The call center is rapidly changing into a multichannel contact center with serious cost, technology, and managerial implications.

In 1998, U.S. consumers made nearly six billion banking transactions through inbound call centers, or 18% of all transactions. We define transaction as one customer or prospect contact, ranging from simple rate inquiries to drawn out loan applications or problem resolutions. Because outbound calls are primarily solicitation or collection efforts, they tend to be handled through stand-alone departments and technologies, and they are not included in this article.

Monolines got about 40% of this volume, reflecting their lack of branches. But the growth rate for all banking institutions is about 12% annually, foreshadowing 10 billion call center transactions by 2003 and a 25% channel share. As a result, investments and work force will increase noticeably.

The number of call center agents in U.S. retail banks will grow from 70,000 in 1998 to nearly 110,000 by 2003. Over the same period, bank branch workstations will shrink by almost 35,000, demonstrating the significantly higher productivity of call centers. Total 1998 North American bank call center operational costs were about $10 billion to $12 billion, of which $1.27 billion was for technology.

Worth noting is that call centers are no longer just for large banks. Technology cost declines and outsourcing now let small banks deploy call centers with as few as 10 agents. Most large banks have kept call centers in-house except for overflow and off-hour needs, lead prequalifications, and outbound solicitations, for which specialized technologies such as predictive dialers, instant scoring, and digital monitoring equipment are needed.

The phrase "call center" should be retired. "Call" implies use of a telephone, but remote service centers must now support fax, video, speech recognition, e-mail, and other Internet communications. The accompanying chart shows the rapid growth of these volumes, stimulated by cheaper bandwidth, the proliferation of consumer electronics, and continued development of the Internet.

Additional remote channels won't have separate service centers. Shared infrastructure, such as the agent systems, will be helpful, even essential. The same consumer will use different channels at different times and expect the agent to have access to any and every communication. Transactional capabilities on Web sites will especially spur phone calls.

The result will be a multichannel remote electronic service center. Higher agent productivity and greater consumer value will result. Of course, so will management challenges. For example, can phone-friendly agents write coherent e-mails? Do agents project well on video? Can one agent switch among media as needed? Industry experience will build rapidly but is currently inconclusive.

To create effective centers, new technologies are required:

E-mail management and response software.

Too many banks still process e-mail manually. Typically, dedicated agents either respond themselves or forward e-mail to other bank employees. The limitations of this rudimentary approach include high costs, poor quality, lengthy and unpredictable response times, lack of control, and potential legal liability.

E-mails may be lost, and audit trails aren't created. Processing e-mails manually can cost up to $8.50 apiece, destroying the Internet cost benefit.

Inbound e-mail was 2% of industry call center activity in 1998, or about 120 million messages. Volumes vary greatly: BankBoston Corp. currently gets about 300 e-mails daily, and Countrywide Credit Industries gets 1,500 in peak periods. Toronto-Dominion Bank expects its volume to quintuple, reaching 25,000 monthly by next year.

Financial institutions are only beginning outbound e-mail solicitations. The credit card industry leads but still sent only 10 million e-mails last year-less than 1% of the "snail mail" volume. This new form of junk mail should hit 100% annual growth rates in the next three years. Beyond marketing, e-mails of notices, changes, statements, bills, and payments are going to develop.

In the retail brokerage industry, about 5% of customers now subscribe to automatic e-alerts of various types, such as stock price changes. In 10 years, the extremely low cost of automatically generated e-mails will make them an ubiquitous feature of remote centers.

E-mail management systems create inbound mail queues, log incoming messages, and assign case numbers for tracking. Sophisticated systems can scan and parse the contents, interpret the e-mail's message, and either return a targeted answer or assign it to a qualified agent. Results from other industries indicate that up to 70% of e-mails can be automatically processed.

Interactive Web response software.

This software identifies customers who have gained access to a Web site and delivers appropriate levels of customer service based on customer value and other factors.

For example, a Web site user can click on an icon to request customer assistance. The system determines the Web page location of, and the reason for, the request. Then it queries a data base on whether the consumer is a prospect or low-value or high-value customer. The software then determines whether the customer should get help by sending in an e-mail inquiry, conversing in real time with an agent on-line, or getting an immediate agent call-back by phone. The latter would seize a "moment in time" sales opportunity.

Interactive Web response is primarily deployed by consumer product companies and has not significantly penetrated the financial services industry.

Video conferencing.

Low-volume branches cannot economically support on-site investment or annuity experts, so some banks use video collaboration. This technology links the customer, branch representative, and a call center-based product expert. Mellon Bank, pushing its Boston Co. and Dreyfus products, has installed video banking stations in 75% of its 450 branches. Use of these systems will grow as costs drop for communication on high-bandwidth integrated services digital networks.

Speech recognition.

Interactive voice response is the only thing that keeps call centers affordable. However, the common practice of requiring customers to push buttons according to menu options has about reached the limit of public acceptance. To handle increasingly complex phone transactions without excessive costs, speech recognition technology must penetrate the banking industry. It can also help the 10% of U.S. consumers, which is surprisingly high, who still have rotary telephones.

Brokerage and mutual fund companies have already deployed speech recognition technologies, primarily due to the broad range of services that can be provided. Touch Tone stock quotes, for example, are very unwieldy, since several letters share a number on the keypad. Speech recognition trading systems have been deployed with great success at Charles Schwab & Co. and E-Trade. Generally, banks have seen less value since manual Touch Tone account number input can be fast and more accurate than vocalization.

The multichannel remote access center of the future will be the main bulwark of customer service, not the branch network. Management and technological complexities will grow.

Banks have already adjusted to computer-telephone integration, which coordinates a bank's data systems with its telephone systems. But video and Web screen location tracking, as well as Web interaction archives and summaries, must also be managed and coordinated. New levels of training and agent productivity measurement and control are needed.

We see fax as a required but low-volume medium. It will remain viable for signature documents, applications, and emergency replacement statements. But it is so inferior to e-mail that its use will remain limited.

Banks today rarely pride themselves on the size, scope, or reach of their inchoate remote-access centers. Mostly, they brag about branches.

But this should change, and the competitive issue will become whether customers can tell the difference. Customer service quality does register; but this no longer means offering customers pleasant personalities at the teller window; rather, it means effective technology and operations at the remote center. Mr. Teixeira is the president and Mr. Rubin a senior analyst at Tower Group, Needham, Mass.

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