The importance of the local branch bank
A major development in international banking is the increased importance of retail banking; retail business contributes more than 60 percent of the total revenue for many large banking groups. Compared with other international markets, Chinese retail banking has seen little development yet there is a big opportunity for retail business. Because the retail business features high margin transactions, a low non-performing loan ratio, risk diversification, and a low risk of default it has become an important development direction for domestic commercial banks.
Although self-service banking (automated teller machines) and internet banking offer customers convenient real-time access, branch banks provide more convenient and people-friendly service. This local customer service is good for handling high-value and complex transactions and services, and is the mode preferred by customers of different ages. While branch banks are important tools for developing comprehensive and effective customer relationships, they are also the most effective sales channels. In the U.S., commercial banks enhance their competitiveness against non-bank financial institutions by selling financial advice products through branch banks. Considering the rapid development of financial consulting products in China, branch banks that develop customer relationships will become increasingly important.
The key drivers for China's branch bank transformation
The key drivers to transforming Chinese branch banks are increasingly fierce competition in the banking industry, high customer expectations for (and current dissatisfaction with) existing branch banks, and the low efficiency of the branch banks. To keep up with leading international banks, the Chinese banking industry urgently needs to change huge numbers of traditionally low-value network transactions into high-value network and personal service transactions. They need to provide more segmented and personalized products and services for customers in order to promote operational efficiency, increase customer satisfaction, increase sales, and boost banking profits.
Driver 1: The increasingly fierce competition in the banking industry
As the banking market opens up in China, foreign capital banks have sped up the pace of expansion. The number of branch banks is increasing, and foreign capital banks are rapidly adding to their assets. According to a PricewaterhouseCoopers Survey, from 2005 to 2008, the assets of 30 foreign banks increased by 134 percent. The foreign banks are targeting the high-end market in the economically developed regions, and the local banks face the threat of losing high-end customers. According to one survey of 11 foreign banks, from 2005 to 2008, the number of retail customers increased tenfold.
During this expansion of foreign banks, many small and medium-sized joint-stock banks added branch banks and increased their efforts to transform the existing branch banks. In the past five years, the number of branches of small and medium-sized joint-stock banks grew by an average annual rate of 13.7 percent. The four largest banks are fully aware of the importance of transforming their branch banks and are actively upgrading. Whether these banks can complete their transformations will determine their shares of the retail business and resulting profit.
Driver 2: To meet customer expectations
Raising domestic customer demand and satisfaction with the branch banks also requires branch bank transformation. Increasing customer expectations includes offering a variety of products, high-quality service, and convenient access to services. If branch banks do not satisfy customers, customer loyalty will decrease, the banks will lose customers and, therefore, banks will suffer huge losses.
The domestic customers show more dissatisfaction with branch banks than with internet banking, telephone banking, and other banking channels. Meeting customer expectations is a great challenge for domestic banks. One customer survey for a domestic bank shows that customers hope banks can improve business processing speed, simplify business processing, and optimize the arrangement of the branch bank. At the same time, high-end customers also hope the banks can provide services in a special area to protect their privacy, and provide a qualified financial adviser in the branch bank.
Driver 3: To increase the operational efficiency of the branch banks
There is a gap between the profit margin of China banks and the advanced foreign banks. As the banking business has gradually moved toward more publicly-listed banks, domestic banks must meet the expectations of investors to get a bigger piece of public financing. As for branch bank operations, domestic banks must use the branch bank to expand the number of customers, deepen customer relationships to increase sales, simplify the back office processes, optimize the layout of the branch bank, and reduce costs.
Currently, domestic branch banks spend less time on valuable marketing because the transaction processing and back office efficiency is very slow. Operating personnel spend most of their time on customer service, transactions, back office processes, and office administration, which are all lower value. Unless branch banks improve their process and operational efficiencies, the profitability and market value of Chinese banking will be impacted strongly for a long time.
These three key drivers are pushing the Chinese branch bank transformation. Specifically, this transformation includes four strategic objectives:
- Expand the retail business
- Improve customer satisfaction
- Improve operational efficiency
- Reduce operating costs
The current desktop application architecture and new technology requirements
For banks carrying out a branch bank transformation, human resources, business results, and technology are all key factors. We will look at the transformation from the technology perspective, starting with the architecture.
In terms of the technical architecture, a branch bank transformation will produce a series of business systems, evolving from a simple trading system into a set of service systems including a wealth management system, a customer relationship management system, a product management system, a fund financial management system, and an insurance system. This set must also include the legacy applications and existing documents built up over time, such as Word documents, PDF documents, calendars, and appointment management. Whether building many systems or integrating a range of existing systems it will be a major challenge for today's Chinese branch banks.
Lets do a simple comparative analysis of several popular desktop technologies presently used in the banks:
A character-based terminal interface is shown in Figure 1:
Figure 1. Character terminal
The character-based terminal, which lacks front-end integration across multiple systems, is a very traditional trading platform with its limited ability to display only text. It no longer meets the business requirements of branch bank transformation.
Browser-based applications for tellers and financial advisors
Figure 2 shows a browser-based system for a branch bank:
Figure 2. Browser-based applications
A browser-based system has the advantages of low cost and efficient version management and release. The client can run the application with just a browser. However, this limits the use of legacy third-party applications that are based on a client/server architecture (such as Visual Basic or Delphi legacy applications). Also, due to the application isolation architecture of the browser, it is difficult to provide some of the functions needed for a teller solution such as direct control of local devices, keyboard-only navigation (without a mouse), and access to the local file system.
Teller and financial advisor applications based on the traditional and rich client
Traditional rich client refers to applications based on the client/server architecture, such as Java Swing, Visual Basic, Delphi, and other techniques. Figure 3 shows an example of one of these applications:
Figure 3. A swing client application
Rich client applications can use local storage and be run off-line, require less network bandwidth, are easily demonstrated, and often run faster. However, they lack an integrated platform, standards, and interface support for integration and interaction, and have limited capability for version management and release.
The banking desktop technologies mentioned above have limitations and do not meet the business and technical requirements of the branch bank transformation. Here is the solution for an integrated banking desktop based on IBM software.
An integrated banking desktop based on IBM software
The rich client technology described below is different from the browser rich Internet application (RIA) technology, but is a true rich client technology based on Eclipse. Eclipse is an open source, Java™-based extensible development platform. By itself, it is only a framework, a set of services that is used to build the development environment by using plug-ins. When we mention Eclipse, many Java developers' first reaction is that this is a Java integrated development platform that has good performance, a nice interface, and debug features. However, the integrated development environment (IDE) is, strictly speaking, only an Eclipse rich client platform (RCP) application. Eclipse is a platform with a perfect plug-in mechanism; it applies Standard Widget Toolkit (SWT) and JFace as interface elements components that provide a user interface (UI) platform called the Workbench. With an excellent plug-in mechanism, you can construct a client platform with good scalability and excellent performance, which provides a good UI experience. IBM WebSphere® Multi-channel Bank Transformation Toolkit (WMBTT) and the Lotus® Expeditor product provide a complete platform based on the Eclipse RCP development and operating framework to help banks build desktop applications such as a desktop teller application, or even call center and wealth management applications.
Here is an architecture diagram of a desktop integration system based on the rich client platform.
Figure 4. The architecture of a rich client desktop integration system
A desktop integration system based on IBM banking software meets the technology needs of branch bank transformation and has the following architectural and technical characteristics:
- Integration and interaction
- Version management and release
- Equipment support and management
- Banking business components
- XML-based programming model
Let's examine each of these in more detail.
Integration and interaction
Development can be divided into the following three stages to achieve the full line of desktop-based service integration framework and system. Each bank can plan their implementation in stages according to workload and project plans.
The first stage of integration: The system integration of the original client
The first stage of integration is a simple multi-application integration. The entire desktop platform is based on an Eclipse architecture where a number of applications are packaged as plug-ins and integrated in a single user interface. Applications include existing character terminal applications, documentation systems, financial management applications, mail client, and identity authentication systems. The different applications might appear on a user screen as shown in Figure 5a:
Figure 5a. Applications in separate windows
After integrating the user interfaces as plug-ins on Eclipse, the resulting UI is shown in Figure 5b:
Figure 5b. Integrated applications
Figure 5a is the desktop system before integration, and Figure 5b is the integrated desktop system. The integration improves the desktop platform for financial management personnel in a branch bank, and provides a friendly, clean desktop platform. This approach can provide an integrated user interface, maximizing reuse of existing application assets without changing the existing applications. For example, the character display shown in Figure 5b can be a part of the integrated system without any application modifications.
The solution provides a platform for a variety of integrations. We have just seen how existing applications of the types shown can be packaged into a single user interface. This is accomplished by packaging the individual interface technologies into a single integrated interface, making the integration much easier.
Figure 6. WebSphere Multi-channel Bank Transformation Toolkit integrated workplace diagram
The second stage of integration: Integration and improvement
The second stage of integration not only provides the application interface integration but also includes the following aspects:
- Data transfers and integration between different applications and the integrated business flow of the multiple application front-ends. A composite application based on Lotus Expeditor can combine different application standards to package the application front-ends, and provide a series of business and data interfaces.
- Terminal updates and legacy system updates, such as the character
terminal used in the bank high counters application and in some
business systems. There are two purposes for the updates:
- The user interface display capabilities of the traditional terminals and business systems are limited. Updating the interface can improve the systems and provide the ability to support the requirements of new business development.
- With a composite application, reforming the business interfaces and data interfaces will allow new data transfers between applications.
In the following figures, the traditional character terminal interface has been updated to a SWT application based on WMBTT. The original character terminal interface is shown in Figure 7a:
Figure 7a. The original character terminal application
The updated application interface is shown in Figure 7b using SWT within WMBTT:
Figure 7b. Transformed WMBTT-based SWT application
During this stage, using the composite application capability, several desktop application front-ends can be integrated into a single cross-application process. For example, when a customer applies for a credit card, someone enters their information into the user information management application and then fills out the form in the credit card system with some of the same information. Using a composite application, the user-related information will be automatically entered to the credit card application form through the new interface between the information management application front-end and the credit card front-end (via the RCP rather than the background application). Then the credit card application can be easily produced and printed — the data for the application is transferred from the previous application in advance. Finally, it will be signed by the customer. Using this front-end data-sharing mode, the operator’s transaction efficiency and service levels have been greatly enhanced.
In the second stage, all the banking applications have been packaged by a Lotus Expeditor composite application to make a front-end desktop application service, such as documents application service, calendar application services, and trading application services.
The third stage of integration: The integrated desktop system based on role
The third stage is the role-based integrated desktop for the whole bank. There are different roles, such as teller, financial advisor, financial manager, and people in the call center. It provides a different set of desktop application services based on roles.
Figure 8a shows desktop systems for a teller:
Figure 8a. The desktop for a teller
Figure 8b shows desktop systems for a financial advisor:
Figure 8b. The desktop for a financial advisor
The integrated desktop can achieve full integration of business and technology. If the bank has a new application requirement in the future, a new plug-in service will be developed based on the platform. After assigning the application to the appropriate role, users in that role can operate the corresponding services and applications.
From a technology perspective, the banks don’t need different development and operation platforms for the various systems. An integrated desktop platform can effectively integrate the resources and reuse the development services, technology, and talents of the bank.
Version management and release
Version management and release is one of the weaknesses of a traditional client/server client. The desktop integration project based on IBM software supports automated download and upgrade distribution functions, with the advantages of both client/server and browser-based systems. This makes it convenient for IT department to do version management and release.
The IBM desktop integration platform supports the following version management and releases pattern:
- Client-initiated version release and updates. The users of the client can upgrade to the latest software version on their clients according to the server’s address.
- Server-side version release and updates. The server selects the clients that need an upgraded software version. The server will send the selected software to the clients (or use a layered deployment).
- Layered deployment. Updates can be distributed from a single server to many clients, but this may cause an undue load on the network. In a layered deployment, a server provides the updates to a limited number of other servers and those servers provide the update to other servers or clients. For example, the head office publishes to a branch server, and the branch server publishes to branch locations.
Equipment support and management
Equipment support and management is one of the important features of the banking desktop systems, because the banks have plenty of equipment such as printers, keyboards, card readers and writers, and cash management devices. The desktop integration system based on IBM software provides some equipment support and management:
- Manage devices through Microsoft Windows® drivers:
With the promotion and popularization of Windows, almost all modern equipment manufacturers have been asked to provide drivers (DLL or ActiveX method) for Windows. WMBTT rich client platform supports DLL drivers or the import and management of ActiveX drivers. You will often need these drivers to directly operate the banking equipment.
- Directly operate serial and parallel ports:
WMBTT rich client supports JSR80 and the SUN JAR API, so you can directly manipulate the serial port and parallel port devices.
- JNI invoke:
With cooperation from the third-party equipment vendors and banks, as long as the equipment provides JNI call interface, it can easily connect with IBM's desktop integrated system.
- Equipment compliant with J/XFS and Windows Open System Architecture
(WOSA) standard drivers:
J/XFS and WOSA are internationally recognized standards. WMBTT provides the support and management of J/XFS and WOSA standard interfaces. As long as the equipment meets J/XFS and WOSA standards, they can be directly accessed by the system.
Banking business components
Desktop integration system based on IBM software also provides a number of banking business components to help banks develop their own customized applications. These business components include: the remote authorization, log and log viewer, cash management, access control, and counter. In Figure 9a you see how the authorized personnel enter the user name and password for authorization and verification:
Figure 9a. The process of remote authorization
Figure 9b shows the result of remote authorization.
Figure 9b. The process of remote authorization
XML-based programming model and page description language
WMBTT provides an XML-based programming model for bank transactions, and an XML-based SWT page description language. A bank's technical staff can quickly use application tools to develop the transaction interface, and implement a data structure and the business logic.
Here is the XML source containing the layout for the labels, values, and image for a rich client screen:
Listing 1. XML source for the rich client
<?xml version="1.0" encoding="UTF-8"?> <XUI> <Composite id="cmpt1238069978156R" bounds="1,-84,910,550" image="currencyExchange.jpg" imageAlignment="LEFT"> <Label bounds="88,109,114,115" image="icons/cxm.jpg"></Label> <Label bounds="221,97,80,19" text="Name:"></Label> <Text bounds="309,93,380,24" text="Shan Jian Hong" background="255,255,128" minLength="2"> </Text> <Label bounds="211,128,80,16" text="Gender:"></Label> <Combo bounds="309,123,110,24" text="Male" editable="true" background="255,255,128"> </Combo> <Label bounds="211,160,80,19" text="Marriage:"></Label> <Label bounds="211,191,80,18" text="Mobile:"></Label> <Label bounds="211,227,80,19" text="Postalcode:"></Label> <Label bounds="211,259,80,19" text="Address:"></Label> <Label bounds="471,127,60,18" text="Age:"></Label> <Text bounds="534,123,155,24" background="255,255,128" text="38"> </Text> <Combo bounds="309,156,110,24" text="Single" editable="true" background="255,255,128"> </Combo> <Label bounds="470,159,60,20" text="ID Card:"></Label> <Text bounds="534,157,155,24" background="255,255,128" text="10043507021678"> </Text> <Text bounds="534,224,155,24" background="255,255,128" text="email@example.com"> </Text> <Text bounds="534,190,155,24" background="255,255,128" text="86-10-82454890"> </Text> </Composite> </XUI>
The resulting screen is shown in Figure 10:
Figure 10. The XML UI of rich client that is based on WMBTT
There are five characteristics for XML UI which is based on WMBTT:
- WYSIWYG (what you see is what you get) programming style
- A component customized for banking
- No need to learn an interface technology, making it easy to use and lowering training costs
- The separation of interface and business logic
- Extensible, effective reuse
From the development of a strategic perspective, the branch bank is and will always be an extremely important channel for bank. The IBM WMBTT-based desktop integration solution can help banks to build the integration desktop platform, which not only fits the bank business and solves technical problems, but also considers new bank desktop application requirements in the future.
- Next-generation banking with Web 2.0: (developerWorks Dec 2009) Read how Web 2.0 influences the design of financial applications.
- IBM WebSphere Multichannel Bank Transformation Toolkit: Learn more about this component-based toolkit for developing enterprise applications.
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