Banking on new technology

the “virtual bank” is on its way. There are management consultants around every corner saying so, but that’s to be expected: they all want a slice of the business that will flow from the organisational turmoil wrought by the rise of electronic banking.

Many of us already have bitter experience of the “virtual” bank: the bank that is never there when you want it but is always there when you don’t. Mine was NatWest. Whenever I visited my local branch, there would, without fail, be someone that I had never met claiming to be my bank manager. It seemed that the bank’s main function was as a meet-the-proles stopover for dazzlingly disinterested number-crunchers who would then step up to that great bank in the sky, NatWest Tower.

But building societies and now the emerging PC-based shopping services have shaken high street banks into activity. They know that they will have to fight to retain customers who are tired of this sort of Stone Age service. Hence the high street banks have been trying to establish services and facilities where its customers are – in the home, on the move – instead of where the banks are.

According to Ernst & Young, the management consultant proud to have coined the term two years ago, a virtual bank uses “contact points” through which bank products and services “are provided to customers in the most efficient and responsive manner possible. Technology plays a pivotal role in the process.” These contact points include cashpoints, telephones, interactive TV, home PCs and – naturally – the Internet.

The virtual bank, for instance, will have cashpoints that offer more than just withdrawal facilities. In Midland bank branches, customers must draw cash out from one terminal, go to another for an instant statement, and a third to deposit cash. To put banking in remote sites, most new, multi-functional automatic teller machines (ATMs) will be installed in non-branch sites like shopping centres, travel terminals and petrol stations.

The generic ATM interface, at which a small number of arrowed keys change function according to what’s on the screen, was once innovative. But users still have to memorise a PIN, the screen graphics look antediluvian and the text-based interface is linear, mechanical and cold. The US is ahead in the development of more advanced ATMs. There, NCR has developed a “next-generation ATM” with Fitch. Designed to eliminate PINs and ill-constructed on-screen procedure, while also improving access to a range of services, the new touch-screen interface uses object-oriented “personal banking environments”, accessed using a smartcard. Users can pay bills, transfer, withdraw or deposit cash, print a statement and demand information about their finances, such as the account balance, the last five cheques cleared and the interest earned.

While such systems are a giant step forward from conventional ATMs, arranging your financial affairs on a screen in a public place, possibly with a curious or impatient queue in attendance, offers no advantages over doing it all at leisure, at home, in private.

Here in the UK, home banking means telephone banking, which, according to Ernst & Young, will see an astonishing 600 per cent growth in the number of calls between 1994 and 1997. First Direct has pioneered telephone banking in the UK with huge success. The service offered 24 hours a day by its legions of unfailingly friendly, bright and helpful staff will not be bettered. The First Direct telephone interface is frequently reviewed. Careful management attends details such as the form of the initial greeting and security check – involving a password and either a memorable date or address – that takes place whenever a customer calls the bank.

Dealing with a well-informed, responsible human will always beat dealing with a machine. Nonetheless, banks are pursuing new media for home banking. Ernst & Young reckons that PC transactions will multiply six-fold over their 1994 level by 1997.

A consumer who can afford a PC is a juicy catch, and a few banks already offer financial planning software packages. Barclays, with Visa, made a big noise in July about its home-banking software service that will allow customers to send requests for information and transactions from a PC down a phone line, to a “host system”. The requested material is shot back within seconds. The software is designed for use with Microsoft Windows – a populist choice, but hardly a universal one. Customers must not only have a PC and be familiar with Windows, they also need a modem.

NatWest has its eye on a more popular medium: TV. It is involved with both current trials of interactive TV services, one by BT and the other by Cambridge Cable. Customers work their way around the system using the number pad, fast-text keys and cursor on a conventional remote control. “The challenge is making it intuitive,” says Steve De Looze, NatWest’s senior executive in new delivery channels. “But it also has to be visually arresting.”

It is in this respect, and in its faster response times, that De Looze rates TV banking ahead of Internet banking. He claims that TV has natural advantages over telephone banking in its capacity to deliver information about complex financial services and products. “Loans, life assurance and pensions are governed by horrendous legislation – we have to put a health warning on everything. They are difficult to sell over the phone. Once we’ve cracked the legislation issues, if we can put these products on multimedia and allow people their own speed and route, we’ll end up with a more satisfied customer and have a

better chance of a sale.”

NatWest is also experimenting with PC terminals that link customers to remote experts by video link. A full service is a long way off and many would like it to stay that way. Steve Hinchliffe, the managing director of Module, an interface design house with experience of developing strategy for financial institutions, dismisses such techno high jinks. “It’s the bank’s IT department’s view of how to introduce IT. I know someone who hit the help button on the NatWest system, and got put through on a video link to an empty desk. They waited two minutes before someone poked their face in front of the camera and said, ‘Sorry, I haven’t been trained to operate this’. It will be very difficult for a screen to beat the phone.”

New channels will emerge, says Hinchliffe, but banks are currently taking too “vertical” an approach to new media. “If you’re looking at your TV and a sign saying ‘home banking’ comes up, you’re likely to say you’re quite happy with your current service. Until the on-screen service adds value, you won’t think about it. Banks need to come in from the side: make offers through areas like fashion, entertainment and sport, which all cross things like shopping and travel at some point.

“I don’t see what benefits a straightforward banking service can give through a PC. But if I’m browsing through theatre reviews or the Next Directory and I’m given options of how to pay, I’m more likely to be interested.”

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