Academic journal article ABA Banking Journal

Banks Begin to Tap the Web's Potential for Internal Change

Academic journal article ABA Banking Journal

Banks Begin to Tap the Web's Potential for Internal Change

Article excerpt

Some call it "webizing." The results can be far more dramatic than online banking has been so far

"The Internet will change everything!" web evangelists have been telling us for the past five years. Bankers have mostly been looking at the marketing side for signs of transforming changes in the delivery of financial services. True, we have internet banking and bill paying, but 80% of banks don't offer it yet and 90% of consumers don't use it yet. However, the internet revolution is happening in business-to-business (B2B) interchanges.

And there's another frontier: "webizing" internal operations. Today, only the biggest enterprises are exploring new ways to handle their internal processes. Few bankers are even aware of the potential benefits.

But using the web to integrate the flow of external and internal operations is surely the way the business world is going.

Evangelists call it creating an information ecology -- the natural habitat of shifting alliances of added-value providers.

A company-wide, information web-based network integrates internal technical resources and business logic with information from customers, vendors, and trading partners. When integration stops at the edge of the enterprise, it's called an intranet.

It becomes an extranet when it also embraces the extended family of players--who could be anywhere on the globe.

Standards are a must

To have a truly "seamless" extranet, there must be links between the bank's legacy information system and an ever-growing array of applications. While some of these applications are home grown, others come from outside application service providers (ASPs). Add to this the collection of applications and platforms resulting from mergers and acquisitions, and the need for solutions that function on any type of computer "platform" becomes an imperative. This can't happen without a commitment to open standards throughout the enterprise.

"Above all, don't stray from the standards path or you will pay dearly," warns David Orr, consultant to the e-commerce division of Liberty Financial Companies in Boston. This means using platform-independent software tools such as Java and XML, along with standard protocols (chiefly J2EE) for integrating data and business logic from hither and yon into the firm's information architecture.

The two keys to success in building a comprehensive system are 1. handling transactions electronically from start to finish--also called end-to-end or straight-through processing (STP); and 2. presenting a single view of all of a customer's accounts (internal or external customers). This is according to Bridget Piraino, director of global financial services marketing for SeeBeyond Technology Corp., formerly STC, a Monrovia, Calif.-based firm specializing in e-business connectivity.

For SeeBeyond's client ABN AMRO, getting a comprehensive view of its cash management position, in multiple currencies, in a single country, means processing some 60,000 transactions per hour in real time.

Go for quick wins

William S. Finkelstein, a senior partner in financial services at Cisco Systems, says that banks can save from 7%-24% of noninterest expense by applying what he calls e-business principles to everything that an enterprise does. No stranger to innovative banking, he helped Wells Fargo and Bank of America become first and second in the number of Internet banking accounts. Cisco Systems-- for a few shining days the world's most richly capitalized company-- makes routers and switches for communications systems and advises clients on how to create enterprise-wide e-business systems. Cisco itself is a good model of a thoroughly Web-enabled enterprise. And it's paying off handsomely, Finkelstein says.

In fiscal year 2000, Cisco will save $500 million on its customer care (call center) operations. This will come from reducing the call volumes. …

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