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Union Bank of California’s Jim Yee Is Reengineering Banking With A Customer Focus

Union Bank of California's Jim Yee talks with Bank Systems & Technology about how his career moves from electrical engineering to industrial engineering to bank management have given him a unique perspective of the industry.

BS&T: Can you describe the UBOC business?

Yee: UBOC is a classic commercial and retail bank. Most of our business is in California. In our global markets group we offer some mutual funds investment products; we have a trust business, and we do support foreign exchange and interest rate-based trading activities. But we no longer have the international branches that we used to -- we sold that business to Wachovia (Charlotte, N.C.).

BS&T: How does your experience at San Francisco-based investment management firm Charles Schwab color the way you approach technology?

Yee: I learned a sense of urgency and gained the understanding that technology can be a real competitive tool. When I joined UBOC, the bank ran a traditional technology shop. I renamed it from Systems and Technology, which sounded more like a data processing shop, to Information Technology to reflect a more current view of technology as a business enabler. Banking today is not only technology-dependent but technology-enabling. I want IT to function as a business partner to the lines of businesses and help define what banking can be.

BS&T: What do your current responsibilities entail?

Yee: In addition to managing the 600 employees in the IT group, this year I've been given responsibility for 1,300 employees in the operations and customer service area. It's funny in that the world is starting to look more like the 1970s when you had an executive in charge of both operations and technology. Now you hear about a lot of CIOs getting involved in business and operations. It's come full circle.

I've also been asked to start a process engineering department that is commissioned to look at foundational processes across the bank from a customer point of view. We will look at how we can reengineer our processes to enable our segmentation strategy and improve overall service quality. These changes will affect the client-facing areas of the bank -- such as branches, sales and servicing -- and online channels. That the bank asked me to head up the reengineering process and put operations and IT in the same organization is a real statement about the bank's foresight about how IT can be an enabler and is such a critical function for the bank to continue to be successful and competitive in the marketplace.

BS&T: Will the process reengineering reduce costs?

Yee: My belief is that when you improve your service quality, you ultimately will reduce expenses. Processing reengineering is a key strategy for UBOC. Whether or not we succeed will be proved in a few years.

BS&T: How long will the process reengineering take?

Yee: We expect this to be an ongoing improvement process, but I think we will get an initial big bang. As business strategy evolves we'll have the opportunity to continually look at how we could optimize our processes to improve quality. Within the next 18 to 36 months I expect to see a significant step up in our quality and a reduction in our cost structure.

BS&T: What technology changes will you make to support the customer focus?

Yee: We are offering self-service Web tools to our customers and plan to incorporate other technologies, such as Linux, and put our Web applications on Intel (Santa Clara, Calif.)/AMD (Sunnyvale, Calif.) commodity platforms. We'll use these Web-enabled tools to supplement our mainframe and transactional systems, which are still cost-effective.

But having technology is only half the answer. You also need to look at redesigning business processes and putting processing capability as close to the point of sale and making it as straight-through as possible.

BS&T: Will you retire the mainframes?

Yee: I don't know. Retiring mainframes is not the destination. Some of our mainframe applications, such as our DDA, are very efficient.

BS&T: What about offshoring?

Yee: Offshoring for us is a strategic alternative that we will evaluate. Offshoring, like retiring the mainframes, is not a destination but a part of our portfolio that we can leverage to become more competitive either by reducing costs or bringing products to market more quickly.

BS&T: Did you have to bring in new staff since you are working with new technologies?

Yee: I did, and we now have a good mix of internally promoted staff as well as externally recruited staff. We are developing our internal staff; we spent a half million dollars on technical staff training last year. I also hired very key senior executive positions to be on my senior management team.

BS&T: How are regulatory concerns affecting your technology decisions?

Yee: First we make sure that we spend what we need to be compliant. Then we look at making compliance part of our process to become more competitive. For example, performing Know Your Customer (KYC) due diligence as a separate compliance task adds costs. But if you look at KYC as part of the prospecting and sales cycle, it enables you to truly know your customer. You can then take that knowledge and offer much better products and services. We want to build the compliance requirement into our business so it becomes a value-added process rather than a burden.

BS&T: Who are UBOC's competitors?

Yee: Our business strategy is segmentation -- understanding our customers and then packaging products and services to meet those segments. Rather than competing generally in our commercial business, we pick industries in which our bankers have domain expertise. Because we know their business, we can provide value-added service to our lending and cash-management products.

In the corporate market, we compete with banks such as Wells Fargo (San Francisco), Bank of America (Charlotte, N.C.) and Wachovia. Our strategy of knowing the industry sectors we serve enables us to get a higher percentage of business in those sectors. Although we are a top-25 bank, we are No. 7 or 8 in cash management.

We're very focused on the California market, although we do have some offices outside the state. On the retail side, we are very dominant in certain geographies, such as Los Angeles and San Diego. Citibank (New York) and Wells Fargo are big competitors, but nonbanks such as ING (Amsterdam), American Express (New York) and others are emerging competitors.

BS&T: Do you view community banks as competitors?

Yee: Yes and no. Community banks market to the entire community, so yes, we are competing for geographic space. But our strategy is not to compete against the whole spectrum of the community but within selected segments of customers we determine we want to go after.

BS&T: Do you expect your IT budget to increase, decrease or remain the same?

Yee: We've been spending the right amount on technology and the bank has been very good about approving the dollars that we need. However, I do feel that we could get a lot more for our dollars. It's all about negotiation with vendors and others. The real question for me is, "How much can you spend productively at a time?" You can throw away millions of dollars, but are you getting value?

Jim Yee started his financial services career as a summer intern at the former Chase Manhattan Bank while attending New York's Columbia University. He liked banking so much that he changed his college major from electrical engineering to industrial engineering and has since spent most of his career in financial services. Since joining San Francisco-based Union Bank of California (UBOC; $52.6 billion in assets) in 2005, Yee has focused on supporting the bank's strategy of owning niche markets through segmentation and providing a customer-centric experience.

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