Downloads |
Overview
Banking customers have more choices available to them today than ever before, in terms of where and when they want to bank and the choice of services and products available to them. Banks are looking to new technology approaches as one option to help them meet these new demands. A significant technical challenge they face continues to be that of application development, in particular, the ability to develop and deploy new network-based applications quickly and cost-effectively that utilize new capabilities across the network. These can range from mobility to new media such as video to network collaboration services such as presence.
Cisco® has developed a framework called the Cisco Service-Oriented Network Architecture (SONA), which includes a suite of reusable services that are built into the network infrastructure. This white paper will show how banks can use and reuse these services to develop new revenue-producing applications more quickly and cost-effectively than on networks that lack these integrated capabilities.
Trends in Retail Banking
An important trend in the banking industry over the last few years is that the consumer base is becoming more diverse both behaviorally and demographically. Young people, for example, might be reachable with a certain set of offers based on instant messaging and aggressive but less-secure returns, while an older demographic might want personal service and lower, but secure returns. Other segments might be more responsive to free checking, free online banking, and an individualized banking contact. In other words, a one-size approach is no longer effective.
In response, business lines in banks are looking to better understand the wants and needs of their customer base in order to develop and market product packages that appeal directly to different customer segments. And as the range and number of products they offer increase, banks are also pursuing techniques and processes to help them disseminate product knowledge more quickly to their branch offices. The overriding issue is that branches must be prepared with the right product at the right time to meet changing and diverse customer demand.
Banks are also finding that emerging channels such as Web banking are having an effect on customer expectations of efficient and competent services delivered in the branch environment. If a customer comes into a bank branch seeking information about a home equity line or a mortgage and the subject matter expert is busy or not in the branch, that customer might leave and not return. In fact, it has been suggested that as many as one in five visitors to a branch who does not receive help in a timely manner will leave and not return. A primary issue then is how banks can best utilize limited human resources in order to respond more quickly to consumer demand.
Information technology (IT) can play an important role in responding to many of these trends, and in the last few years banks have begun evolving their IT environments to meet customer demands. In the old IT paradigm, individual business units approached IT to develop specific applications, databases, and systems for a specific product. But this led to departmental silos where customer data, business services, or compute resources could not be easily shared across business units.
Today the focus is on building architectures that enable cross-sharing of customer data as well as business services. This enables a bank that wants to better understand its customer base to pull information from different silos to create a more accurate picture of a segment's buying patterns, allowing a more targeted marketing effort. In addition, by making this information easily accessible to employees at branches, banks can provide employees with a single logical view of the customer so the employee can be more responsive to customer inquiries and concerns.
Although banks have been focusing largely in the area of application integration to create architectures for cross-sharing of customer data and reusing of business services, another area of the IT department has made significant progress in building a standardized foundation: IP-based data networks. Cisco SONA is a framework on which banks can use their network assets by fully utilizing services that can be deployed in the network enterprisewide. These services include security, mobility, identification, and other interactive services. After these services are enabled in an intelligent network, they are reusable, virtual, and ubiquitous throughout the entire enterprise, allowing banks to connect their employees and customers with the information they need transparently.
Cisco SONA is a framework with which financial institutions can take advantage of their network investment to deliver services that can be applied modularly to critical business opportunities.
Two areas of retail banking are showing great promise for deriving increased revenues with the implementation of business applications on top of the Cisco SONA framework, including:
• Virtual subject matter experts in retail branches: By providing customers immediate access to subject matter experts, banks can potentially reduce "revenue leakage" significantly, which translates into large revenue gains, particularly at large branch banks.
• Increased branch sales productivity through rich, interactive, and immediate online training: By extending to all branches the immediate power of video streaming, CxO video broadcasts, interactive videoconferences, and online rich-media resources, banks can cut training time by as much as one-third, enabling new hires to achieve steady-state revenue much more quickly. Online multimedia training is also enabling banks to disseminate new product knowledge much more quickly to the field, which has grown increasingly important as the pace and volume of new products increase.
The next section of this white paper will describe the essential capabilities of the Cisco SONA framework and how these capabilities can be applied to enable new business processes. The final section will take a more in-depth look at the two uses cases mentioned earlier--virtual subject matter experts and improved sales productivity--and will make assumptions about how the Cisco SONA framework can be used in each case to guide significant new revenue opportunities.
The Enabler: Cisco SONA
The common element of the new capabilities described earlier is the Cisco SONA, which functions uniquely as a services-delivery platform. Cisco SONA helps companies evolve their existing infrastructure into an intelligent network needed to support new and evolving IT strategies such as Web services and virtualization of applications such as voice, video, and presence. Virtualization means resources such as computing platforms or storage can be easily extended and shared across the network infrastructure. Because the network touches every part of the IT infrastructure and every user in an organization, as well as most customer-facing applications and processes that affect the customer experience, it is the ideal location to build in ubiquitous services based on standard interfaces and technologies.
But Cisco SONA provides much more than simple connectivity; it also enables interoperability as part of the infrastructure. Most enterprise IT environments are built of siloed applications, and many of these applications and processes do not interoperate. This has led to the use of third-party middleware to provide the glue for connecting incompatible applications. But if some of this middleware can be migrated into the fabric of the network, which Cisco SONA provides, then fewer third-party devices, software, and management/maintenance are required. Why use several means of deploying services on different standards that will cost more and might not be able to interoperate when companies can use one standard, one means of deployment that supports all communications and presence channels simultaneously?
To cost-effectively deploy the remarkable capabilities described earlier requires the ability to easily and quickly roll out new applications across a uniform framework where the critical services needed are built into the network and are based on industry standards such as Extensible Markup Language (XML). This eliminates the very long time frame typically required to spec out middleware, program it, test it, and finally deploy it.
The Cisco SONA infrastructure provides a holistic, network-based approach to business and technology integration. Cisco SONA is radically different from traditional network and application design-and-deployment strategies, which feature dedicated hardware-based silo applications. At its foundation, the Cisco SONA IP network systems layer enables virtualized network services across the enterprise, from campus to branch to data center to WAN (see Figure 1).
Figure 1. Cisco SONA Infrastructure for Retail Banking
The Cisco SONA integrated network services layer holds primary network services such as security, mobility, storage, unified communications, compute, and identity services. As described earlier, capabilities that were previously limited to one particular application now become shared services. This shared approach breaks down silo functionality and enables the virtualization of common services across multiple applications, users, locations, and devices.
The Cisco SONA application layer supports traditional business applications from vendors such as SAP, Oracle, Microsoft, and IBM, as well as the Cisco collaboration applications: telephony, unified messaging, video, Web conferencing, customer contact, and instant messaging. One strong differentiator of Cisco SONA is its ability to provide a shared services platform that supports not only Cisco applications but also applications from many other vendors. To date, there are more than 200 Cisco compatible technology development partners for unified communications. These partners deliver thousands of innovative applications to customers across the Cisco open standards framework.
The following section will provide more detail on the how Cisco SONA services can be used and reused to deliver innovative new applications quickly and cost-efficiently to provide compelling business value to banks today.
Two Scenarios of Cisco SONA Delivering Tangible Business Value
Reducing Branch Revenue Leakage by Capturing Higher Percentage of Retail Bank Walk-In Customers
Market researchers estimate that as much as 20 to 30 percent of customers who walk into retail bank branches seeking assistance with financial services walk out unsatisfied. A surprising percentage of these customers are likely leave the branch as a result of two factors limited banker availability and lack of product expertise in the branch. Either situation is typically an untracked cause of "revenue leakage"--a term describing lost potential revenue--because it is likely these customers will not return for a future appointment and might well reach out to a competitor.
Banks are employing a number of strategies to address this challenge by seeking ways to best optimize a geographically distributed and often specialized workforce. Migrating to a more mobile workforce and improving overall product expertise are emerging industry best practices that can improve branch service delivery. Yet banks must look to create breakaway value for customers in order to establish competitive differentiation. The integrated network services layer in the Cisco SONA framework can help banks achieve these benefits.
Consider the following scenario where various Cisco SONA services interact to provide a customer with a satisfying collaborative session with a virtual subject matter expert. A customer comes into a branch and sits down with a banker to discuss a small business loan. Although commercial banking is not this banker's specialty, she informs the customer that a business loan expert is immediately available. After gathering some basic information, she accesses the Cisco Unified Client application on her desktop and is able to see a list of commercial banking experts in nearby branches.
The application indicates the availability and manner of preferred communication of these experts, a function defined as "presence" in the Cisco Unified Communications service. When the banker simply selects a suitable expert from within the application, a call is automatically placed, and the resulting conversation ensues between the local banker, acting as a facilitator, and the expert and the customer. In addition to mitigating potential leakage, the immediacy of the conversation accelerates a sales process that satisfies the customer and might ultimately lead to other cross-sell or upsell opportunities.
A rough calculation demonstrates the potential revenue-generating effect of these services when applied to point-of-sale opportunities. Let us begin by assuming 20 percent leakage--that one in five customers who come in seeking product information leave and do not return. Then, consider the potential if the branch is able to convert 25 percent of these customers. This would amount to a 5 percent increase (25 x .20) in product sales. Based on this, a bank branch generating $50,000 of product-based revenue per month could capture an additional $2500 per month ($50,000 x 5%). With a 500-branch network, this would amount to $1.25 million per month revenue increase, or $15 million annually.
In the preceding example, the commercial banking expert was located in a nearby branch. But the ubiquitous nature of Unified Communication services in the Cisco SONA framework means these functions can be distributed over greater distances, further increasing the efficiency of the branch. IP telephony and IP contact centers--both components of the Cisco Unified Communications service--allow experts to exist in contact centers, in branches, or even at home with no distinctions between them. Most importantly, regardless of the expert's location, there is no significant difference in telecommunication costs because voice and data are running over the same network.
How Cisco SONA Enables Virtual Subject Matter Experts
The preceding scenario illustrates just how lucrative a virtual subject matter expert capability can be. But although the scenario seems direct and straightforward, in fact many activities are occurring behind the scenes on the network to enable a transparent collaboration. This is similar to a ride in a luxury car, where the driver enjoys a smooth, luxurious ride without realizing the many processes that are occurring beneath the hood and throughout the chassis to enable that smooth ride.
If we look beneath the hood of the virtual subject matter expert capability, we see the Cisco Intelligent Network operating, calling on different processes in the Cisco SONA framework to initiate, secure, monitor, and help ensure a satisfying collaborative experience. But unlike a car, the Cisco Intelligent Network is multidimensional and can support different use cases. What is unique with Cisco SONA is that many different processes, or services, are built into the network and are reusable. So while a bank might use a number of services to enable the subject matter expert, it will be able to reuse many of these same services to quickly and efficiently build different applications.
The Cisco SONA services that enable a virtual subject matter collaboration can be described best in three sequential steps:
1. Who to Contact
2. How to Contact
3. Setting Up the Collaboration
Who to Contact
In the first step, the sales representative needs to locate and determine the availability of an appropriate subject matter expert. The rep uses the presence functionality that is part of the SONA Unified Communications service. Presence tracks a user's location and availability along with the user's preferred devices and opens a window to show the rep these various options.
How to Contact
Once the subject matter expert has been identified, the Cisco Intelligent Network next determines where the expert is on the network and the most effective path or tunnel to reach the expert. This brings in the policy functionality of the Unified Communications service that manages and moderates routing rules and directory information and determines automatically whether the call should go to the expert's cell phone, desk phone, or a softphone-enabled laptop.
Before any communications are enabled between the bank location and the subject matter expert the network must also exert operational control and determine that the subject expert is on a secure, certified and valid endpoint. The SONA security service engages at this point to check that the endpoint is running Cisco Security Agent. Cisco Security Agent is software that runs on the endpoint and interacts with other Cisco security software to determine that the endpoint has the proper virus protection installed. It also checks to be sure that the virus software is up-to-date with the latest signatures and that any necessary operating system patches are installed before network access is allowed.
Setting up the Collaboration
Finally, now that it has in a few milliseconds found the expert, determined how best to contact the expert, and secured the endpoint, the Cisco Intelligent Network is ready to set up the actual collaboration. The Cisco SONA interactive service responsible for this step is the media functionality in the Unified Communications service. The value of Cisco SONA media functionality is that it can integrate various media types into a conversation transparently--a conversation might begin with audio and can then be upgraded to video transparently if desired without requiring any changes to the infrastructure. Web conferencing can also be enabled easily if the expert wants to pull up certain documents to share with the customer.
At this point another security issue comes into play: confidentiality. Is the person on the other end really who that person claims to be? Is the path from point A to point B secure? Securing this requires other functionality in the Cisco SONA security service: authentication and the setting up of a secure VPN tunnel or use of SSL technology.
Finally, after the call is established, one additional service comes into play--application delivery service, or service acceleration. Nothing could be more damaging to a video collaborative session than pixilated images or abstracts distorting the picture. This is a real possibility if the connection is a slow WAN link and heavy amounts of data and video are using the link simultaneously. Functionality in the application delivery service includes various acceleration engines and intelligent caching of Webpages in order to speed delivery times by up to 200 percent. The Cisco also offers a functionality called wide-area file service (WAFS) that reduces the delay and latency of traffic on a WAN link between two applications.
The next scenario will describe how banks can increase sales productivity in their branches by delivering training and the sharing of best practices using rich media such as video broadcasts, interactive video training, and videoconferencing or audioconferencing followups. The power of Cisco SONA is that many of the same services used in the virtual subject matter scenario just described--various security functions, media, and presence--can be reused in this scenario, enabling faster application rollout and lower cost.
Driving Higher Sales Productivity in Retail Branches and Stores
Front-line branch sales and services skills are a primary competitive differentiator in the banking industry. Yet banks face many challenges when trying to maintain a fully productive and product-fluent branch sales force. The historical challenges of delivering training to geographically dispersed regions and branches that specialize in different product families are ever-present concerns. In addition, banks must also today contend with a high turnover rate of branch sales associates and, more recently, the task of managing a faster-growing product pipeline.
These are significant challenges that affect revenue, productivity, and growth. Many retail bank branches in the United States experience turnover rates of sales professionals from 15 to 30 percent. Many of these professionals specialize in specific areas, which compounds training challenges for new employees. This means it is critical to bring new hires up to speed as quickly as possible in order to begin generating revenue.
Meanwhile, new products and product bundles are increasingly being developed to serve the needs of diverse customer segments. For example, bundles for a certain demographic could include a store card, remittance program for broad payments, and checking with low fees. Bundles for another group could include free checking, free online banking, and an individualized banking contact. In this environment, how do banks keep the front line employees abreast of new product information and the skills to sell them?
Rapid and Targeted Content Delivery Using Rich Media Assets
Cisco SONA helps minimize the effects of these challenges by providing network services that make it possible for banking institutions to quickly deliver important information with a rich user experience to all branches simultaneously. This allows institutions to deliver content for important tasks such as new hire training, new product introductions, and sales best-practice sharing, all of which allow branch personnel to be more productive sooner. An additional benefit is that this increased access to rich information, including video, audio, and flexible on-demand materials, can improve employee satisfaction and lower the average turnover rate.
Most of the existing processes for distributing information to branches are costly endeavors that incur frequent travel and time out of the office or uneven materials distribution and delay in reaching far-flung branches. Even with today's electronic distribution methods, the main method to train and distribute information is instructor or product manager road shows in regional locations with follow-on local training for branch staff.
Contrast this scenario to one in which content, in any digital form, can be distributed, stored, and accessed on demand in every branch using the Cisco Digital Media System, Cisco MeetingPlace® conferencing solution, and Cisco TelePresence virtual meeting solution. Banks can deliver important CxO video broadcasts, interactive video or audio training, product introductions, and best practice video on demand--even customer-facing digital marketing--directly to local employees with minimal effects on the transaction processing activities of the network. This can reduce sales readiness time from months to weeks or days with better retention rates. In addition, banks can target content to specific employees or regions, providing better message quality and integrity. And many of these activities can be coordinated with customer-facing marketing using the Cisco Digital Media System, which can deliver live and on-demand content to digital signage in branch lobbies or waiting areas. All of these offerings are based on the integrated security and unified communications services of Cisco SONA's integrated network services layer.
As new bank employees ramp up faster on primary information, and products reach markets sooner, both are quicker to reach a steady state of revenue generation resulting in increased revenues. Let's take a look at the effects on an institution in reducing new hire training from 12 weeks to 6 weeks, providing it with 6 extra weeks of steady state revenue per new hire. To see how potentially lucrative this accelerated training could be, consider the 500-branch bank described in the earlier example with three sales associates per branch producing $5000 per week at steady-state revenue. If we assume a modest 20 percent annual turnover rate, the potential return is:
• 3 sales associates per branch x 500 branches = 1500 sales associates
• 1500 sales associates x 20 percent turnover rate = 300 associates replaced annually
• $5,000 revenue per associate x 6 weeks (extra time of steady-state revenue due to faster training) = $30,000 additional revenue per new associate hire
• 300 associates x $30,000 additional revenue = $9 million in new revenue
In summary, by reducing training from 12 weeks to 6 weeks through digital media assets available on demand or live over the network such as CxO broadcasts, interactive training, and videoconferencing or audio conferencing follow-ups, a 500-branch bank can see new revenue of $9 million in a year's time.
A separate significant revenue increase could also be projected to the bank's success of accelerating product knowledge dissemination to all the branches. With faster training on new products and the growth in the number of products targeted at a more diverse and segmented customer base, a large bank could realize a corresponding increase in revenue to that achieved with faster new hire training.
Conclusion
As described in this paper, innovative banks and financial institutions have the opportunity to enable new business capabilities that can deliver remarkable results, including allowing them to capture more revenue per customer, bringing new hires to steady-state revenue more quickly, and expediting the transfer of new product intelligence to the field. The foundation on which these new capabilities are based is Cisco SONA.
These examples only touch on the broad capabilities inherent in Cisco SONA. Additional Cisco SONA services such as wireless or compute services might be best suited to delivering enablement in addition to the services mentioned in this white paper helping banks meet the unique business challenges they face today and tomorrow.
For More Information
To better understand how Cisco SONA can help your institution, visit Cisco at http://www.cisco.com/go/sona.