Countrywide CIO says Y2K is only the beginning

Year 2000 compliance looms large, but for the banking industry deregulation will ultimately be a greater issue. Once retailers, airlines and telecommunications companies start offering banking services, banks will have to offer a wider range of products, with more flexible and personalised service. Countrywide CIO Ron Hooton is in the happy position of being three weeks away from declaring Countrywide's core banking system Y2K-ready, leaving the bank free to concentrate on the bigger issues.

Year 2000 compliance looms large, but for the banking industry deregulation will ultimately be a greater issue. Once retailers, airlines and telecommunications companies start offering banking services, banks will have to offer a wider range of products, with more flexible and personalised service.

Countrywide CIO Ron Hooton is in the happy position of being three weeks away from declaring Countrywide's core banking system Y2K-ready, leaving the bank free to concentrate on the bigger issues.

He says banking deregulation presents opportunities as well as challenges because banks will also be free to offer non-traditional services.

"We're very serious about selling other services and we're looking at how we can leverage our relationship with customers and our network to sell a broad range of products. We already offer insurance and we do it well. I'm not aware of any bank offering health insurance but I'm sure it will come."

"There is a tradition that banking has to be about money and it has to be a fortress but I don't see that being very relevant in the future," he says. "It's narrow to look at banking as transaction processing, taking cash deposits and withdrawals over the counter. Those are a cost centre and eventually will have to go. Customer relations and customer services will be the big driver in the future."

Cutting the number of branches and increasing customer service may sound like an oxymoron but Hooton says as branches close, banks can increase their points of presence through highly functional kiosks.

"I don't think we're ‘over-branched' but we can make gains by increasing our points of representation with a self-service strategy. We're looking at kiosks which can provide a whole range of services such as personal loans, car insurance and mortgages. The technology that sits in these devices would allow us to sign off and complete the whole transaction from credit referencing to producing documentation, using scanning technology for the customer's signature, and giving final approval."

Hooton sees Internet banking as another channel for customers to access banking services.

Countrywide has been piloting Internet banking for six months and is due to take it to the public "very soon".

However, the major project which will allow the bank to relate better to customers is a new core banking system, he says. "I think we've struggled over the past few years with the fact that we had a legacy system and we've had to work around that. Having said that, I think a lot of banks suffer from the same issues.

"We've taken steps to do something about it and in a couple of years we will be a very technology-capable, technology-intelligent bank. We're also increasing IT literacy in the bank. Our managing director is IT-savvy and there is a very clear recognition within the organisation that information and IT are critical to the future of the bank."

The core banking system — a 15-year-old, heavily modified legacy system — is being replaced with a packaged solution, FNS:Bancs, which will go live in October. Apart from ending the bank's reliance on Cobol development, it will provide customer-oriented banking applications, and the flexibility to develop future applications to meet customer requirements.

"At the moment if you go into a bank you're really an account. If you're lucky some banks have linked some of your accounts. We're saying a customer is a human being attached to several accounts. This could be extended further to apply to a person who is a highly valued customer with Countrywide but doesn't have an account with us, for example, they could be a director with some of our highly valued-business customers. We have to have a better level of service and this platform will allow us to do that."

Other projects such as a data warehouse upgrade will also mean the bank can focus more tightly on customers.

"For about three to four years we've had a fairly effective marketing database but it needs a substantial revamp. I can see a lot of applications around that — improved customer segmentation, activity-based costing, credit risk management, enhancement of customer marketing and cross-selling opportunities. For example, as an extension of segmentation we could look at bundling pricing options for customers — for highly valued customers we could offer a once annual for all services."

Hooton admits that with the upgrade of the core system the bank's IS department of 160 faces a huge workload at the moment, but he believes the projects are great motivators and points to the successes.

The bank has just completed a six-month SAP implementation, replacing the bank's financials.

"We fast-tracked it on the basis that we wanted to replace only what we had at the moment and do very limited re-engineering. We had an excellent project manager [Louise Hallam] who drove it hard, and we had a high level of collaboration between IT and business. We created a team from IS and business constituents and had a business executive as project sponsor. It was like a virtual team within an organisation [12 to 15 people] plus partners from Ernst & Young."

The rollout of Citrix WinFrame to replace Windows 3.11 at its 70 branches has given an "extraordinary" improvement in PC network reliability, he says.

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