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Integrating online banking with straight through processing - a vision of banking in the future Back  
Liam Foley looks at the prospects for online banking in the future and finds that the revolution has only just begun.
The banking industry, as we currently know it, has been around for over 300 years.

There have been many changes in that period, but the fundamentals of banking have largely remained the same. From a commercial customer’s perspective, the key services provided by banks are providing credit and processing payments.

Whilst the detail of banking is much more complex than providing credit and processing payments, these simple fundamentals are at the heart of modern banking. And, despite the radical changes that e-business will bring to banking, these fundamentals will most likely remain. The changes will relate to how these services are delivered and who will profit from their delivery.

The key trends that are impacting these banking fundamentals are:

Straight-through-processing: The integration of all of the banks systems to ensure that a transaction moves through all systems as quickly and efficiently as possible to completion. The technologies that underpin this include middleware, application integration and web-services platforms.

Customer centricity: This is not a technology trend in itself, but is very close correlated with the roll-out of online banking. This involves restructuring the banking processes to fit with the customer’s view of the world, and their way of working. The technologies that facilitate this customer centricity include CRM (customer relationship management) systems, plus aspects of the integration and services platforms mentioned above.

Self-service: This is the familiar web-banking and telephone banking trend that puts the customer in control of their own banking. This has benefits to the customer in terms of control and convenience, whilst giving the bank increased efficiency. The technologies that are making this possible include web-servers, application servers, middleware and messaging technology, plus things like java and EJB (enterprise java beans).

Banks are currently working on delivering these kind of services to their customers, and on implementing the related technologies, and by 2010 they will have had a chance to impact the way we interact with our bank. ?. In the next 10 years or so, technology will continue to impact the ways in which banks serve their customers.

What will the banking experience be like for the business customer in 2010? Take the scenario of a fictional Irish-owned medium-sized plastics company called P-Tec who operate two production facilities, one in Bray and one in Dallas. It is Friday 5th February 2010, and P-Tec has recently won a contract to make the plastic casings for a new range of 3.5G mobile video-phones. To fulfil this contract they need to buy new equipment from a German company called K-Plant, and they want to finance this by means of a lease. The process to finance and pay for this could be as follows:

Jim McCann, the finance director of P-Tec is in his car. He tells his voice activated in-car computer to call the K-Plant equipment salesman: ‘Call Mark Finnegan’.

Mark is in a restaurant when he answers the call, and the CRM software on his Pocket Computer automatically displays a picture of Jim, all the information relating to Jim’s previous enquiries about purchasing new injection moulding equipment, and a copy of the quotation that was sent to Jim.

Jim says to Mark: ‘I want to accept your quote, and order the equipment, a long as you can deliver it to our Dallas plant within three weeks. I will also take your lease finance option.’

Mark selects the finance line of the order screen of Pocket Computer and selects lease, and presses the ‘Quote’ button. The Pocket Computer sends the pro-forma order details to the K-Plant HQ in Frankfurt. The Frankfurt system looks up the P-Tec customer account, identifies the secure e-mail address for the P-Tec finance director, and sends this address along with the order details to the Bank. The bank pre-fills an electronic lease application form (in XML format) with the details supplied, and sends it to Jim’s email address.

This email message pops-up on Jim’s in-car computer, and it announces ‘Lease Application Form’. The in-car computer reads out the information requested, and Jim replies ‘Auto-fill form’. His in-car computer connects to the ERP system in his office and uses the XML links in the form to retrieve the required data. The in-car computer announces ‘Form complete’. Jim parks his car and reviews the form on screen before pressing the ‘Send’ button.

The form is immediately routed to the German Bank that underwrites all K-Plant’s lease contracts. The arrival of the form in the bank, triggers and automated credit verification message to a credit bureau, a search of its internal CRM system, an automated search of the P-Tec record on the Companies Office database, and feeds all of this data into an automated risk scoring system. The risk scoring system categorises this business with P-Tec as medium to low risk, and quotes a finance rate of 9 per cent. This automated quote pops-up on the screen of the German bank’s customer relationship manager in Dublin. He reviews the details, and clicks the ‘Approved’ button and enters the following comments onto the CRM record for P-Tec. ‘These guys are a growing Irish company - we should be doing more business with them’, and sets his electronic diary to remind him to schedule a business development meeting with Jim McCann.

The banks system in Frankfurt generates a lease contract (In English language and under Irish law), showing the 9 per cent rate, a schedule of 36 monthly payments, and automatically sends a copy to Jim and to the company solicitor. The contract appears in the Solicitor’s work queue. He has been expecting it and goes through the document. He phones Jim: ‘The contract is pretty standard and looks OK. Some of the terms are a bit one-sided and should really be reciprocal, but it’s not worth the hassle of trying to change it’.

Jim is now back in the office, and opens up the contract on his workstation. It needs to be signed by two directors, so Jim selects his own name and Eamonn (his CEO) from the list of approved signatories. The automated document routing software requests an electronic signature from both. Jim signs his copy from his workstation using his smart card, Eamonn signs his copy by voice print over his 3G mobile phone. The signed contract is routed through to the bank, where it is electronically signed by their legal department, and a signed copy routed back to P-Tec.

Jim electronically sign’s the P.O. which is automatically transmitted to the supplier as an XML message and loaded into their ERP system. (The ERP system will invoice the bank when the equipment is shipped, and the bank will then initiate the leasing charges.)

Jim receives an order conformation from the supplier thanking him for his order, and advising him of the production scheduling status of his order, and the date that the new equipment will be delivered to the Dallas plant. Jim also receives an offer from the bank for a forward currency contract to cover the currency risk on the US Dollar / Euro exchange rate. Jim declines the offer of the currency contract, as his group treasurer already has this covered off. The ERP system automatically forwards the delivery information to the work queue of the plant manager in Dallas.

Mark is now finished his lunch and is meeting with another client, his Pocket Computer silently displays a message from his company’s Sales Management System, that states ‘Order Received from P-Tec for EUR 8m, you have now achieved your sales target’. As soon as Mark finishes his meeting, he heads for Doheny & Nesbitts.

Three weeks later, the equipment is delivered to Dallas. The truck driver presents the manager in Dallas with a handheld computer that displays an electronic Delivery Note for the equipment. The manager signs this Delivery Note with his voice print, and the handheld computer immediately transmits this document over the 3G mobile data network to P-Tec’s ERP system and to K-Plants ERP system in Frankfurt. K-Plant’s ERP system forwards the Delivery Note and electronic signature to the bank that is providing the lease.

Within 10 seconds of the delivery in Dallas, the German bank has received an electronic Delivery Note from K-Plant, and a matching and validly signed GRN from P-Tec. The bank immediately transmits an electronic payment for the full price of the equipment to K-Plant, and initiates a Direct Debit to P-Tec’s bank account for the first instalment under the lease. These payments are cleared and settled in real-time (no overnight delay) through a fully automated cross-border Euro clearing system.

All of this completed electronically, with the lease contract being set-up in one afternoon and the cross-border Euro payment being settled in real-time. The bank has been fully involved in facilitating this commercial agreement, they have completed all transactions on a Straight-Through basis, have conducted business in a Customer Centric way, have allowed the customer to control the process and has involved the Bank’s customer service staff where they can add value. All the technology to do this exists today, but has not been implemented in an integrated and pervasive way. It will take a lot of hard work and persistence to get everything in place and working seamlessly by 2010, but maybe it will be worth it!

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