The multichannel challenge


3 May 2011


The move towards multichannel banking is inevitable. What is less certain is how well banks are lining up to embrace it. Massimo Milanta, CIO, UniCredit, talks to Nigel Ash about how the bank, with its award-winning online presence, is squaring up to the challenge.


Massimo Milanta notes that until recently most banks had more pressing concerns than developing schemes for multichannel banking. However, in the last 12 months most have begun to dust off the plans for what is generally seen as the future of both retail and corporate banking. UniCredit, he says, is no exception.

UniCredit is already highly rated for its online presence. This February, financial communications specialists Hallvarsson & alvarsson (H&H) ranked the bank's corporate website number one for the fourth year running in a wide-ranging survey of analysts and financial professionals. UniCredit was also rated sixth out of 500 banks for its online retail presence.

Nevertheless, after extensive analysis, UniCredit is rebuilding its online IT platforms for leveraging on the international experiences within the Group. "My view is that we are headed toward a multi- and a micro-segmented market," says Milanta. He does not believe it is a case of simply slicing the multichannel market up into inexperienced or advanced online users, along with the traditional branch-using customers. UniCredit is planning to spend €50 million a year on customer-facing IT in its retail banking operation, and the online rebuild will make up a significant portion of that budget.

The bank is, at the same time, he says, extending its corporate banking infrastructure with a further €50 million of investments, to allow direct interaction with business customers to support them in UniCredit's trademark Global Transaction Banking.
"We want to extend the value chain around complex transactions, especially in support of our multinational clients. But we are also looking to the mid-size and SME sectors."

Looking to retail, Milanta is predicting the adoption of a completely new approach. "I think that in order to be commercially attractive, we need to segment our clients more by their behaviour. We are at the end of a traditional segmentation and on the verge of a more detailed one-to-one marketing. ICT's role is to support the business needs with an innovative approach, and to test all the best
new ideas.

"Our challenge is to have a more comprehensive theorem to understand the needs of our customers. These, of course, may not span more than one channel. But the biggest complexity will be to keep track of and anticipate their needs in terms of providing a more comprehensive answer to a range of requests, rather than selling individual products."

Milanta says UniCredit's ambition is to have a 'dynamic' infrastructure, hence the perceived need to start renewing the entire online presence. However, he is keen to point out that the bank is not moving away from its existing technology and software. It will continue to use IBM's WebSphere programme on its IBM servers.

Personal touch

One of the main challenges, he says, is functionality. So far, like many other banks, UniCredit has only sold a limited catalogue of products online. In its case it has been credit cards. The industry has discovered that the difficulty with closing sales for more complex products is the lack of customer interaction with online advice.

UniCredit has just completed a pilot project in a handful of branches in Italy whereby customers could go to a screen and discuss a product with an adviser remotely via a video conference.

The availability of such face-to-face advice is, maintains Milanta, going to prove extremely important in closing sales.

However, says Milanta, this by itself is not the entire solution. "One of the lessons we learnt from our pilot was that it is simply not enough to give a video conference to a user in order to sell something. We recognised that it is also important to have a completely redesigned process where the remote interaction can be completed end-to-end.

"So in entering the second phase, which is the rollout of this functionality," he says. "We strongly believe that the interaction has to be tuned to the complexity of a product. Therefore, clearly for a complex product, human interaction is needed, but this does not need to be physical contact."

A by-product of this initiative was that UniCredit recognised that in its branches an online teleconference link to an adviser would enable it to boost the functionality of the branch itself, which could not always be expected to have the necessary expert advisers on the premises. Branches are, says Milanta, an important channel and will, he believes, remain so.

"So we are experimenting, not only to find clients via web channels, but also with the best way to connect branches to remote experts."

One interesting side issue that emerged from the UniCredit branch pilot for face-to-face online product advice was that while it was clearly desirable for the customer to see the adviser, it was also very useful for the adviser to see the customer. Therefore, when the service is rolled out to clients' computers, the bank will encourage people to turn on their own cameras. However, Milanta does not believe that this should be made mandatory.

Research, most recently that produced by Efma and Finalta in their 2011 report into multichannel banking, suggests that there may still be a 'push back' in some parts of banks against the rise of online services. This latest report notes that the organisational and cultural barriers to multichannel working, which it first identified in 2007, still exist.

"The banks' senior management has to strategically balance the marketing mix. The branch is still very important in customer management and direct channels are increasing very fast.

"Over the medium- and long-term, multichannel banking is one of the key elements of our investment and the major focus of our business. So I don't think that we can say the traditional business is pushing back. I would rather say that the business is riding the wave and willing to invest in improving our ability, most of all to sell through online channels, rather than having transactions only through those channels."

Banking with confidence

Security, and by extension confidentiality, remain a prime concern for both retail and corporate customers. As required by law in some European countries such as Italy and Germany, all online sales have to be done via a public key and remote telephonic signature. This process is therefore being developed at UniCredit in parallel with its prototype for remote advisory services.
"We have seen that the two processes have to be strongly integrated," says Milanta.

The good news, he believes, is that once the customer has successfully completed their first online purchase, perhaps for a relatively straightforward product, there will be a significant increase in confidence. This will boost later sales of more complex offers from the complete portfolio of products that UniCredit is planning to launch via its rebuilt web presence.

Confidence in actually making online banking product purchases when the purchases themselves are understood will, however, only be part of the story. Users, especially of mobile phones, will need to be confident that the data channel they are using is also secure. Mobile hacking scandals in the UK, coupled with a continuing risk of SIM card cloning, which could ultimately allow a criminal to take control of a user's bank and credit card accounts, remain a reality.

The major focus of concern is around the vulnerability of mobile devices, including the new communications-enabled tablet computers. Yet it has been pointed out that most home systems are no more or less vulnerable, since the majority of them use a WiFi link to their broadband Ethernet hubs and the data is therefore open to remote interception. One UK broadband supplier even uses its customers' WiFi hubs to create a network for mobile users who subscribe to its roaming WiFi product.

Milanta also agrees that with the increasing power of smartphones, it is probably strategically deceptive in the long term to consider mobile devices as a separate channel, given that already many mobiles are effectively fully-featured computers that happen to fit into customers' pockets.

"There is no question that the importance of security is increasing every day," says Milanta. "At UniCredit we are investing more and more on focusing people on this. Clearly security has a drawback because it makes the overall structure more complex, at least in terms of defensive security, when we do everything to avoid the penetration of our sites."

Security is a constantly evolving challenge where effectively there is no final victory.

"I think you can never put enough security in place. What we are now increasingly doing is to support our clients by putting in predictive anti-fraud measures, both internally and externally, that work by analysing the behaviour of various accounts.
"We know now that the increasing trend is for fraudsters to have 'botware' (for 'robot' web crawlers) and malware installed on clients' PCs or even employees' PCs if not protected."

Regardless of the security of a bank's website, criminal malware can intercept passwords and memorable information or keywords.
The countermeasures include studying the way that bots work and seeking to frustrate them; for example, says Milanta, by moving password fields around the screen.

"We are also monitoring the time taken moving from one screen to another. If it is too fast it becomes suspicious. We have also identified the fact that some criminal software repeats the same pattern before operating a money transfer, for example. Therefore, whenever this happens we become suspicious at our security operating centre, which is working round-the-clock all year. They will therefore intervene and block the operation, then call the client and verify that everything is okay."

Inevitably though, says Milanta, new and ever more sophisticated criminal software is appearing all the time. It can best be countered with automated tools that anticipate crime, coupled with strong internal and external support to monitor suspect activities and block them.