Case Study: Online Integrated Banking Positions RCB Bank as Technology Leader

by Marsha Cansler, contributing editor, Jack Henry & Associates

When RCB Bank made the decision in 1990 to become a technology leader, the stage was set for the Claremore, Oklahoma, institution to achieve unprecedented growth. Hovering at $104 million in assets at the time, the bank was determined to reach $500 million by 2000. The need for technology was twofold: First, to undergird future expansion and acquisitions, and second, to allow RCB to offer competitive products and services that would increase its customer base.

Moving data processing in-house with the implementation of a core system would lay the groundwork. In choosing Jack Henry & Associates, bank officials cited the vendor’s display of flexibility and willingness to listen to the customer. According to RCB Senior Vice President and CFO Tom Bayless, “Jack Henry had a good game plan going down the line in terms of being able to deliver the kind of products we wanted.”

And so the ball was set in motion. Long before the Internet was even a gleam in the eyes of most bankers, the foundation was laid upon which to build an online integrated banking system.

Internet banking before its time

RCB Bank made its first step toward Internet technology in March 1996, after completing a study and analysis of what was then called “home banking.” Several institutions were offering the service with software and modems that allowed customers to dial in to the bank through their PCs.

RCB, however, had the foresight to understand that the Internet would soon have a major presence. It didn’t make sense to spend money on a home banking module that would quickly become antiquated. There must be a way to provide home banking services via the Internet.

The bank turned to its core-processing vendor for an integrated online solution. Upon discovering that the provider was indeed developing an Internet banking product, RCB Bank agreed to be the first customer to beta test the software. By October, implementation was under way.

RCB rolled out its online banking service, complete with check imaging, to customers in January 1997 and for the entire year, remained the only bank in Oklahoma to provide online banking via the Internet. At the time, fewer than 10 banks in the nation had the capability to provide check images, front and back, online.

An integrated solution

The software installed in 1997 has since evolved into NetTeller Online Banking and given RCB a competitive edge. Because the product is integrated into the core system along with a number of complementary products, customers are able to conduct inquiries and transactions online 24 hours a day, thus increasing customer satisfaction and loyalty.

Individuals can obtain their balance, last deposit, current transactions and activity, information on loans, perform inquiries into history records—even transfer funds from one account to another. Not only are check and statement images available online, but they also can be printed for added convenience. Transactions can be downloaded into programs such as Quicken and Microsoft Money. And the bill-pay function makes it possible for customers to automate payments to vendors.

Commercial customers are further served through cash management, which provides additional tools such as wire transfers, direct deposits, ACH origination, funds management, and stop payments.

Customers aren’t the only ones benefiting from online integrated banking. Because information and banking services are available continuously through the Internet, customers are no longer regimented to making inquiries via telephone. This frees up bookkeeping personnel, as does the fact that customers can make their own transfers online. Therefore fewer bank employees are taking calls or making entry transfers, resulting in increased productivity and efficiencies.

“Real-time” online processing

According to Bayless, an advantage to having complementary products integrated through one vendor is that from the customer’s perspective, accurate information is available in real time. While transfers and transactions are in reality, memo posted until the batch update runs, these adjustments are immediately made to customer balances. “So it’s real time to the customers,” says Bayless. “This type of seamless integration is a big advantage over batch systems of third-party Internet banking systems that merely hand off information.”

These “real-time-like” results are possible because a single vendor is able to integrate the host system with such complementary products as a voice response unit, ATM system, Internet banking, and bill-pay solutions—and bring all those components together under one umbrella to keep account balances current. That’s without a customer ever having to talk to an individual at the bank, regardless of the time. As RCB Data Processing Manager Charles Wilson explains, “At the point a check card settlement clears or a customer uses an ATM card or makes a transaction at the teller line, both voice response and the Internet reflect those changes.”

Bayless tells the story of an RCB customer who got a phone call at 10 a.m. on a Saturday from her son in Tokyo, asking her to wire money. Instead, the woman directed her son to walk to the nearest ATM machine. She immediately logged onto the Internet and transferred $300 from her account to that of her son. He called back in 15 minutes from Japan with money in hand.

Ease of implementation and maintenance

The initial implementation process of Internet banking was unique in that RCB Bank served as a beta site, working with the vendor to refine the system. Wilson reflects, “It was pretty straightforward—probably one of the easiest installs we’ve ever done.” His only advice to other banks is to ensure that the host computer system is well tuned with plenty of resources. “The hardware behind the scenes must be able to support quick Internet response time in order to give customers instantaneous access to information.”

As program upgrades have been implemented over the years, the advantages of having an integrated system that is developed, delivered, and supported by the same vendor have become increasingly clear. Wilson shares a recent example. “When a new version of the core product was released this year, changes had to be made to the teller, platform, and payroll systems. It was all included on one CD. We didn’t have to purchase software upgrades or get instructions from four or five vendors. With regard to the Internet banking system, Wilson continues, “We’ve experienced cost savings and convenience in that Jack Henry has been able to simply dial in and upgrade us. They haven’t had to come onsite or send us a CD or tape to load.”

Communication link for the future

Internet solution upgrades have provided RCB Bank with the backbone to handle continued growth. It’s a good thing, since the bank’s percentage of Internet banking users has increased from 10% in 1999 to a 32% penetration today. And the numbers are growing. When customers of two new branches were recently surveyed as to why they chose RCB Bank, 60% indicated that Internet banking was a major factor in their decision. RCB Bank has met and surpassed its goal of $500 million in assets, with online integrated banking playing a part in that expansion.

Bayless expects Internet banking to play an even larger role in the future as a growing number of younger customers use the technology. “The Internet has some similarities to ATMs back in the 1970s,” he surmises. “It’s another form of providing a communication link to our customers, and it will be increasingly important in the future.”

Bayless is not ready, however, to jump on the “Internet-only” banking bandwagon. “Customers want brick and mortar,” he says. “But they also want the convenience of Internet banking and the ability it brings to access information at any time. While voice response systems have been in place for many years and are still used, the availability of information over the telephone doesn’t begin to compare with what you can get over the Internet.”

As attractive as these capabilities are, Bayless fears that many bankers may waiver over the cost of Internet banking. “I think they’re looking at it wrong,” he says. “The Internet is no different than the telephone in that it’s a necessary service to provide communication with your customers. It shouldn’t be viewed as a stand-alone profit center; it’s too integrated with all the other services a bank provides.”

And it’s the integration that’s profitable: profitable to customers who are better served with greater flexibility in conducting business, and profitable to banks that gain market share, customer loyalty, and increased internal efficiencies. As Bayless sums up, “Online integrated banking offers the best of all worlds.”

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