In the UK, every bank is in hot pursuit of the
same holy grail: to liberate vast quantities of customer data from
the information silos where they are held so that each arm of the
business can access all a customer's dealings with the bank at the
push of a button.
But gaining a single view of customers is easier said than done.
The technology infrastructures of the UK's banking giants consist
of a multitude of computer systems running independently, each
storing vast amounts of customer data.
While a bank's different businesses - such as mortgages, loans,
personal, investments and commercial - all have their own separate
databases, they frequently share customers. Making all this
customer information available in one place is a key long-term
banking goal because the business benefits for getting it right are
massive.
In a nutshell,
a single customer view would allow banks to save money and
time, add value to the brand through improved customer service, and
give bank staff better information when making decisions about
providing financial products.
Ralph Silva, analyst at TowerGroup, sums up the advantages of
data integration as reduced operational effort and better
cross-selling capabilities.
Risk reduction
But it's not just about performing more efficiently, it's also
about reducing risk. "By not seeing the complete customer
relationship, banks are susceptible to inappropriate risk
calculations that considerably increase their exposure," Silva
says.
With the current sub-prime mortgage fallout still weighing
heavily on the financial services sector it is clear that banks are
not immune from the damages caused by bad debt.
Integrating customer data is of strategic importance. The
principle helped finalise the takeover of Abbey in 2004 by Spain's
Banco Santander, as achieving a single view was a key factor for
both parties. The fact that Banco Santander could fast-track the UK
mortgage bank towards achieving that single view of customers was a
major attraction to Abbey shareholders because it was seen as
a way to cut costs and improve services to customers.
Abbey is currently implementing Banco Santander's global banking
system, which is due for completion in the summer. The
Parthenon system, as it is known, is a platform developed in-house
which offers front-to-back customer processing.
"It moves us from silo-based product systems, where we don't
have a single view of the customer, to a single customer view,"
says an Abbey spokesman. "In doing so we have
straight-through
processing, much better sales tools and improved
administration.
"We'll avoid the need for customers to repeat information, and
the way in which we store it means we will have it in one place
rather than by product."
Multiple database merger
HBOS, which was created by the merger of Bank of Scotland and
Halifax in 2001 following a £30bn deal, also has the challenge of
integrating multiple customer databases from two separate
companies.
Vincent Chaney, head of customer strategy for retail marketing
at HBOS, says the bank is a complex business with a number of
brands, but that customers view all their dealings with the bank as
part of a single relationship.
"We have been expanding our single customer view over a number
of years and will continue to do so as we gain a better
understanding of what data is available both within and from
outside the bank," Chaney says. "At present we have single customer
view with operational and analytical environments across our main
brands and main product groups, but there are some gaps."
Cross-seller's dream
According to
HSBC, the advantages of a single view "are enormous". It says
the customer experiences better service, which is good for
business. "It offers greater loyalty, fewer errors or service
failures, and less rework, as well as a much clearer picture of a
customer's overall value, both current and potential," says a
spokesperson.
HSBC bank says a better understanding of customers will aid
cross-selling.
Another flag bearer of British banking, Barclays, is currently
finalising the implementation of software to link different systems
across its business in the UK to create a unified view of
customers.
Olaf Theilmann, managing director for direct channels at
Barclays UK, says that the services banks offer will improve when
customer details are integrated.
Theilmann believes customers require three things, which all
banks are trying to provide: ease of use when dealing with the
bank, a personalised service where the bank knows who a customer
is, and the ability to control their finances.
"A single view of customer plays into all three. It improves the
experience because a customer does not have to be passed between
lots of other people and they will see faster and more consistent
processes."
Attempting Everest
The ultimate goal is to have a single all-encompassing customer
database, with details of customers and all their relationship with
the bank on it. But this is the financial services equivalent of
climbing Everest 100 years ago. Despite the difficulties, though,
achieving this goal would set any bank apart from competitors.
A single database would even take banks beyond a single view of
customers and on to IT-automated customer processing through the
use of algorithms.
Banks are climbing this mountain in stages and are currently
building virtual single views of customers by using software to
link existing systems.
Silva says banks can do it in steps. "First comes the technology
that interconnects databases. This can be as simple as a middleware
solution that can connect to relational databases. The alternative
is the development of a front-end technology that aggregates
various databases.
"Step two is cleaning up and moving the data to a large
relational database with various front-ends designed for individual
lines of business."
Marathon, not a sprint
The single database paradise is still a long way off, given the
cultural changes, prohibitive costs and
major technical challenges. Instead,
banks are moving towards a single view through the use of web
technologies to link legacy systems.
Barclays is using Java-based web services to bring all customer
data to hand without the heavy cost of replacing its entire
infrastructure.
"The challenge is to find smart ways of linking all the relevant
systems, particularly the front-line applications and the product
engines," says Theilmann. "We could rip out the IT infrastructure
and start again, but that would be costly and time consuming.
Lightweight Java technologies give us the flexibility to achieve
this integration without any significant impact."
Similarly, HSBC is moving towards the single view through the
use of software. It has invested heavily in business intelligence
and customer relationship management software over the last 10
years to bring together customer details. "Our UK personal finance
and commercial banking operations already have a single view of
customers and we continue to develop this," says a spokesman.
In today's banking environment, where customers have various
means of interacting with a bank such as online, on the phone and
at the branch, HSBC uses fairly standard software and database
technologies, but says the value lies in how it links multiple
channels. In essence, the value is in the plumbing, supported by
specialist analytical tools. Legacy tools are replaced as HSBC
develops and rolls out group standard technologies.
HSBC has even begun integrating databases from different
businesses and says it will continue to expand this practice.
Chaney says HBOS will continue to build on its existing
infrastructure, which is based on large DB2 databases. "We will
continue to build on the current system, which has two-way feeds to
and from our product systems, some of which are legacy systems," he
explains.
The challenges
As well as the technical challenges presented by incompatible
interfaces, there will be cultural obstacles to overcome when
separate business units begin to share data.
"[The main challenges are] culture, culture and culture
[because] people will not want to give up control of databases,"
says Silva.
Banks will also have to be vigilant following the creation of a
single view to ensure that single views remain just that.
Chaney says that when systems are upgraded, the impact on
integrated systems must be carefully monitored. "As the customer
view is dependent on integration with the product and risk systems,
it is vital that we keep up to date with developments to these
systems," he says.
Time is also a challenge. The longer that banks continue to hold
multiple versions of customer details across the business on
separate systems, the harder it will be to change. Each time a bank
wants to introduce a new financial product, it creates a new system
which is not automatically linked in.
"All big banks have developed legacy IT architectures over time.
There are new products added every year, and the architecture
becomes pretty complex and not all systems are integrated," says
Theilmann.
Cold winds of recession
Financial services companies have been hit hard by the credit
crunch, which has blighted the global economy since the US
sub-prime mortgage market collapsed. UK mortgage bank
Northern
Rock has already been nationalised after it had to borrow
billions of pounds from the Bank of England.
Technology spending is often the first to be cut when hard times
come around, but reducing investments in technology to enable
single view could be suicidal for a bank because a tough economic
climate will hit the weakest the hardest.
It is no surprise then that banks are not shying away from the
inevitable and seem united in their desire to meet in a single-view
paradise. It is, after all, a desire that stretches back over a
decade.
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