June 27, 2003

Because the financial services industry is an integral cog in the mechanics that drive personal and business commerce, it remains in a constant state of evolution as it attempts to mirror the needs and desires of its customers. As customer requirements change, so do banks' products and services. Much of this evolution is the result of technology.

In the 1970's, the great technology revolution was the introduction of Automated Teller Machines.In the 1990's, Internet banks sprouted upon the virtual landscape, and Internet banking was touted to virtually eliminate any need for physical interaction with the bank.

Surely, this would be the final "nail in the coffin" for brick and mortar banking and the conventional branch. But while many redundant bank branches did close due to mergers and acquisitions, branch banking is more vibrant than ever.

According to Tower Group studies of more than 4,500 households conducted in 2001 and 2002, 92 percent of households visited a branch at least once in the previous month.

So why all the branch visits? Check deposits. Two-thirds of branch transaction volume is check related, and check deposits account for a major part of branch teller activity. Why? Because the branch is the only deposit alternative that customers trust.

REALIZING THE HIGHEST VALUE

A significant amount of money and effort has been invested in driving customers away from the branch. The reason: branch transactions are labor intensive and alternative delivery channels are often much more cost effective.

The problem with that paradigm is that when a customer is driven from the branch, the bank loses its greatest opportunity to sell value-added services. It is small wonder then, that 30 percent of customers that defected from one bank to another cited service related issues as a reason driving the change, according to Celent Communications studies. Banks are thus embarked on branch renewal efforts to improve service and rejuvenate their major points of contact with their customers.

Given this 'rediscovery' of the branch, it is essential to use branch personnel to their highest value. The highest value use of branch personnel is the new frontier in banking: converting tellers to relationship managers. Tellers enjoy a unique relationship with their customers. Because of the frequency of visits, tellers are especially well positioned to sell new products and services, uncover problems, and cement rapport to assure customer retention.

Changing tellers from points where transactions are merely fulfilled to launch pads that build customer intimacy requires a strategy that carefully balances customer service and operational efficiency. The strategy needs the backing of senior management from both the retail and operational sides of the bank, and requires the alignment of business processes, recruitment, training, and technology that will enable the new frontier.

The reality of today's branch deposit processing, however, is typified by largely manual processes and systems that require tellers to focus disproportionately on processing transactions. In addition, checks go though multiple manual "touch-points," beginning with the teller, and including transportation to processing centers outside the branch. Each touch-point not only boosts the cost-per-transaction, but also increases the points at which errors can occur.

Thus, not only are branches saddled with processes and systems that are major barriers to repositioning the role of the teller, but the existing error prone infrastructure puts the banks retail franchise at risk.

TECHNOLOGY EMPOWERS TELLERS

The good news is that developments in imaging, intelligent character recognition, telecommunications, and the Internet have made possible deposit automation technology. Deposit automation is designed specifically to address this new view of branch banking and to deliver the efficiency necessary to raise front-line personnel to the professional level that will yield a healthy return on the bank's investment. Deposit automation systems integrate customer information with advanced image processing, character recognition, and versatile data-matching workflows to streamline the customer point-of-transaction experience-virtually eliminating customer and teller errors.

The best-designed systems eliminate many of the "touch-points," and employ automation to reduce or eliminate clerical work and redundant activities. This frees teller time to focus attention on the customer rather than the process itself. The results are happier customers, more productive tellers, and more profitable banks.

Deposit automation systems are also extensible in that they can be used to capture, validate, manage, and distribute check transactions at any point of presentment inside or outside the bank. Thus, these systems also help banks position themselves for major changes brought about by rapidly advancing legislation referred to as Check 21.

The next new frontier in banking? It was there all the time. It's all about looking at opportunities in a new way, and taking advantage of new technology to make it a reality.

Vijay Balakrishnan is vice president of marketing for Alphretta, Ga.-based Alogent Corporation. He can be reached at Vijay.Balakrishnan@alogent.com.