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The Evolution of VoIP

As Voice over Internet Protocol technology matures, banks increasingly are adopting VoIP solutions to cut costs, improve efficiency and enhance customer service.

Two years ago, when the staff at Bank 10, a community bank with six locations in Missouri, attended a morning conference call, one branch would start the meeting by dialing another branch, which would then contact another branch, until everyone was on the line. The problem, says Bill Delphia, network administrator at the Belton, Mo.-based bank, was that the quality of the phone conversation degraded as people were added to the call. Some people couldn't hear, others would talk over one another and branches sometimes would get kicked off the call. It was a bad way to start the day, he says, noting that it often left people "perturbed."

Today, Delphia relates, those problems are gone. Thanks to Voice over Internet Protocol (VoIP) technology from Basking Ridge, N.J.-based Avaya, Bank 10's morning conference calls now go off without a hitch.

According to Delphia, the VoIP upgrade was made possible when the bank installed T1 lines in each of its branches in 2001. "We had the infrastructure in place to do IP telephony, because we had each of our branches sending data back and forth through our computer systems," he says. However, the bank also had numerous different phone systems, "so we were looking for a system that had an audio bridge," Delphia adds.

Bank 10 first tried a private branch exchange (PBX) VoIP conversion kit between two branches, but "it didn't seem to work very well," Delphia notes. So, in 2003, he began shopping for an out-of-the-box solution, considering solutions from Cisco (San Jose, Calif.), 3Com (Marlborough, Mass.) and Avaya before settling on a system from Avaya. "We didn't replace it all at once," he explains. Instead, the bank opted to roll it out branch by branch. The first branch was fitted with VoIP in October 2003 and the last was completed in October 2004.

"Most of the install was done offline," Delphia says. Planning and training were the most time-consuming parts of the rollout, he relates. "Programming took our vendor about a week." The physical installation and testing for each branch was completed in just a few days, Delphia adds.

Now, "We have a morning meeting that we can call into and everybody gets a clear signal. You can hold a multitude of meetings - up to 20 different rooms, which can hold a total of 120 calls," Delphia says. "The morning meetings run so much smoother."

Bank 10 isn't alone in moving to VoIP technology, which allows firms to send phone calls over their data networks, resulting in a range of benefits, from lower long distance costs to more flexible telephony management. Don Rhodes, policy manager at the American Bankers Association (Washington, D.C.), says there is a "quiet revolution" under way at banks across the U.S. as more and more move to VoIP. "Banks, like many other businesses, are beginning to realize the cost savings associated with VoIP," he asserts.

Traditional PBX phone lines rely on circuit switching: A switch is open during a call between two numbers, allowing the parties to speak to one another, and the switch closes when someone hangs up. However, the voice conversation is the only information transferred over the line, which doesn't operate at maximum capacity, since one caller listens while the other speaks and there are lulls in conversation.

VoIP, though, relies on packet switching, similar to the way that e-mails are sent over the Internet. The technology breaks down a voice call into bite-size information packets. Instead of keeping the switch open all the time, the information is sent and received as needed, allowing excess line capacity to be used to carry other data. When the voice data arrives at its destination, it's reassembled into a voice call.

Can You Hear Me Now?

Initially, concerns that VoIP calls were not as crisp or reliable as traditional PBX-based calls impeded the technology's adoption. The concern, however, has been tempered as the technology has matured. According to Jim Bright, industry marketing manager for financial services at Cisco Systems, a year-and-a-half ago, banks were waiting to see if the technology worked. "That's not the case anymore," he says. "They know it works. Almost all U.S. banks have VoIP in their plans," he contends.

"Adoption took place earlier with small and mid-size banks," Bright continues. "It's an easier decision to make - the smaller you are, there are not as many committees to go through." However, large banks also are joining the VoIP game, he adds, noting that Bank of America is rolling out VoIP across its entire U.S. operation.

For Bluefield, W.Va.-based First Century Bank ($378 million in total assets), the primary driver of VoIP adoption was cost savings, but the abilities to improve staff efficiency and provide better customer service also were important. The financial institution realized substantial cost savings by moving to VoIP across its 10 branch locations, according to Jason Farmer, the bank's IT manager. He says the bank's long-distance bill dropped by about 90 percent, to $300 to $400 a month from the $3,500 to $4,000 a month the bank paid before deploying VoIP. The technology eliminated long-distance calls among branches, Farmer relates, noting that most of the long-distance bills the bank rang up were "employees calling each other." VoIP also cut cabling costs and fees for leased phone lines, he adds.

First Century, which employs 230 people, also moved to VoIP after it installed T1 lines. "We had very little bandwidth to remote branches," Farmer says. "As our data needs increased, we saw the need to increase bandwidth," he explains. Once the bandwidth issue was solved, "It made sense to move to VoIP to help pay for some lines and get a quick return on investment." The system, from Cisco, was installed in August 2004. It includes 180 IP-based phones with LED screens deployed across First Century's headquarters and another 38 branches. It took about six months to roll out the system, relates Farmer.

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