Phone systems bring customer service to a new level.

Technology is the answer to banks' customer service concerns. It all started with automated teller machines, and the next natural step in banking technology is banking by phone. Interactive voice response promises to be as widespread in banking as ATMs are today.

These voice systems allow phones to act as terminals for host computers to retrieve or input information. About 70% of banks with more than $1 billion in assets are now using the systems to provide customer service. About half of the banks with assets of less than $1 billion use IVR.

With interactive voice response bank customers can check balances, items cleared, interest rates on loans and investments, and loan payoffs.

If proper security is in place, they can pay bills and transfer money from one account to another. Virtually any information that can be accessed by a computer terminal can be accessed through IVR.

Though some argue that this technology eliminates the personal touch of the bank employee, it has been proved that there is no faster way to answer basic customer questions. To prevent any customer relations problems, all systems should have an "out," allowing the caller to opt for a bank employee at any time during the process.

The price tag for this technology, ranging from $20,000 to $200,000, is determined by the amount of phone lines required to handle the call volume and the level of software features. Prices are coming down on these units as more vendors enter the market with PC-based models.

Cost justification is fairly simple. For example, if the low-end system can handle 300 calls a day, that's the equivalent of two full-time customer service representatives. Thus, the savings from the IVR add up to about $50,000 a year, or a 2.5% return on the investment in the first year.

To get the most benefits from an IVR, keep the following five steps in mind:

* Develop the goals of this project. This is traditionally the responsibility of upper management.

The questions that must be answered include: Do you want to eliminate full-time equivalent employees, increase efficiency, and improve customer service? Do you want to allow wire transfers of funds and payment of bills? If so, how will you handle the security risks? Will there be a single phone number for automated and live operator calls or two separate numbers?

If upper management lays out the goals, the project team will have boundaries within which to work.

Project teams can get hung up for days on things as simple as whether to use one or two phone numbers. Marketing wants this, operations wants that, and telecommunications wants directions. That's why top management must call the shots.

* Choose a project team leader with background in more than one of the following departments: technology, marketing, retail banking, and operations. The project team needs representatives from each of these areas as well.

One of the most common mistakes that banks make when implementing IVR is not asking for input from all key departments. The technology departments (data processing and telecommunications), for example, will probably not be sensitive to the customer service needs.

Likewise, marketing might want something that is not technologically possible. To avoid delays and miscommunication, make sure the team leader has direct access to upper management.

* Gather data from all divisions: marketing, operations, telecommunications, data processing, potential vendors, and the bank's competitors. Marketing will need to survey customers and prospective customers to determine what they want.

Additionally, marketing should research what kinds of voice systems the local competition offers. Retail banking, marketing, customer service, and loan operations departments speak to customers frequently.

Some of these calls might be handled by the IVR. Finding out the type and number of calls will help determine the number of ports needed.

From the telecommunications department, you'll learn what technological options are available in delivering the calls.

Traffic studies of existing call centers can add valuable information in determining the number of lines and ports needed for the IVR. Statewide or interstate banks may want to deliver the calls to a central IVR through an 800 number or a local exchange with some type of call routing or forwarding.

Information on all options, such as using the existing network or building a new network, must be collected and analyzed for cost effectiveness. If the network fails, what disaster recovery options are there in getting customers' calls to the appropriate place?

The data processing department will look at the interface between the IVR and the host computer. It decides if special programming is needed and how to handle multiple sessions and other host connectivity details.

It will also help decide if it is necessary to acquire the source code for the IVR application, and should have a strong say in which system is purchased.

As a team, both telecommunications and data processing will approach potential vendors. Build a "wish list" of the features you desire and allow the vendors to give their input.

Try to determine what responsibilities the vendor will take on and what the bank will have to provide. Give the vendors some flexibility to get creative with their product, but beware of "vaporware." Many vendors sell software that is still in the conceptual stage and hasn't been created or tested out yet.

You may save money as the vendor's guinea pig, but it's rarely worth it, because problems that can arise as the bugs are worked out. You'll want to check references of banks that are using the same software in similar applications. Select a vendor that meets your specifications.

* Develop a firm implementation plan with a timetable. Since it is highly unlikely that you will be able to use the software as is, build in time for customization. Otherwise, this step could delay the whole project.

Your budget will determine how much customization you want. The plan should give ample time to install the telecommunications network and equipment needed to support the volume of calls.

Consider the customer service call center that will be receiving the overflow calls and give them time to train their staff accordingly.

Material, such as a user-friendly brochure or card as a statement stuffer, will need to be developed to clearly communicate the process to customers.

When developing copy for the IVR prompts or scripts, limit the number of options per menu level to three or four and the number of menu levels to two or three.

Once the scripts are finalized, find the proper voice to read the copy by either hiring a professional or holding tryouts of bank employees. Female voices are usually used, but there is a trend to mix male and female voices to add some variety.

Throughout the implementation, monitor the vendors carefully. Often orders are misplaced or neglected. A paper trail for change notices or modifications is the best method.

Always be prepared for mistakes along the way. Contingencies need to be in place, but try to stick to the plan.

* Upon completion of the implementation, the final phase is to test the system and put in place the means to periodically review its features.

Typically, a bank runs a pilot using bank employees or a select group of customers. This pilot helps determine what changes must be made before the system is released to the public.

The most difficult part of the pilot is to load-test the network for the eventual call volume.

After the pilot has been completed, survey the users for suggestions on future changes. Once the system goes live, monitor it.

To ensure that the technology serves you best, you need to be flexible to customers' changing needs. Call volume will always increase if the system is effective, so monitor call traffic carefully.

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