Bank cashes in with IT quality management

Two years ago, when Barbara Desoer was named global technology, service and fulfilment executive at Bank of America, she immediately began applying her expertise in the “Six Sigma” methodology for eliminating defects from business processes.


Desoer had gained experience of the quality management system chief of the bank's consumer products group, and brought this to bear on its IT and fulfilment practices. The investment is already paying off in more efficient processes, better alignment with business and even increased sales.

Bank of America is the third-largest bank in the US in terms of assets, and its IT organisation had been applying multiple software development processes across its numerous businesses. Not only was this inefficient, but the divergent approaches also made it difficult for IT staff to rotate among business units, says Desoer, who has been at the bank for 29 years and has also had stints as its top marketing executive and president of its Northern California banking group.

Desoer assigned a team leader to use Six Sigma techniques to create a single application development methodology. That standard has been introduced to the consumer and small business banking units, and is being rolled out to Bank of America's capital markets and wholesale banking businesses, with the wealth management and investment management groups to follow.

Desoer is optimistic that the standardised methodology will reduce development time and help make developers and project team members more transferable across business units in the coming years. This could be crucial if an exodus of retiring baby boomer technologists and a widely anticipated shortage of entry-level IT workers make it harder for the bank to find and recruit people with the skills it needs, Desoer says. "We are going to be increasingly challenged to find highly qualified technology associates, five to 10 years out.”

Jim Eckenrode, an analyst at TowerGroup, applauds this effort. As financial institutions modernise their IT portfolios, the need to attract people with cutting-edge technology and business skills will become more acute than ever, particularly as banks find themselves competing for IT talent with "sexier" firms such as Google, says Eckenrode. "Providing people with exposure to a lot of areas while keeping their skills fresh is a good strategy.”

To help the bank's IT organisation align more strategically with its businesses, Desoer has challenged her IT staff to learn more about the bank's external customers and their needs. "The voice of the customer is what you start with when you embark on a Six Sigma piece of work," she says.

Many of Bank of America's estimated 33,000 technology associates are now working alongside business colleagues in banking centres, call centres and other business units, in order to listen to the customer voice and look for improvement opportunities.

A prime example of this occurred about a year ago when the bank's IT and business associates asked customers about the most important aspects of opening an online bank account. They found they needed to focus on the amount of time it took customers to open an online account and on authenticating users remotely.

The IT and business staff applied Six Sigma techniques to reduce the number of screens customers had to navigate to open an account from 10 to four. The online banking team also developed improved desktop authentication techniques and introduced live text chat to facilitate new sales and provide improved customer support, Desoer says.

This kind of improvement helped Bank of America win recognition in Keynote Systems' customer experience rankings in April 2005, as one of the top banks for online customer service, with first-place honours for ease of opening a new account.

Online banking has been a big success for Bank of America, Desoer says. The bank's 19.8 million online customers typically apply for more loans, make more deposits and are 30% more profitable to the bank than its other customers, she explains.

The technology group has also supported the bank's credit card division and its approach of using a "50-50 mix" of direct mail through the post and sales pitches during customer service calls and online banking interactions to attract new customers. If a prospective customer is applying to open a cheque account online, information about the person's credit history is mined by another software system to help generate a pre-approved credit card offer before the account has even been opened, says Desoer.

Although other big banks have applied Six Sigma and other quality management techniques to improve their IT operations, "other banks don't necessarily wed the technology and the processes together" in the way the Bank of America has, says Eckenrode.

Not everything has gone smoothly for the bank during Desoer's tenure. In May 2005, bank officials confirmed that information on roughly 60,000 customers had been stolen by a data-theft ring, in what was then believed to have been the largest US bank security breach in history.

But Desoer says no damage was done to the affected customers and the experience was not entirely negative. It helped the bank focus on security strategies, including new online authentication capabilities that her department has rolled out over the past year, enabling online customers to prove their identities from their computers instead of having to appear at the bank in person.

One of the key areas where Bank of America's IT organisation has contributed to the bottom line has been through systems integration work following the April 2004 acquisition of FleetBoston Financial. The effort to consolidate systems between the two banks, completed in autumn 2005, helped contribute to $1.85bn (£925m) in pre-tax operational savings for Bank of America, says Desoer.

The IT organisation also plans to migrate the bank's credit card portfolio on to the IT platforms of MBNA, a credit card issuing firm acquired by Bank of America in January. This effort, which will take 1m staff-hours to complete, is expected to help generate $850m (£425m) in after-tax cost efficiencies in 2007, Desoer says.

"This conversion capability that we have in the technology group – to be able to do these conversions flawlessly – is really unparalleled in the financial services industry, if not in other industries as well," she boasts.

TowerGroup's Eckenrode believes financial services firm Wachovia also "has a well-honed merger integration strategy", but he and Larry Tabb, chief executive of analyst firm the Tabb Group, agree that Bank of America has made great inroads in this area.

Bank of America's ability to quickly choose which systems to keep and which to retire, while continuing to support innovation throughout the business, "has been a real strength for them, much more so than [for] a number of other firms", such as JP Morgan Chase, which has struggled with its systems integration efforts, says Tabb.

With the success in helping to drive credit card sales as a model, Desoer believes the IT organisation can do even more to boost revenues in the bank's other businesses. Now, she explains, "we need to do that across all of our products, and that's a big opportunity to go after".

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