Banks Need to Innovate Across Channels to Gain Share Amid Economic Downturn, Microsoft Reports From Leading Banking Conference

ORLANDO, Fla. — Nov. 18. 2008 — Today’s economic upheavals will permanently alter the U.S. banking industry and the way it offers services to customers. Bank CIOs face a myriad of challenges in helping to navigate their business during the financial crisis. However, banks that succeed during this period will use the opportunity to increase market share by attracting and retaining customers, and innovating ahead of the competition. At the 2008 BAI Retail Delivery Conference & Expo, Microsoft Corp. will demonstrate several ways banks can better attract, retain and up-sell customers by connecting consumer-facing technologies with back-office banking systems. To learn more, PressPass spoke with Colleen Healy, U.S. Financial Services general manager, Microsoft.

PressPass: What are the biggest challenges facing banks today?

Healy: Banks today are really at a crossroads. Management is faced with increasing pressure from shareholders to determine exposure to the crisis, while at the same time customers are concerned about the status of their accounts. Couple this with recent mergers and acquisitions, and it’s not an easy time to be a bank. Of course, during times of crisis, some companies decide to retrench or scale back efforts in improving their products and services. Others, though, use it as an opportunity to innovate and grow, grabbing market share from competitors. From our perspective, we feel like this is a time to innovate — a time to leap ahead of the competition using technology.

PressPass: What kinds of technology solutions does Microsoft offer to address issues related to the crisis?

Healy: It’s a good question, because in some ways our existing solutions are really well suited for these times. While technology certainly isn’t a cure-all for the economic crisis, our value proposition is that we can provide cost-effective solutions that help customers uncover risk, assist with integration efforts and manage customer experiences. Our platform is easy to deploy and use, and it’s widely supported. In fact, some of the key offerings we’re discussing with banking customers today include solutions in risk analytics and reporting, regulatory compliance, high-performance computing, customer insight, and integration services. In some cases, banks already have the ability to deploy these sorts of solutions with Microsoft technology they currently own in-house. In other cases, we’re happy to discuss new innovations on our platform, or bring in a best-of-breed partner to assist.
PressPass: When you mention “attracting new customers and innovating,” what do you mean exactly?

Healy: Well, as I mentioned before, this is really an unprecedented time for financial services institutions. And they really have a choice to make — to either retrench or drive growth by attracting new customers. How do banks do this? We believe it’s by providing what we call a “connected experience.” We all know that customers have many ways in which they choose to interact with their banks, whether it’s via the phone, Web, branch or more. Couple this with the emergence of new digital and consumer technologies — whether it’s Xbox or mobile phones — and you have the clear emergence of a consumer-centric, experience-based market. This ultimately requires banks to engage them in a consistent way across all touch points. Microsoft is unique in that we have technology across the consumer and enterprise space — something we call “connected experiences.” We’re uniquely able to help banks connect these consumer and business technologies together to better build relationships and loyalty with customers.

PressPass: How are customers specifically taking advantage of Microsoft’s platform to solve these problems?Healy: There really are lots of ways. One example that we’re demonstrating at the show is Bank of Montreal, which is using Microsoft Virtual Earth to provide a superior online customer experience. Using the solution, the bank has created a sophisticated branch locator that includes specialties, such as financial planners and the like, services, multiple languages and sister bank chains in other countries. This a perfect example of providing a rich online experience that connects directly back to the physical branch — a connected experience between two distinct banking channels that appears seamless to the customer.

PressPass: You also released a survey today on “millennials” and their banking channel preferences. What did the survey find?

Healy: The survey found that banks may need to rethink their approach toward capturing customers of the “millennial generation” — people between the ages of 18 and 30 years — by significantly stepping up their efforts to reach them through higher-tech channels, including instant messaging, text messaging and more. As is to be expected, millennials predominantly go online for basic transactions with their banks, such as viewing account balances or paying bills. But when it comes to complex transactions — such as opening new accounts or applying for a loan — their preference is in person.

More interesting, however, is that many millennials prefer talking to customer service representatives via instant messaging (IM). And Canadian millennials prefer IM at two times or more the rate for activities such as receiving financial advice, opening a new account or applying for a loan.

PressPass: What should banks take from this survey?Healy: At the end of the day, I think the survey shows that millennials are immersed in technology and they will soon demand — if they haven’t already — to interact with their financial services providers in a tech-savvy way. Banks that succeed in grabbing a share of the 80 million or so millennials entering the work force will be the ones who use technology to communicate and interact with them, but also provide a seamless experience across all channels — branches, Web and more.

PressPass: What will Microsoft demonstrate at this year’s BAI Retail Delivery Conference & Expo related to “connected experiences”?

Healy: Well, we’re showcasing a lot of these newer, innovative technologies I mentioned earlier, including Virtual Earth, Microsoft Surface, Tellme and more. Customers who visit Microsoft’s booth will see live demos of all of these solutions. We’re hoping to spark interest in innovation and technology as a lever for growth — particularly within bank branches — during these turbulent times.

PressPass: How committed is Microsoft to the banking industry?Healy: I think we’re uniquely positioned to bring together the digital lifestyle and work style to create connected experiences between banks and their customers. In the past five to six years, our financial services unit has grown from six to 600 people supporting the business. Our banking team is made up of industry veterans who have come to us from reputable banking institutions as well as investment firms. We leverage their years of industry experience and expertise to provide banks with reusable business components and cross-channel consistency for more agile customer service.

Also, our large and dynamic partner community, as well as our R&D investments, have allowed us to stay on top of key banking trends. Drawing input from our partner ecosystem on needs within the industry, our product teams are able to develop forward-thinking solutions that drastically improve the bottom line of our customers. We have core products that are on everyone’s desktops. In fact, as a company, we spent nearly $7 billion in R&D last year and have built innovations into our platform — from mobile devices to Surface to the 2007 Office system.