not scrapped. It is being dealt within smaller projects or as independent initiatives primarily due to evolving customer expectations and competitive pressures.

There have always been doubts raised about growth of branch as a channel and its importance in the US. However time and again, banks have realized the potential of a branch to grow business in conjunction with other emerging channels. The need for core deposits is critical for banks now and according to analysts� branch channel in the US is set to add another 1700 branches approximately in the next 4 years raising USD 59 million of deposits year on year. This is the business driver for banks; hence they are developing ways and means to attract customers through futuristic services that aligns with geo-cultural trends by embracing evolving technologies. One of best examples and most current would be HSBC�s rapid new branch expansions irrespective of their `HSBC Direct� online channel strategy.

I had posed a question to some of my friends who have been banking in the US for at least 10 years across various age groups, my question was: In last 6 months, how many times did you visit a branch and why? Almost all of them thought for a while and could give only about two or three reasons for visiting the branch but those reasons were so crucial from the bank�s perspective to take customer relationship to the next level. Customer Experience has been on the top of every bank�s CEO�s strategic initiatives every year and to deliver this

in branches, the banks have to think different to keep up with customer aspirations. Though the core customer needs from a branch in the past, present or in the future does not change drastically, but the way it is delivered has definitely evolved. Other industries such as Retail, Telecom, and Logistics have used technologies to take customers to different levels and the same is being expected in banking by the customers not only in US but across the globe.

We have time and again heard of various initiatives that have been explored and a few banks have already taken bold steps in implementing the futuristic branch services using cutting edge technologies. In addition, they have also made commitments on how it would be done in the future. The most prominent futuristic branch initiatives in the US are:

Umpqua Bank has been a pioneer in launching some of the trendy and futuristic branches. They have Product Wall with interactive touch-screens related to their unique offerings, Discover Wall with touch-screens providing suitable product offerings and printing on-demand brochures, Community Wall with touch-screens for providing opinions on community initiatives, local space for social networking, Lounge that has a café and in-store shopping, Service desk that has `Ask an expert� through on-demand conferencing.

First National Bank of Omaha opened a Coffeehouse Branch last year featuring a �virtual koi pond� that uses virtual fish to direct customers to the appropriate interactive kiosks to complete transactions or receive product information, safe deposit boxes that are secured with iris-scanning biometrics, storewide wi-fi access, an image-enabled ATM, a concierge, flat-screen TVs and a children's play area with a coin counter designed to look like a wizard and a gourmet coffee bar.

TD Bank launched their new branding initiative after acquiring Commerce bank that brought enormous emphasis on branch look and feel, customer pull factors through penny arcade and longer branch hours.

There are many other banks that have offered such tangible futuristic branch services like the pioneer ING which launched ING Café more than two years back in New York, erstwhile Washington Mutual also had branded their unique branch banking service centers.

Bank of America which has been pioneering innovation in banks launched a joint innovation initiative on `Future Banking� with MIT and this is not limited to

A

�Re-inventing the Futuristic Branch�: The changing phenomenon to keep pace with US Consumers

4

Demystification

`Future Branch�. This initiative is looking into areas like lab for financial engineering, responsive environments, speech & mobility and human dynamics.

So how are the banks, analysts, business, and technology vendors in the US envisioning the `Future Branch�?

Following are few of the technology moves in various stages of ideation, production and implementation:

Network Infrastructure: Unified communications delivered through converged voice-over-IP (VoIP) system that integrates voice, video, and data communication on one network to provide video enabled interactive services, Security aspect of integrating IP video surveillance and other network-centric facility services such as access control and alarm management on one converged network, Capability to identify, prevent, and adapt to dynamic threats with important integration of continuous, real-time risk management and proactive regulatory compliance.

Intelligent flat-screen televisions: These are not just for playing normal news channels but also help in selling products, services and serves as digital signage. These can be monitored by a branch or at a central back office location for a region.

Real time marketing and communications capabilities: This is both for customers and branch personnel

Branch Alerts and Push Technologies: This is in conjunction with other channels to synchronize all non-branch channel experiences delivered to branch as well

Integrated branch applications: Seamless integration of all distributed applications like contact management, complaints management, knowledge management, personal finance management, LDAP with sales & service delivery front end applications used by branch personnel and moving to a more interactive Web 2.0 environment.

Customer tracker in branches: To track specific customers and customer movements/behavior in branches through Intelligent cameras, Biometrics, RFID technology.

Customer flow management systems � Provide multiple services like ticket printers, alerts on monitors/media messaging, counter call forward, internal system integration � LDAP, real-time view of operations for management, service position display numbers, deployment of sensors and `assist� devices in the branch.

Employee performance trackers � This has moved to next-gen kind of offering for the branch manager and other management team to have real-time dashboard views.

Wireless terminals: Hybrid kiosks to enhance self-service options and can be suitably placed for access beyond branch hours, Teller-assist stations, Enabling wireless customer-service representatives using multi-media tablets, this is also being extended for Relationship Managers to provide services outside the branch that is normally being referred to as `branch in a box� services.

Cash terminals � Teller assisted cash kiosks both for cash acceptance and dispense involving both retail individual and bulk cash transactions.

Touch screens - that are interactive and informative providing product updates

These entire branch infrastructural changes are very expensive and banks

are not interested in pursuing all of these, they are reviewing most of these technology concepts/offerings carefully. They realize that it is not mandatory to have such futuristic services implemented in every branch. They are not looking at putting savvy outlets but ensuring that the technology adopted is contextual. All of this started as hype and some of them have become a reality. Banks in the US have adopted their distinct models to deal with the `Futuristic Branch�. Banks are trying to bring in new experiences to address multiple segments, stay tuned with next-gen offerings and above all to grow organically.

Realistically US banks will look towards adopting only some of these following `Futuristic Branch� initiatives in the next few years:

Branch size, layouts and technology offerings will vary based on the location (downtown/ suburbs/ supermarkets/ universities/ malls), customer foot-fall, local communities and segment of customers served

Self-service kiosks and Teller assisted terminals Video enabled technologies to offer expert advice to address

customer needs instantly Seamless integration of branch sales and service applications that will

provide transparency for guiding customers across the desks TV screens that are intelligent to achieve multiple objectives � sales &

service messages, product demos, marketing campaigns, alerts

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Demystification

Technologies that can reinforce trust in customers like real-time risk management or proactively adhering to regulatory compliance due to open networks and transaction volumes

Wireless options to increase mobility Next gen analytics to bring the best and personalized experience

during every customer visit

Many of the leading technology companies like Microsoft, Cisco, HP, IBM, NCR, Diebold and numerous other niche vendors have been contributing to reach the realistic stage of a `Futuristic Branch� where concepts have been tested and implemented in certain banks, and many of them are still being assessed. Wipro as a System Integrator can play a crucial role through partnerships with these companies and also enhance services through its unique Customer Experience lab and banking solution center offerings.

The banks in the US will keep reinventing their strategies and looking out for technologies to tap branch business across regions they operate and to ensure that every foot space in a branch brings revenue. `Futuristic Branch� has thus become a dynamic phenomenon since customers keep their banks on their toes based on their ever changing needs.

6

Demystification

Bank Branch in the 21st Century Peter Barnsley Regional Practice Manager, UK Geography, Wipro Technologies

here is a world of contradictions surrounding the Bank Branch in the 21st Century. Many banks are investing hundreds of millions of pounds in refreshing and re-equipping their branch networks, adopting service

models that are more akin to retailers than banks and trumpeting their branches as serving local communities.

Yet there are many people in upper echelon demographics who rarely visit their bank branches. So what is the attraction for the banks? Branches are expensive, our towns and cities are �over banked� and, while recession driven mergers in recent times are creating some rationalization, the banks continue to invest in this channel.

The fact remains that the majority of financial product sales take place in branches. Generally, when making choices about significant financial arrangements, people have more trust in a face to face situation than over the phone or the internet. The challenge facing Bank retail channel execs is how to make a branch visit as pleasant experience as possible; attract and engage with customers for high value sales, enable service to be delivered as quickly and efficiently as possible and, above all, leave the customer with a strong sense that you have delivered the brand promise, your individual needs were taken care of, they know everything they needed to know about you and you left the branch feeling happy.

To achieve these goals, banks are looking to exploit futuristic technologies and open up the traditional branch layout of customers on one side and staff on the other. The branch will become a host for a multi-channel customer experience, allowing customers to engage in a range of self-service, assisted self service and assisted services touch points. Customers will be greeted by a floor manager of host who will identify them (possibly using biometrics, RFID, contact-less device or swipe card. The purpose of their visit will be determined and captured by the host using a mobile device or tablet PC. This information will be relayed to the bank�s CRM systems and a number of processes will then be initiated to get the maximum value out of the customer�s visit to the branch. This does not necessarily mean trying to sell products to the customer on every visit. Sometimes the �next best action� is more to do with service rather than sales.

Listening to some of the innovators in the banking marketplace talk about the branch of the future you would think that customers will soon experience a world similar to Tom Cruise�s in the film �Minority Report�. Customers would be identified via biometrics or RFID devices as they approached the branch. Immediately, marketing messages relevant to their needs would be displayed on flat screens as they passed by. Images of branch staff on hand who could help with the bank�s view of the next best action for the customer would be highlighted so the client could ask for someone by name.

Barclays in the UK recently opened a branch of the future in the West End of London. One the innovations they are using is Surface technology where customers can use their hands to move images on a tabletop computer.. Using such technologies attracts customers through the �cool� factor. The branch has used this technology to increase sales of a Life product by over 50%. What Bank executives need to bear in mind, though, is that technology and process management are tools and will play an important role in the customer experience and they will help to drive value and efficiencies. But, they must not forget that that one of the chief reasons the customer has come to the branch is to see a person and the way that the customer and the bank employee interact will have a bigger impact than any amount of technology that can be crammed into the branch. Strong leadership, well trained and motivated staff is far more important than the technology they use. Banks will forget this at their peril

T

7

Technology Drivers

Key Technology Area: Unified Communications

efore we delve into the role of Unified Communications to the concept of Branch 2.0, let us try to define it. Unified communications (UC) is a multimodal communication (using voice, IM, email, and video) System. It

includes presence, identity, and availability features to streamline business processes by reducing the human latency inherent in most business communications.

UC integrates communication channels, networks, IT systems and business applications in order to improve how individuals and groups interact and perform. It may be a stand-alone suite or a portfolio of integrated applications. The business applications greatly enhance the productivity by using the communication and presence enablement features.

UC primarily comprises of the following communications products: 1. Voice and Telephony � Fixed, Mobile and VoIP 2. Messaging � Instant, e-mail and voice mail 3. Presence and Contact Information 4. Conferencing and Collaboration� Voice, Video and Web 5. Customer Contact Center Clients � Desktop, Browser, PDA etc

UC and Branch 2.0 Branch 2.0 is a branch which is smaller compared to the traditional bank branch but with a significantly richer technology footprint. Financial services organizations require the ability to collaborate on demand, anywhere and at any time. For the end customer, the lack of communication integration can mean frustrating delays, inconsistent data across channels, and a less-than-satisfactory customer experience. In fact, banks lose more than 10 percent of their customers each year1. Needless to say, it is critical for advisors, agents, brokers, asset managers and specialists to be able to make those connections

1 Source: Microsoft Website

with co-workers, customers and intermediaries if they are to successfully serve their clients.

Hence, it is not surprising that they are early Adopters. By virtue of being early adopters, the financial services industry knows that the payback on UC deployments can be huge. They view UC and IP telephony as not merely a replacement of the traditional PBX, but as a platform that delivers strategic value. The financial services industry has a broader UC framework that goes beyond the mobile phones and desktop application integration. Focus Areas for the Bank Branch Improve Sales and Customer Experience They need the entire customer facing staff to be well-trained and have complete information of the customer at their fingertips. Take the example of improving the branch profitability. They require the teller to play a role beyond just giving out cash and collecting receipts. They are being asked to identify opportunities for delivering the right message at the right time to increase sales and improve customer experience. At the same time, they also understand that a single person cannot be an expert on every product they sell. This is where Unified Communication comes to the rescue. They are focusing on the concept of Communications Enabled Business Processes (CEBP) CEBP integrates communication capabilities, workflow tools and business applications. The lack of loyalty is a systemic problem in the financial services industry. Whichever communications platform the financial services firm adopts, it must deliver a consistently good customer experience and occasionally delight 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.

Let us take the example of Account Opening process to illustrate this as we feel it is one of the most important customer touch points and can make or break the relationship. When a customer opens an account the process needs to be smooth. In the retail banking industry, as many as 30% of new customer

B

Branch 2.0 � How Unified Communications will shape the future Anubhav Mishra Senior Architect, Microsoft Practice, Wipro Technologies

Anirudh Jayaraman Consultant, Banking Domain Team, Wipro Technologies

8

Technology Drivers

accounts close within the first 90 days due to an irritating problem with the account opening process2. Maintaining a consistent high quality is essential to reducing this 30% loss. Further, if there are known difficulties in the opening process that can be addressed with 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. Right here, Right Now Banking powered by UC It is almost impossible for the bank sales advisor/officer to be an expert on all the 150-200 products of a large bank like say a Bank of America or a Wachovia. Using Video and Audio conferencing, customers can be put in touch instantly with a product expert. Once they are familiar with the product, the bank staff can help them complete the formalities of account opening. Banks are also exploring the digital signage which was hitherto used only in retail stores. Picture this; a customer walks into the branch to apply for an auto loan. Post completion of the formalities, he looks at the digital signage on the screen that advertises the insurance products. Banks are looking at integrating the digital signage with their communications infrastructure so that customers can use the touch screen or a phone associated with the digital signage to get more information on the advertised product.

2 Source: Lippis report on Unified Communications

9

Technology Drivers

Sachin Malhotra Technical Consultant, SOA/BPM practice, Wipro Technologies Key Technology Area: Middleware

usiness leaders are in a perpetual cycle of emphasizing on cost reduction, service creation and react to new market realities during difficult economic times. They realize that harnessing the intellectual power of

distributed workforces and core operations plays an important role in delivering personalized branch expertise and greater customer value.

Branch 2.0 is rooted in the belief that investing in communications innovation within branch office facilities combined with on-line properties creates value. Branch 2.0 changes the binding of how people communicate in the enterprise by not being based on their location or specific site. Key Branch 2.0 Attributes Multi-Site Capabilities: Branch 2.0 architecture offers capabilities to

leverage resources between and among multiple sites within the network.

Multiple Modes of Communications: Branch 2.0 needs to support a wider range of communication options. Mobility, IP video, Voice over Wi-Fi, SMS, E-mail, RFID, etc., are required modes of communications in today�s branch offices.

Open, Flexible Architecture: An open Branch 2.0 architecture is critical to scale a deployment and build upon that investment over a long period of time.

Presence: A federated presence, which is accessible to applications, people and communications, allows an organization to direct resources within a massively distributed workforce toward improving the customer experience in branch offices.

Security and Business Continuity: Branch 2.0 requires that customer data in communication-enabled applications is protected and is available even in the event of disaster.

Branch 2.0: Intelligent Branch Office Communication There are two fundamental approaches to Branch 2.0 implementations: either centralization of IT and communications in data centers for branch offices or distribution of these services at the branch level.

This can be achieved by enabling a wide range of communications-based applications such as Communications-Enabled Business Processes (CEBP) improvements. This framework extends beyond desktop and mobile phone communication launch points tied deep into business process which satisfies a competitive branch office business requirement. The goal of CEBP is to optimize business process and result is a more efficient, automated closed-loop process which translates into significant ROI. Cisco SONA: A SOA approach to Unified Communications Organizations are addressing the challenges of Branch Office Constraints by deploying service-oriented architectures (SOA), unified communications, video, web services, and virtualization, a Cisco® network can help accelerate, secure, and scale the infrastructure with reusable network-based services. The network constitutes a key element of any comprehensive technology architecture.

The Cisco Service-Oriented Network Architecture (SONA) Framework includes a broad portfolio of network-based services that applications can use to help achieve desired business outcomes. These services offer reusable, robust, and unique capabilities that all applications can leverage.

This framework includes three interconnected layers. Primary is the Core Common Services Layer, comprised of an extensive library of network-based service categories working together to create functionality that can be used by the Applications Layer, which contains all types of business applications used across the enterprise.

At the Physical Infrastructure Layer, Cisco designs, tests, and validates sets of modular, connected infrastructure elements organized by places in the network (PINs). These branch, campus, and data center reference solutions form a quick starting point for understanding how network-based services can be deployed with business applications in a variety of industries.

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Branch 2.0 � A Service Oriented Approach

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Technology Drivers

The Core Common Services layer is distinctive to Cisco and offers a breadth and depth of integrated services throughout an enterprise-class network. This layer comprises seven major core service groups, which deliver consistent and robust capabilities throughout the network:

Real-Time Communication Services offer session and media management capabilities, contact center services, as well as presence functions.

Mobility Services provide location information, as well as device dependent functionality.

Application Delivery Services use application awareness to optimize performance.

Security Services help protect the infrastructure, data, and application layers from constantly evolving threats, and also offer access-control and identity functions.

Management Services offer configuration and reporting capabilities. Virtualization Services deliver abstraction between physical and

functional elements in the infrastructure, allowing for more flexible and reliable service operations and management.

Transport Services help with resource allocation and deliver on the overall QoS requirements of the application, as well as routing and topology functions.

With Cisco Core Common Services, your business can use an architectural

approach to transform its technology infrastructure to improve business agility; accelerate innovation through unique network-based capabilities; increase time to capability and reduce cost of ownership through service reutilization.

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Technology Drivers

1 Source: Avkiran, N.K., International Journal of Bank Marketing (1997- page 224-237)., (1999 - page 206-220))

Pavan Kumar Rao Application Analyst, BI and DW Practice, Wipro Technologies Key Technology Area: Analytics

dvances in Business Intelligence and Analytics are changing the way, the traditional banking is done. The resulting changes will have a great impact on the reconfiguration of bank branches network according to

the dictates of the market. A branch of the future must be framed within a flexible organization and can be changed within minimal human and resource costs in order to keep pace with ever-changing customer needs. Since branches occupy the key position in the bank�s organization, its performance is in the core of strategic directions of each bank. The relation between branch and community�s performance must also be explored in order to identify the optimal scale size for a network of existing and new branches. Objective To reach the optimum number of branches, given a certain level of operational and fixed costs, and the optimum mix of services that each should provide. Solution This combined objective can be linked to the weighted sum of the performance of each individual branch within the area under examination. Metrics may include: deposit balances per branch, number of new accounts per month, average of retail lending balances, number of new lending accounts, balances of financial investments and so on. The value of the metrics is a function of various internal and external (to the bank) factors, which are the problem variables.

Internal factors may include: number of employees, e.g. tellers, corporate representatives, receptionists, administrators and so on; number and level of the management staff; and Operational variables, e.g. number of ATM�s or transactions. External factors may include: area population and growth rate, average family income, number of small/corporate business establishments and so on.

Algorithm Using mathematical techniques we can model and formulate factors (find optimum value, or a set of possible values for each factor) and make a

prediction � estimation for the applicability and usefulness of the proposed plan.

To eliminate a branch we measure the performance of all branches and we select the one with the lowest performance score. By resolving the problem, we calculate the new performance of the reconfigured network. If the difference between the overall performance and the operating costs (i.e. staff�s salaries, rent for buildings and so on) for all branches increases, the procedure is repeated until . In this case the network has reached the point of operational efficiency. Note that t is an index of iterations, which is identical to the number of branches eliminated through the iterative procedure, and

The Steps of the algorithm are provided below1:

Step 0:

Input: number (n) of branches, number and values of performance variables (branch data), and current values of the external and internal variables .

Step 1:

Regress performance variables on external (non-controllable) and internal (controllable) variables, to determine matrix A and vector in Equation (1).

- (1)

Step 2:

Regress external and internal variables on themselves to determine matrix B and vector in Equation (2).

- (2)

Step 3:

Observe the value of the same internal or external variable among different branches and form

inequality (3) with appropriate . -

(3)

A

Branch 2.0 - An Algorithmic approach to Branch Network Optimization

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Technology Drivers

Step 4:

Impose the bounds and of inequality (4) for each variable.

- (4)

Step 5:

Calculate the performance of each branch separately and of the whole bank branch network from equation (5), before optimization.

- (5)

Step 6:

Solve the linear programming problem of equations (6)-(12) to determine the overall optimum performance for the bank branch network and of each branch. The model is as follows:

Maximize, - (6)

Subject to:

- (7)

- (8)

- (9)

- (10)

- (11)

- (12)

Step 7:

Branch Elimination Procedure

Step 7.1: Set t=1. Step 7.2: Calculate the difference Step 7.3: Find branch i* with lowest performance . Step 7.4: Eliminate branch i* and reformulate problem (6) - (12). Step 7.5: Resolve the problem without the branch i*. Step 7.6: Calculate the difference for the n-t branches. Step 7.7: IF THEN a new elimination is suggested; set t=t+1 and RETURN to Step 7.3; OTHERWISE, keep all branches in the bank branch network since it operates effectively, and GOTO Step 7.8. Step 7.8: Terminate �> When efficient branch network reached.

The algorithm terminates by providing the target number of branches in the catchments area, the mix of services that define the optimum performance for the bank branch network, and the operational parameters of each branch (through the values of the controllable factors. So the algorithm becomes a tool that is always up to-date according to the dictates of the market.

Conclusion Here, an integrated approach for reconfiguring a community branch network according to the dictates of the market is developed. Its main advantage is that the performance and factorial variables, which are under examination, are defined each time by the management team. The results indicate that through this approach, the branch network at the community level can be streamlined and transformed into en effective, revenue-generating group of bank nodes

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Technology Drivers

Ashish Gupta Technical Consultant, Enterprise Security Solutions Practice, Wipro Technologies Key Technology Area: Security

ith every new Banking technology like online service, self service banking, internet banking, call centers and mobile banking aiming to improve user experience, there�s always a question about the

survival of Retail Banking. While more and more customers will bank online, the fact is that majority of high value transaction and deal will still be made in the Bank Branch. The Branches will definitely stay but the way a Branch operates today will change beyond recognition. This article discusses one such business model and solution in using a Smartcards to improve user experience and convenience when a customer visits a Bank Branch. Bank customers and management view the queue length in bank branches as a key indicator of service levels. New approaches that merge video cameras, radio frequency ID cards and advanced software reduce queuing times. - Gartner A Brief 0f Banking Card Technology Smartcard is a known technology in Baking Industry. Let me start by explaining Smartcards that are specific to banking industry and are governed by Banking industry and MasterCard & Visa compliance. The first and the most common of them is Magnetic Strip Credit/Debit cards which are used to withdraw money from ATM, to do online payment, and to perform transactions at Point Of Sales terminal etc. The other form of Smartcard is contact chip Credit/Debit card which is governed by Master & Visa compliance also known as EMV cards. EMV cards were introduced to increase transaction security and reduce frauds. The Proposed Smartcard Our proposed Smartcard will be a hybrid card with a contact-less chip powered by Radio Frequency (known as RFID) which is not specific to EMV compliance but will have proprietary banking applications. This card can be embedded on the same plastic part of the Banking card which has a Magnetic Strip or a contact EMV chip. Since this card will be logically separate from the EMV part of the Banking card it will not attract any compliance requirement. The contact-

less part of the card can hold multiple applications e.g a contact-less part with 2K Byte of memory can hold approximately upto 6 applications. Business Model Since there will be an additional cost associated in adding contact-less chip on the Banking Card there has to be some Business model to work out this cost. There can be various Business model suiting the requirement. I would like to discuss one such model for this purpose. In this situation Bank ties up with corporate organizations and can co-brand this card. The bank will have their applications on the contact-less chip card, whereas corporate can have their application on the remaining memory of the contact-less chip card and the cost of the card is shared between these two entities. Improved Banking Experience Smartcard will be programmed with customer information. There will be few kiosks in the banking branch connected with contact-less (RFID) reader. As soon as the Customer visits Bank branch and approach one suck Kiosk and places his card next to the reader, the reader will prompt for a PIN. Upon entering the PIN user will then be connected to his account, where he can access his banking details like credit/debit statements, cash deposit, consolidated view for next few months payment dues etc. Also based upon his credit status and account information the Kiosks will display promotions suiting that customer. Promotions can include products from banking like loans, policies, insurance to online shopping and purchase of cinema tickets, bus/rail tickets, excursion trips etc. For performing any purchase/transactions, the card will have a small ePurse application where the customer can load some money from one such kiosks and use it for buying products/services within the branch. In 2010, the local branches of leading retail banks will look quite different. Your presence will be detected as you enter. Staff will greet you, offer advice and solve your problems using wireless devices. They will offer to visit your office or home if you need them to. - Gartner Other facilities in the Branch may include Coffee vending machine, Internet Kiosks where the customer can again use his Smartcard and use these facilities. Also customer can approach teller identify himself by placing the card on the

W

Personalized Banking Experience Using Smartcards

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Technology Drivers

reader connected to the machine at the teller desk and can perform high value worth transactions. Applications for Corporate The contact-less part of the card when co-branded with corporate organization can be used as door access to provide access to buildings and premises. It can also be used to mark attendance of the employees as he flashes his card at the electronic attendance register. The same card can contain other applications like Library and canteen which the can use to issue books and buy food for himself. Other applications in the campus can include corporate buss pass application on the card, so that whenever an employee boards a corporate bus/cab, the validity of the buss pass will be identified by the reader connected at the bus/cab entrance. One of the major concerns with the BPO employees is the security of female employees using corporate cabs. It is not permitted that a female passenger/employee should be the first one in and last out. This can also be tracked by the same smartcard. All information gathered by the card reader will be sent to corporate command centre through combination of GPS and GPRS technology. Conclusion Future bank branches needs to think of innovative ways and solutions to improve user experience and sell more products by combining technology, improving IT Infrastructure, providing increased automation and also using innovative business models to consume costs.

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Technology Drivers

Banking Services Mobilization Rakesh Kumar Goel

Project Manager, Mobility Practice, Wipro Technologies Key Technology Area: Mobile Channel

anking industry is in intense competition in today�s world. To stay profitable, various Banks are launching innovative services to keep customers and lure newer ones. Services like 24hour banking, Service at door step, Telephone

banking, Internet banking, Extended Business Hours (EBH), Speedy processing are only a few to mention. The latest entrant is Mobilizing Branch services. Greater part of

today's bank transactions take place somewhere else other than in branch premises Mobile bank branch is now seen as an answer to the challenge of designing a new service channel that is fully secure, functional and which customers can readily learn to use and trust it.

Setting aside the bottlenecks and bringing in some innovative ideas, some of the services which bank branch can provide via home computing or mobile developments are as

follows: Account opening Documents verification Digital check deposit requests. Digital documents submission Biometric authentications Videoconference-based live talking to bank officer, and so on

A video conference-based live bank officer who could serve many client

locations from one central location to assist clients with more complicated transactions. The use of interactive video enabled bank branch to offer a �real� person to deal with customer issues, while still conserving office space and machinery by just transporting the bank manager through interactive video to the client locations is the next step.

Even banks are involving or planning to implement their internal banking processes to be carried out via mobility services when key bank resources are on the move. Examples are:

High value transaction authorization Digital documents verification Legal advice/comments on corporate documents Biometric authentications White boarding and Multiparty audio/video conference support - SME

productivity, travel cost reduction, resolution of complicated approval/transactions/issues

Location, context aware (current role, usage) CRM Integration

Conclusion Branches can provide consultancy services and assistance in complex transactions by connecting to the bank managers or subject matter experts at remote locations through video conferencing and mobility services.

Some of the values various interfaces add in mobile banking

Interfaces Value Adds

Browser /WAP Inexpensive entry

Emulation of the online experience Appeal to mobile professionals

SMS Speed to market

MMS Broad customer reach Gen Y/appeal Frictionless customer interaction

Thick client - J2ME High-value apps

Rich user experience

Security

Bank retention of display control

USSD Menu based services

Rich user experience

Security

Available on every handset

STK Application has to be downloaded SMS based

Encrypted

B

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Market Watch

Figure 2: Percent of people who stated, �I am more comfortable dealing with people when I shop or bank.�

Source: Forrester

Figure 1: Survey Question: �How satisfied are you with these points of access when trying to resolve a service issue with your bank?�

Source: Forrester

Evolution of Bank Branches Abhishek Gupta & Khushboo Goenka Business Analysts, Banking Domain Team, Wipro Technologies

ey Tags: Process anomalies in branches, Multi-product Application, Reuse of previous applications, Cross-channel application, Tracking Issues, Issue Resolution, Self Servicing, Advanced CRM, Next generation product

configurators, Multi channel architecture Research by Forrester indicates that branches have not gone out of focus.

Their consumer surveys show that a branch can most satisfactorily resolve a customer service issue. 89% of the people surveyed said that visiting a branch either satisfied them or highly satisfied them as against 70% for those who visited the website and 58% for those who wrote an email (Refer figure 1). The survey also showed that nearly 25% of the consumers prefer to research products online and purchase them offline (Refer figure 2). It also showed that more than half of consumers are more comfortable dealing with people when they make a purchase.

We see that branches are important for establishing and maintaining customer relationship. Given these trends, banks are re-looking into their branch strategies. According to Federal Deposit Insurance Corporation (FDIC) reports, even though the number of banking institutions has declined between 1994 and 2003, the number of bank branches has increased by 15%. New branches are smaller in size and are generally designed for specific purpose. They are also designed to create a relaxed and pleasing ambience. There are three major process anomalies observed in branches today that makes it imperative to consider a revamp in branch structure and operation. These anomalies are as follows:

1) Account opening process: Most customers prefer to open accounts in person. But with so many processes and applications for each product, each process takes about 30 minutes or more, this increases proportionately for more than one application. Along with the abnormally high time that it takes to fill the form and do the formalities, the bank personnel also take a lot of time to verify and accept the form, and all this while the customer has to wait patiently. It makes the whole process unpleasant and painful.

2) Issue Resolution: Customers generally come to the branch to resolve problems they can�t get solved via other channels. However, branch personnel aren�t always knowledgeable enough or have enough authority to solve these problems. Moreover there is no standard process for issue resolution. This leads to a not very good customer experience.

3) Customer needs assessment: A lack of interaction has been observed between the customer and branch employees. As there is no system in place to talk to customers and capture their needs, banks loses many opportunities to cross sell or up sell to them.

Having realized the above anomalies, the following trends are observed with respect to bank branches:

1) Multi-product Application: Account opening process broadly requires the following steps:

Authenticating the customer Assessing his/her needs Suggesting appropriate products Letting him/her decide what to purchase Completing the application Account fulfillment activities like issuing checkbook and ATM Card

K

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Market Watch

The procedure is similar for most products. Multiple account originations require multiple form filling and authentication of the same data multiple times by the branch staff.

Banks are hence replacing these product/service specific application forms with customer specific application form where a single form can be used across products/services. The steps in these forms are configurable depending on the products and services that the customer wants to apply for. Banks are using business process management (BPM) applications from vendors like Pegasystems and Chordiant Software for this.

2) Reuse of previous applications: Even existing customers have to fill in all the information already existing with the bank each time he applies for a new product/service. Banks don�t maintain customer databases in such a way that the information can be reused. This is also because banks maintain products in silos and hence all information, data and dealings related to them are done in silos too. But banks are now changing this and saving cost and time by capturing and maintaining reusable data through back end processing and implementing Customer Data Integration (CDI) Solutions.

3) Cross-channel application: Banks are integrating applications and providing application save and restart capability within and across channels to facilitate customer�s buying process. Even a partial saved application can be completed at a branch and vice versa. This process saves time and provides a smooth transition across the channels for the customer. Banks are using services of Getronics, Unisys, and BPM for this.

4) Tracking Issues: Customers who come to a branch when they cannot get a problem solved via some other channel have to generally leave with just a verbal assurance. Banks are using process-based case-management system from Chordiant Software and Pegasystems, and are integrating front end and the back end to record and track customer problems. Banks are also using emails and SMS to keep the customer informed about the status of his/her problem.

5) Issue Resolution: The branch staff are well trained and knowledgeable enough to solve customer problems instantly. In case they cannot they have clear escalation process that reduces delays in customer problem resolution. The branch manager can effectively manage open issues by redirecting it to the right Subject Matter Expert. For example: Bank of the West has a branch

escalation hotline called �Service Express�. The hotline staff have the authority and knowledge to resolve problems across products and services.

6) Self Servicing: Using self-service machines in bank branches is becoming popular. These machines provide traditional ATM services as well as services like check cashing and image capturing. The purpose is to reduce pressure on tellers and to provide a nice customer experience. Citibank North America has deposit boxes in its branches that give sequentially numbered, traceable receipts for deposits and payments, providing customers with an alternative to waiting in the teller lines. Concourse unit supplied by Source Technologies is an example of this type of machine.

The next generation branches must also have the following capabilities: 1) Advanced CRM: The focus of CRM will have to shift from being pure sales oriented to being customer centric. Advanced CRM will retrieve data from a broad set of structured and unstructured sources and encapsulate them to be used for giving a better customer experience.

2) Next generation product configurators: With increasing competition and rising customer demand of personalized products and services, banks will have to provide the customer with an ability to choose and make a bundle from their own as well as from third party vendor products. For this, banks should be open to embracing external products and should have the capability of integrating with external configurators.

3) Multi-channel architecture: The branches should also have multi-channel capabilities to enable the branch staff service customers better and with least possible resolution time.

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Fun CornerFun Corner

yldneirf oce

the Banking & Financial Services -newsletter from Wipro Technologiese

For Wipro internal circulation only

Athreya H D

Quiz

Rush your responses to: thoughtline@wipro.com

1. Which is the first Indian bank to have an overseas branch and where?

2. Which bank has the largest chain of branches in India?

3. What is the term used to describe the scenario when a large number of bank customers withdraw their deposits?

4. Who started the concept of Satellite branches in the early 20th century?

5. Which was the first US Bank to start the concept of Green Branch?

6. Which is the first bank in the world to revolutionize the idea of Branchless Banking?

7. Who was the first person to use the world's first ATM?

8. Which Bank's system works solely on trust and doesn't have any legal instrument (no written contract) between the bank and its borrowers?

9. Which bank sponsors the Nobel Prize in Economics?

10. Which is the first bank to introduce RFID technology in Indian Retail banking?

May Edition Quiz Answers1.f.2.g.3.j.4.i.5.d.6.a. 7.b.8.h.9.c.10.e.11. Joint Venture12. Conglomerate Merger13. Market Extension14. Reverse Merger / takeover15. Intrinsic Value

The winner for the May Thoughtline Edition is Joydeep DuttaThe winner for the May Thoughtline Edition is Joydeep Dutta

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