1. Check, Money and Account Handling

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1 Strategic Planning, B. Adrian Research Note 11 March 2003 Real Time in the Bank Branch: Technologies That Can Help Real-time enablement is an important focus for retail branches. However, financial services providers must first sort through which processes and methods can benefit from becoming real time. Core Topic Financial Services: Financial Services Drivers, Strategies, Direction and Vision Key Issue What technologies and processes will enable the real-time enterprise in financial services? Strategic Planning Assumption By year-end 2005, the technologies that provide greater branch real-time enablement by providing information directly to the customer, facilitating cash and check handling, or streamlining resource use will be requirements for cost containment and competitive parity (0.8 probability). A great deal of interest has been generated recently concerning real time and the real-time financial services provider (FSP). However, any FSP considering embracing real-time concepts must first realize that increasing operational speed, simply for the sake of speed, has limited value outside of improved organizational performance. FSPs must step back from the hype and examine the processes and interactions that can be accelerated, and determine whether they should be accelerated and what the economic effect is likely to be. As the concept of the real-time enterprise (RTE) matures, and FSPs begin to embrace it, one of the primary focuses for realtime enablement will be the branch. When looking at the variety of processes that occur in the bank branch, and evaluating their current and appropriate real-time states, it's clear that there is a mixture of real-time and non-real-time processes. These processes can be classified across four categories: 1. Check, Money and Account Handling With the exception of the initial waiting line in the branch, as far as the customer is concerned, traditional branch activities such as check cashing and depositing appear to take place in a fairly real-time fashion. The customer walks up to the teller window, presents a check or cash and, in a few moments, walks away with cash or a deposit memo or receipt. Even so, a few banks are striving to make this part of the process even nearer to real time by using electronic identification of customers, signature validation, and coin- and cash-counting machines. There are several aspects of these processes that are not performed in real time. Non-customer-facing activities, such as end-of-day balancing and cash counting, are usually highly manual batch processes. Similar handling is also seen in the Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 behind-the-scenes processing of everyday banking transactions and paper check processing. One technology that can help with real-time management of cash handling is cash recyclers. These systems provide automated dispensing, acceptance and counting of paper bills and coins at each teller station for each transaction, and virtually eliminate manual money counting. The up-to-the-minute snapshot of each drawer's cash status that recyclers provide can offer several benefits to the branch: Time savings achieved by limiting manual counting Reduced errors that result from manual counting Greater optimization of cash delivery and pickup schedules Reduced risk of fines related to accidental cash reserve imbalances Imaging can also help real time-enablement of the handling of paper checks. The immediate electronification of check information on presentation to the branch allows for more-rapid non-batch-processing and reduces reliance on the paper note. The result can be savings from a decreased need for pickup and delivery of paper checks and from reduced delivery and processing slowdowns attributable to such things as inclement weather. 2. Customer Service and Advice Although routine customer-facing activities are often real-timeenabled such as the ability to access information for current customers and use it to prepopulate applications for additional products or services for nonroutine inquiries and behind-thescenes operations, manual and batch schemes predominate. An especially difficult problem is the fact that the branch often is not directly tapped into customer information generated by other delivery channels; in fact, the capability to share this information is often present, but the bank does not take advantage of it, primarily because business processes have not adapted well to past technology implementations. As a result, customers are subjected to inappropriate cross-sell attempts or cross-selling is foregone completely. Offering advice, such as for investments or sales suggestions, suffers similar handicaps. These types of advice require specialized information and scripting, and appropriately trained personnel are often not available. Approaches to this problem range from directing customers to self-service options to the stillexperimental method of providing multimedia access, as well as 11 March

3 centralized advisory personnel or "roving" experts who have scheduled time slots at each branch. Technologies related to customer relationship management (CRM) such as data warehousing, middleware and customer analytics can help address these issues by creating the morereal-time availability of customer information. This especially pertains to these processes: Sales and Account Opening: Real-time availability of customer information provides the most complete and accurate customer view, which is required for making the most-appropriate sales offers. In addition, more timely sharing of new account information within the organization facilitates activities such as fulfillment and leveraging for potential sales by other lines of business. Customer Inquiry/Complaint Handling: Real-time availability of transaction information is critical to handling customer inquiries and complaints. Not only is it necessary for providing the most-accurate responses to questions and issues, but customers will also increasingly consider infrequently updated batch information as an indication of technical obsolescence. Portfolio Management/Product Advice: Any process in which portfolio or product advice is solicited stands to benefit from real-time enablement, especially when performed during a face-to-face interaction in the branch. First, it enhances the agent's ability to provide accurate advice. Second, it allows a greater ability to offer "what-if" analyses, which can be critical to many types of interactions. Third, by eliminating the latency between the request and the advice, it reduces the likelihood that advice will be sought elsewhere. 3. Branch Management Overall branch management is mostly not enabled with real-time information processing capability. This affects decision making at the branch level and at more-centralized levels, because information collection, data analysis and sharing is erratic and typically involves at least some paper-based steps and processes. Workflow analysis and management tools promise to help alleviate these problems. The more-timely resource adjustments that workflow analysis delivers not only direct savings from optimized use of personnel and facilities, but also stand to have a tremendous effect on whether customers are satisfied with their experiences in the branch. 4. Self-Service 11 March

4 In many banks, branch-related self-service technologies mostly on-premise automated teller machines (ATMs) present challenges for the RTE. Although the customer-facing aspects of self-service (such as cash access and making a deposit) appear to be virtually real time, the back-end processing components are not. Tellers and other branch personnel often cannot access information about ATM withdrawals and deposits until the next business day, and even then the availability of ATM information is entirely dependent on the daily pickup schedule of the ATM contents. Here are some scenarios for real-time enablement opportunities: Cash Collection/Cash Disbursement: Many of the same technologies that can help facilitate real-time activities with teller-facing cash and check handling can be applied to ATMbased self-service transactions. For example, the paper bill handlers in ATMs can provide a degree of inventory management similar to what cash recyclers can offer tellers. Similarly, applying imaging technologies to ATMs can help expedite the processing of checks deposited via ATMs. Not only does this allow more-rapid processing, but it can also furnish savings from a reduced need to physically visit the ATMs and remove the paper checks. Imaging can also enhance customer satisfaction by allowing earlier access to deposited funds because of more-rapid processing. Cross-Channel Information Sharing: Other delivery channels can benefit from real-time availability of ATM-related information, especially when it includes not only transaction amounts, but also data about the time and location of the transactions. This timely data is very important for activities ranging from simple inquiry handling by other channels to development of use profiles for targeted product and service offerings. Marketing: ATMs have not historically been considered strong sales channels. However, as the functionality of ATMs expand, and consumers become more comfortable performing non-cash-based transactions with ATMs, realtime enablement of this channel for use as a marketing tool will become more important. Customer analytic and personalization technologies will help. As has been seen with other delivery channels, pushing to the ATM of marketing messages that are based on current, individual preference and transaction data will be able to evoke response rates many times greater than nontargeted approaches. Web ATMs will also be needed to help drive this real-time marketing. Their ability to deliver frequently updated 11 March

5 messages from internal marketing engines and partners via the Internet will be key to engaging customers during transactions and generating truly compelling offers to them. Acronym Key ATM Automated teller machine FSP Financial services provider RTE Real-time enterprise Bottom Line: The decisions involved in whether to real-timeenable branch-related processes are unique to each enterprise. However, the greatest likelihood of obtaining true business value exists through real-time-enabling those processes that provide information directly to the customer, facilitate cash and check handling, or streamline resource use. By year-end 2005, the technologies that provide greater branch real-time enablement by providing information directly to the customer, facilitating cash and check handling, or streamlining resource use will be requirements for cost containment and competitive parity (0.8 probability). 11 March