When Woodforest National Bank opened its first branch in a Wal-Mart store, it wasted no time adjusting to the needs of its customers. Like Wal-Mart itself, Woodforest's in-store bank branch serves customers seven days a week and stays open long hours.

Similarly, when Woodforest first began offering treasury management services in 2004 to its small and midsize business clients, the Texas-based community bank began to think like the corporate customers it wanted to attract. Among other things, that meant replacing an old phone-based account transfer system with new online services that allow users to deliver online wire payment instructions securely. Today Woodforest offers nearly the same portfolio of treasury management services as the money-center banks.

The automated treasury platform empowered Woodforest's front-line sales and customer service people to help drive the bank's growth through new revenue opportunities. "We wanted to be able to service our customers but also be more competitive," says Fred Gibbons, vice president of operations for Woodforest, an employee-owned bank with $2 billion USD in assets. "We've now hired a salesperson to sell the services to new customers. We're looking to grow this piece of the business."

Today's financial institutions struggle to differentiate themselves in a marketplace squeezed by competitive pressure on pricing and higher customer expectations around service levels. To succeed in the new environment, smaller banks and brokerages are developing a strategy that relies on reusable business services to introduce or enhance their account opening, bill payment, and money transfer offerings (see chart, "Top Online Banking Initiatives," below).

These organizations partner with third-party specialists, such as Web-enabled payment engine and cash management service providers. Each service typically works across several channels, including branch offices and the Internet, and provides a more consistent customer experience.

The enterprise systems in these companies often use a similar building-block approach with software. Employees increase productivity and experience reduced training time as a result of the common look and feel across all applications. What these companies are learning is true across all industries. When people are equipped with the right tools, they become more productive and are better able to compete with industry giants. In this case, smaller and regional banks gain the flexibility they need to stay agile and compete in markets that were previously off limits.

In a recent survey of top U.S. banks, online managers rated the following goals in order of importance.

"Banks are electronically able to do things they couldn't do before," says Nancy Atkinson, senior analyst with Boston-based research firm Aite Group. For example, they can better respond to changing customer demands. "Even the smaller to midsize enterprises that have traditionally banked with community banks are finding themselves in a global marketplace where they may be starting to source from Asia Pacific," says Atkinson. So their banking needs are "more than just getting a loan and making deposits at the local bank." Over the years, call centers, Interactive Voice Response units (IVRs), ATMs, and online services were widely adopted. For example, about half of all adult Internet users bank online, according to a recent survey (see chart, "Growth in Online Banking Services," below). However, these technologies were often developed in silos. According to Anthony Jacob, Microsoft industry marketing director for worldwide financial services, this "created huge IT costs. It also cut down on banks' ability to innovate because they were paying a lot of money to keep the channels open."

Now banks are not only ramping up faster to compete in new markets but also preparing for coming services like IP banking and mobile access to services. What's more, software that relies on reusable building blocks gives financial institutions a more informed, cohesive view for timing the launch of new products and better integrating their service channels.

Internet banking has been growing steadily. Nearly half of all adult Internet users in the U.S., or 63 million people, bank online.

Using modular software, Citibank created a collaborative portal and information service called CitiVision to help its corporate and investment bankers provide better service to their clients. Then Citibank saw the opportunity to extend many of the same services the bankers could access directly to their corporate treasury clients, through TreasuryVision. TreasuryVision leverages many of the same assets CitiVision, allowing it to be rolled out in a fraction of the time of comparable solutions. "That's an example of how an internal solution could be quickly morphed into a customer-facing service as a value-add," says Jacob.

By automating key processes—including purchasing, invoicing, payments, and the like—on a united technology platform, top bank managers are freeing their employees to assist in improving operating efficiencies. They're also providing visibility into financial flows to enable process improvement, and collaborating on how to improve cash flow strategies. That strategy works well not only in financial services, but across all industries. When empowered with the right technology, employees can serve clients better and more efficiently.

In Bangkok, Thailand, Asia Credit Limited Bank (ACL), a former finance company now morphed into a commercial bank, focuses its energy on small and medium businesses. The bank features technology as an important selling point. "Proprietors of these businesses are a technology-savvy younger generation," says Senior Executive Vice President K. Tarissa Tanjasiri. "Our success depends on how we differentiate ourselves with technology that provides quicker and better service than our competitors."

ACL Bank broke new ground in Thailand with its integrated, unified agent desktop. With no legacy systems to modify, the bank quickly installed flexible back-end databases and integration servers to connect to its core systems. The bank's use of multi-channel integration and video teleconferencing means that relationship managers can converse more easily with each customer-whether that customer has walked into a branch or contacted the bank by Internet or phone.

A comprehensive view of the customer helps ACL realize greater margins. "Banks want to do a better job of cross-sell and upsell," says Jacob. "It's not just a front-end story. To make the front effective, you need a great back end that has the data and the tools that give the people on the front lines timely access."

Cultivating relationships with younger banking customers accustomed to the Web calls for an integrated services strategy. Experienced Internet retail users are more likely to trust online banking sites, according to research by Consumer Reports WebWatch, a grant-funded project of Consumers Union, the non-profit publisher of Consumer Reports magazine in the U.S.

What's more, in a survey of online retail banking customers, comScore Networks found a strong correlation between respondents' satisfaction with their banking relationship and the banks' Web sites. Eighty-eight percent of customers happy with their bank's Web site also reported high levels of satisfaction with the bank, according to comScore, a Reston, Virginia, research firm. Conversely, of those customers dissatisfied with the Web site, only 16 percent gave the banking relationship a high rating.

Woodforest bets that highly effective Web experiences will build trust among its corporate customers. Says Gibbons: "The more secure and timely I can make it for ourselves and our customers, the better for everyone involved."

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