Case Study: Using Java technology to develop a customer-oriented Internet banking solution

The Co-operative Bank used Java technology to develop a customer-oriented Internet banking solution that integrates the...

The Co-operative Bank used Java technology to develop a customer-oriented Internet banking solution that integrates the flexibility of online services with the security necessary for critical banking transactions

The whole online Internet Banking System (IBS) depends on Sun's Java technology platform, which was chosen for its portability ( the fact that it runs on any Java-enabled consumer device from PDA to TV set-top box ( and therefore endorsed the Bank's "anywhere, anytime banking" philosophy. The whole strategy of Java fitted in with the Bank's plans, because it is also inherently secure. Keith Girling, head of Channel Development at the Co-operative Bank says: "This is an exciting development which offers our customers yet another important delivery channel. It underlines our anytime, anywhere banking philosophy and again puts the Co-operative Bank at the forefront of high-tech banking."

The Co-operative Bank plc is a relatively small bank, with two million customers and a five per cent UK market share. Its aim is not to compete directly with the major players, but rather to focus on market niches and differentiate clearly on product and price. For example, the Bank offers a unique "free for life" Gold Card, and is now the largest Gold Card issuer in Europe.

For the Co-operative Bank, IT is a critical enabler. Business and technology work hand in hand at the bank, and all their IT development work is outsourced on demand ( they find and acquire skills as and when they need them.

The Bank has always had a fully integrated customer database, which means that if you call the customer centre you can access information from all your accounts and they can all be accessed by the different channels.

The Bank now uses the Internet for five main lines of activity. The Bank's home pages are used as selling and communications tools and are regularly refreshed and maintained. They are acknowledged as state-of-the-art and attracted 500,000 hits in the last six months alone.

The company also uses an intranet for its internal bank communications, integrating its relational database so all employees have access to company information quickly and easily. The Co-operative also uses an extranet (private network which links to selected companies externally) to communicate with suppliers, customers, partners and academic institutions.

Now the company has moved into Internet banking, with the launch of its online service, which Girling firmly believes is the route forward: "Internet Banking can involve a simple device at the customer end and will deliver on a mass market basis. It is the strategic way forward. We have a well-developed range of interactive channels, including mobile telephony and satellite TV, and [they] all work because our mainframe operating systems all operate to a standard approach. All we had to do was draw them together to deliver across a new front end. Banking on the Internet enables customers to use a whole variety of products ( from PCs on desks in the office and at home to consumer devices such as set-top boxes and PDAs."

The customer profile ( the Co-operative is one of the most upmarket banks in the UK ( fits Internet banking perfectly. Customers are typically extremely busy, they travel a great deal and need access to their bank accounts at all times of day, and from wherever they happen to be.

Girling says that within a generation, the whole banking scene will have changed dramatically. "Within 15 to 20 years, using the Internet will be normal business. It takes that amount of time for there to be a massive shift in customer behaviour. It has taken over 25 years to reach the point where 70 per cent of customers now take all their cash out from 23,000 ATMs [cash point machines] around the country."

Security is always a major issue with the Internet and the Co-operative Bank has invested heavily in the market-leading security technology from business partner Brokat. Encryption protects every transaction and the whole system meets the very highest international standards. One of the key components of the system is the use of the mouse. Customers are asked to move their mouse around regularly; this generates random information which makes the security solution even more secure.

The Bank's systems have been rigorously tested and are proven fully secure, but to further re-assure customers, all users must register a Security Pass Code and Secure Personal Information (SPI) with the Bank via a free telephone call prior to using the service for the first time.

The SPI will consists of five pieces of memorable information, such as names and dates, which will only be known to the account holder. Internet users will be asked to confirm any one of the five items of SPI details plus security pass code using the on-line service. Failure to do so will abort the Internet access and the customer will be asked to contact the Bank by telephone.

Phase One of the online Internet banking is a basic but comprehensive service. It offers customers 10 basic transactions including transferring money, paying bills, ordering statements and changing standing orders. Beyond that, Phase Two will see the system upgrade in capacity and resilience as consumer devices for the Internet become available and more touch screen technologies come into use.

The Bank is also looking at developing its kiosk banking in shopping centres. "We already have 40 physical outlets in terms of remote kiosks which allow customers to take out cash, deposit money and carry out a number of other transactions. These Internet banking facilities will undoubtedly figure in our kiosks in the next few years."

The online service was successfully piloted with the bank staff and Girling has been pleasantly surprised by the results. "We have seen a very high level of usage among our staff, with some slightly more unusual use of the service ( at 2 o'clock in the morning and from abroad, for example." Girling's ultimate aim, he says: " to give the service customers need to ensure they can manage their personal financial affairs from wherever they are."

(c) 1999

Compiled by Rachel Hodgkins

Read more on Software development tools