The call centers of financial service institutions (FSIs) have undergone tremendous change over the past several years. Once used primarily for inbound-call customer support, the call center is now becoming a dynamic "customer contact center," embracing fax, e-mail, and Web communications, as well as telephone contact. In addition, banks are migrating from service-oriented to sales-driven strategies. For many FSIs, the call center will become the cornerstone of a next-generation retail delivery infrastructure.

The numbers of customer contacts received by banking call centers are already proving this to be the case. And those numbers are driving initiatives affecting everything from agent training to the use of cutting edge technologies (including speech recognition and video).

Telephone dominates

Looking carefully at some of the key trends helps put the importance of call centers in a clear light.

Examination of individual banking delivery channels helps illustrate the call centers' importance. Looking at the transaction volumes that each channel processes, the dominant channels continue to be branch, ATM, and call center. When we look at channel transaction growth rate, the two leaders here are PC banking (which is exhibiting strong growth, albeit from a relatively small user base), and once again, call centers.

Thus, the call center is the only delivery channel which has not only a large number of current transactions, but which couples that volume with double digit growth over the next five years.

While today the telephone is the dominant call center access device, centers are evolving to become strategic contact centers, which incorporate various different points of contact, including fax and e-mail. The number of e-mail contacts is growing rapidly due to the increasing use of the Internet by banks as a delivery channel. Many banking call centers have been surprised by the volume and frequency with which they receive electronic messages.

Banks have established sophisticated telephone call tracking and reporting mechanisms which measure important statistics like call volumes, abandonment rates, and call duration; but technologies to support e-mail inquiries are relatively new, and few banking call centers have installed them.

While the relative proportion of incoming contacts by e-mail is low, some forward thinking call center managers are today installing the technologies to prepare their centers for increased e-mail volumes. Examples of e-mail support technologies include:

n Automated Response Software. These applications open an incoming e- mail message and return a response which acknowledges the mail's receipt and promises a detailed response within short time. Advanced response software can scan and parse the contents, interpret the e-mail, and return a targeted message which often can fully answer the inquiry. Some of these advanced packages also have elements of workflow and agent routing.

n Interactive Web Response Software (IWR). IWR software is embedded in the bank's web pages. As consumers request agent assistance, IWR software can access a customer database to determine the customer's value to the bank, and can determine by the customer's location at the Web site whether that customer can (a) send an e-mail for response, (b) would be better handled using on-line chat between customer and agent, or (c) the best way to respond to an immediate moment-in-time opportunity would be by immediate agent call back.Among the key drivers of the increased prominence of call centers in the financial industry are the efficiencies banks can reap from a well-run operation. There are three key technology categories driving the efficiency and effectiveness of modern call centers:

Interactive Voice Response Units (IVRs);

Computer Telephony Integration (CTI);

Agent Tools and Technologies.

To date, brokerage and credit card companies have been most open to deploying speech recognition technologies, primarily due to the broad range of services that can be provided over traditional touch tone based services (touch tonebased stock quotation systems, for example, are unwieldy to use, since several letters share a number on the keypad.). Speech recognition telephone quotation systems have been deployed with great success at investment brokers Charles Schwab and Company (San Francisco, California) and E*Trade (Palo Alto, California).

U.S. banks have had more difficulty defending the cost/benefit justification for speech recognition. There has been a perception that little customer value was added, as manual account number input was often faster and more accurate than vocalizing the same number series. As a result, banks have been more conservative in installing speech recognition applications. However, some banks are now using lower-end technology that prompts callers through telephone menus, rather than high-end continuous- speech systems. The Tower Group expects a banking business case will be developed over the next 12 months, with some early adopter banks deploying applications in that time frame.

wide-ranging benefits

CTI software provides wide-ranging benefits to call centers. CTI delivers customer information to agent workstations so that the agent can quickly identify the customer, recognize that customer's value to the institution, answer the caller's questions, and have the opportunity to cross-sell or up-sell the institution's products. Investment in CTI can be recovered through reduced telecommunications expenses and increased product sales.

While banks had been slow to incorporate CTI in their call centers, several factors are driving current interest:

Decreasing cost and complexity. Client/server-based CTI, and its ability to scale, allows FSIs to install CTI in tactical deployments and to expand later with relative ease. While high-end CTI may be prohibitively expensive for smaller banks, an increasing number of IVR and call center application vendors are offering integrated, basic CTI packages at lower price points

CTI demand grows with international call center acceptance. As competition increases within the European Economic Community, The Tower Group expects international institutions to use CTI technology aggressively as a means of modernizing delivery channels. CTI brings many advantages to international FSIs offering pan-European services: CTI applications allow an FSI to construct one call center with multilanguage routing and self- service capabilities, rather than needing to maintain call centers in each country. Call transfer and conferencing are critical requirements for servicing the complex product lines of most European FSIs.

wide-ranging benefits

Call center agents have been the beneficiaries of technology improvements reaching the call center, including:

GUI applications and development tools. FSIs have a large number of mainframe applications, but are upgrading to user-friendly GUI applications that can be used to tailor screens, reports, and other functions for specific departments, campaigns, or agents. Additionally, FSIs, which often hire software engineers into their IT departments to maintain applications, want systems that are based on commonly available development tools and scripting languages.

Video Conferencing. The Tower Group sees an area of growth for desktop videoconferencing in call centers. Videoconferencing provides a bank customer sitting at a video kiosk in a branch or other remote location the ability to conduct a video- and audio-based conversation with a call center agent. This technology will appeal to banks offering more complex financial products, such as investments and insurance.

The deployment of call centers within the financial services industry continues to grow rapidly. Many financial institutions are now implementing their first call centers or refurbishing existing centers to include productivity-enhancing technologies. A second trend is the evolution of the call center from a simple support/cost-containment service to an enterprise-based relationship/revenue-enhancement role.

As more consumers warm to the idea of self-service, and "anytime, anywhere banking," the industry should expect the call center to take on a more prominent role in how financial products and services are delivered. As that prominence grows, technology, and how its effectively deployed, will prove paramount to the bank's success.

Ian Rubin is a senior analyst with The Tower Group. He can be contacted at 617.965.9090, ext. 201.

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