Wiring the Retail Channel

Since opening its Web site in 1996, Wachovia Corp. has continually sought ways to improve customer service through the Internet. It recently moved to the Corillian Voyager eFinance platform, which allows transactions in real time and more consolidated access to accounts. In partnership with Kinexus, a New York high-end aggregator, Wachovia brings MyNetWorth to its affluent clients. Kinexus will gather pertinent client data through direct data feeds instead of through less-expensive screen scraping, a service similar to what it provides Chase, which holds a $49 million stake in the company.

In 1999, Wachovia united the online banking, online investment and Internet products groups into a new e-business division and put executive vice president Lawrence G. Baxter in charge. Baxter, a former Duke University law professor and special counsel to the Senate Committee on Banking, Housing and Urban Affairs, joined Wachovia in 1995. In an interview with BS&T associate editor Karin Halperin, Baxter talks about his division's past and future plans.

BS&T: With so many banks bringing account aggregation to their retail customers, why is Wachovia proceeding so selectively?

BAXTER: The need is more urgent on the private banking side. Private banking customers have complex financial situations. They need tax information and applied financial planning tools. They want to go beyond just having all the information gathered in one place. We perceived a need there.

BS&T: So what will Wachovia bring them?

BAXTER: We would like to see aggregation that offers robust financial planning that feeds into calculators and projectors in a rich fashion. We want it to provide different views of a portfolio so that a customer can meaningfully adjust it. We would want it to produce tax-layer reporting for families that have different IDs for children, spouses, a business. You can't do any of that stuff with the current state of aggregation technology.

BS&T: What about aggregation for the mass market?

BAXTER: We're highly likely to offer it next year, with one of the recognized leading players. We don't see account aggregation as something the public clamors for. The kind of people my instinct tells me are likely to want it most urgently already use personal financial management software, like Quicken and Money.

At this stage aggregation wouldn't give them more than they've already got. We will not back off, but security and privacy remain major issues. If you give your user ID and password to an agent, you are not just handing over the right to collect information. As our sites get more transactional, you are giving someone the ability to do an awful lot of things on your account.

BS&T: What are some of your retail initiatives?

BAXTER: We've got the best new banking platform in the country, the NT-based Corillian Voyager engine, although we're still running a bulk of customers on S1, who we'll convert next year. It's got some home run applications, like genuine check imaging, which some people claim they've got but don't.

We are moving out to retail with wireless-it's a little more difficult because you've got much bigger numbers. And we need our site to be OFX certified. We had Wachovia Connection Plus on the corporate side, which gives account and cash management access, and so we were able to set up wireless much quicker there.

In the asset and wealth management division, in addition to the MyNetWorth initiative, we've had what we call the affluent client Web portal in development, along the lines of Morgan Online.

BS&T: How has your site evolved? Have your goals changed much?

BAXTER: Various groups have contributed to it. In 1997, we instituted online trading. We've always been Internet only, not private dial-up, which is still prevalent with a lot of big institutions.

We started Internet banking with S1 in early 1998. I had the Emerging Businesses Group at the time, which served as something of a coordinator for these various groups. At the end of 1998, we created a division within the retail bank called Digital Financial Services, and that merged the electronic banking group with the unit that we had already built to develop the intranet and Internet. We managed the Web site.

Through 1999, we were a two-faceted organization. One was really a line of business in which we had all the electronic banking pieces-bill pay, ATMs, debit cards, campus cards, smart cards. But we also provided infrastructure and development for the whole company. We were located in the retail bank, and the other parts of the company were not getting as much attention as they needed. We reorganized again at the end of 1999 and created the eBusiness Division separate from the other business divisions.

We left the e-banking line of business in retail and created a type of federal system, where we had this e-business group that provides the thought, strategic leadership and infrastructure.

BS&T: What about electronic bill presentment and payment?

BAXTER: We use CheckFree for bill payment. We piloted bill presentment with TransPoint. We use InvoiceLink, a bill presentment company bought by BCE Emergis as a referral for our corporate customers who want to post their bills to the Web. We've not deployed electronic bill presentment out to the mass market. We're still waiting to go with a vendor who can deliver enough bills to make it worthwhile. And that's the catch-22. We won't be able to get customers for it unless they know enough bills will be presented. It's going to be important, and we need to be able to move quickly with the right solution.

BS&T: How has your online customer changed?

BAXTER: Early adopters were the more affluent, technologically savvy customers. There was a strong correlation between that and profitability. Now online banking is diving deep down into the mass market. It's been healthy. It's broadened our focus from just looking at the pure profitability of customers to recognizing that they want to communicate with us more efficiently. Our new platform has a lot of self-service elements to it. And it has kept our focus, although I don't know if we've done such a great job on it, on making sure the site is user-friendly.

BS&T: Do you believe bank branches are doomed?

BAXTER: Branches are changing their character. Wells and First Union recognized a long time ago that branches have to be more than just teller queues. They may have been out there ahead of their time, and they may have overemphasized technology, but if you think about the pressure on people's time, a lot of what they do financially is just a set of chores. Get the bill payment done, get your money where you can, make a deposit as quickly as you can, buy or sell a stock without any hassle. Then there's other things they care very much about, but they don't really get the time to go to a branch. You can combine the Internet and the branch to make banking more efficient.

For example, with mortgage application or portfolio management you might say, "I've been through the tools you've got on your Web site, but I think we need to talk." The branches are becoming more accommodating and attractive to people who have those deeper needs than just a quick "I need to cash a check" or "I need to draw some money."

That's not to say that will go away, because customer behavior changes slowly. People still line up outside the doors on Friday afternoons to cash their paychecks. While there are technology solutions for that, they're not going to be adopted quickly. People feel more comfortable doing what they've always done.

Over time the complexion of the branch is changing, and it's becoming more of a genuine value add. Is the physical location adding value, or is it just an anachronistic point where somebody can get their chores done? Banks that are going to be successful need to translate into that genuine value add.

Branches also need to be where the foot traffic is, because financial services in and of itself is not the pull for most people. People go to a shopping mall because they can get everything done in one place, and the atmosphere is exciting. People don't wake up in the mornings and say, "Oh, golly gee, I'm going to have a relationship with my bank today." As demographics have shifted you're seeing a great big redeployment of branches to the suburbs and crossroads.

BS&T: Has your division taken any risks?

BAXTER: Wireless is a risk. There is clearly no established case for wireless financial services right now. There is a projection of wireless access to the Web for the population, and it's an encouraging one. And there is clearly widespread adoption of wireless devices like phones and PDAs.

Does that translate into people saying they want to pay a bill on their phone or trade a stock or receive an e-mail? We don't know for sure yet. We had to go out ahead of the market indicators, and I've often had skeptics say, you know, there's a whole school of thought that says this is way overblown and the hype is ridiculous.

We decided that in some things where we're close to the edge, we should take the chance. We may be wrong, but I think everything's showing that this was a good bet, but we were very much aware of it being a bet as opposed to a rock solid business case.