Bank consolidation, often of the emergency variety, has been on the rise the past couple of quarters. That presents a delicate balancing act: Move customers off legacy systems as fast as possible, but don't disrupt relationships.
With 67 percent of the addressable market engaged in online banking, according to Celent, maintaining online continuity is a priority. "We have customers who are logging into our online banking site a dozen or more times a month," says Joy Marshall, head of online banking platforms for consumer and business customers at Wachovia, which was acquired last fall by Wells Fargo. Wachovia and Wells Fargo plan to consolidate their online banking platforms - Wachovia uses Fiserv's Voyager system and Wells Fargo uses a home-built platform - but only after determining the most customer-friendly path to integration. "Both online banking platforms are currently being reviewed, but will likely result in consolidating to a single platform. To ensure minimal disruption to our customers, this will be done a deliberate and thoughtful way," Marshall says, adding the scale of the combined platforms will allow for easier product development in the future.
The pre-integration evaluation will include a diagnostic analysis of each platform, marrying capabilities to customer expectation, consistency with the institution's retail strategy, cost of scale and future revenue generating opportunities. Once a conversion plan is developed, special care will be taken to ensure the integration is largely invisible to the consumers. "The last thing you want to do is surprise the customer," says Marshall. "When they log in to see if a check has been posted, they don't want to have to undergo a conversion experience."
By enabling a conversion that's pain-free for consumers, Wells and Wachovia hope avoid some pain of their own. Years of bank consolidation, a trend that accelerated in the past year, has commoditized banking to the extent that millions of consumers are now bank shopping: Do they stick with their bank, go with its acquirer, or try a new institution? The answer is often a click away, based on the utility of an institution's overall Web presentation and functionality, and frankly, the amount of respect afforded to customers in the Web channel.
"Some banks have forced customers to change bank accounts, re-enroll in online banking and set up their bill pay accounts over again," says Trevor Gee, principal in the financial services practice at Deloitte Touché Tohmatsu, who says banks need to shield customers from the upheavals that can occur when two large organizations come together.
Merging banks need to choose between consolidating online banking platforms immediately, or running them separately for a period of time. Consolidation yields immediate cost savings since the bank will no longer need to run two systems. But maintaining separate systems is likely to be less disruptive for customers as they're not forced to switch from their familiar e-banking experience to accommodate a new system.
The bank's final decision on integration depends on the acquiring bank's financial goals and its willingness to continue some version of a dual-platform system.
"Lots of banks are trying to conserve cash, and it's cheaper to run one e-banking system than two," says Bart Narter, svp of Celent's banking group. "The flip side is that before you can achieve these savings you'll need to experience a short-term increase in expenses due to the costs of consolidation."
Also a factor in the choice is that by maintaining two Web banking platforms for a while, the bank has more time to integrate back-end transaction processing systems. These systems, which manage checking accounts and process bill payments, can be more complex to convert than online banking platforms, so buying time is a plus.
"It's easier to migrate front-end systems than back-end systems, which are more modular," Narter says.
And the fact that online banking platforms can communicate with multiple back-end platforms allows banks to create a window for the transition. "They can choose to migrate the front-end and back-end systems at the same time, or use a single front-end system while leaving the back-end systems in place," Narter says.
Not surprisingly, there are a number of tech options that can to help banks engender an easy Web conversion for their customers while minimizing integration costs. The acquiring bank, for example, can continue to allow customers from the legacy bank to operate in their familiar online banking environment, while deploying software that transforms legacy data into its own formats.
"This increases efficiency and reduces costs for the acquiring bank, while improving overall customer retention and increasing revenue," says Jim Gahagan, global industry executive for the financial services division of Sterling Commerce, an integration software provider.