4 Practical Steps For Bank-Brokerage Integration

Providing an integrated user bank-brokerage user experience is difficult. Here are 4 steps that can help keep an integration project focused and on task.

Competition for the mass affluent wallet has been heating up for years. The fight between banks and online brokers has seen players from each side relentlessly adding services to retain and attract key segments. Most direct brokers now offer fully integrated online banking with bill pay, and even more banks offer (or are building) online brokerage capabilities.

But banks choosing to expand their online investment capabilities no longer face an "all-or-nothing" decision to enter the space. Existing offerings can be extended with new capabilities or channels, new offerings can be launched sequentially, and client experiences can be combined with various levels of integration. If done properly, firms can expect to capture more of their existing mass affluent clients' assets, enable hybrid models of service at lower cost, cross-sell and upsell to various segments, and better attract the younger generation.

Following the Steps to Success

As explored in "How To Effectively Integrate A Bank-Brokerage," or "part 1" of this short two-part series, the complexity of this convergence requires product and technology owners to have a full understanding of the critical path elements and challenges that might interfere with the success of the combined offering. In order to guarantee an effective integration that leads to client retention and satisfaction, bank-brokerages must evaluate their internal capabilities and appetite for necessary infrastructure.

In some cases, the product and technology teams can apply knowledge and best practices from other projects to ensure the bank-brokerage integration is a success. With elements like authentication, a single sign-on process used to grant client access to multiple systems, a technical approach could already be in place that would carry over to this framework. Here are some priorities for consideration:

1. User Friendly: Make the front-end as user friendly as possible. This often means utilizing single sign-on to bank and brokerage, unifying look and feel, and integrating service communications from both sides. Twelve of the top 100 banks now have single sign-on, and many have built integrated service sites for routine self-service events.

2. Data Has Limitations: Understand the limitations of your client and account data. If your organization was built from many broker dealers and bank mergers over the years, your account data is rarely homogenous. Different firms had different data entry approaches and standards, and your data will reflect the diversity. Matching client name, address and tax ID handles the basics, but many account holders vary their own behaviors on the use of middle initials, suffixes, and even spelling of first name. This means that account viewing privileges may be hard to automate. But false matches accidentally allowing one client to view another's account data is another significant consideration when establishing an effective tactical framework. If the data in the system is dirty or outdated it could impact algorithms that maintain the entire infrastructure of the system and create another project that starts to meld with general data cleanup efforts. This is especially true with account linkage, the matching processes that creates relationships between two systems, or between systems and a central profile. Critical path elements for account linkage include, creating queues and manual processes to route and manage failures and automating remediation processes ("Don't see your account? Click here and we'll find it"). Connectivity can be a barrier in this workflow if systems are not configured to exchange data as needed.

3. Single Account View: The display of a client's brokerage account numbers and balances in their online banking summary page is a fundamental feature for clients that requires product and technology teams to define user experience and behavior of a demarcated investments section, which is important for new online brokerage account acquisition. Additionally, displaying batch or real-time information will need to be consistent across the banking and brokerage accounts. Clients will expect to see their investment information updated as frequently as their bank account details. This can be facilitated by creating a connection or transmission approach (APIs and web services for real time calls / file processing and field mapping for batch transmissions).

Roadblocks to the success of balance display often come from online banking platforms having varying levels of integration capability (some can only read from a single source) and multiple user IDs may be touching a single profile which have different account access rights. This issue occurs most frequently with integration of legacy systems and the need to reconcile how they behave within the overall framework.

4. Transfers Made Easy: Money movement, such as cash transfers of all kinds (between accounts within a single institution, across institutions, and to third parties, etc.), is a fundamental aspect of the integrated bank brokerage. Tactical success will be dependent on if transfers reside solely within online banking. If not, how will alternate mechanisms be serviced? Like the display of account numbers and balances, customers will expect transfers to be executed consistently (in real-time, batch, or in between).

In the case of integrating established entities (such as that of a merger between an existing bank and an existing brokerage), it can be difficult to align language among partners. Transfer can mean different things to different companies and teams so this should be configured upfront to ensure definitions are consistent throughout the back-end.

A Strategic Road Forward

Many of the tools that facilitate bank-brokerage integration ultimately require deeper integration of middleware and back office systems.. Currently, investments and banking accounts exist in a siloed fashion, operating independently from one another, and integration with internal systems for transactional and profile data is limited. This also influences service departments where customer service reps do not get a full view of the client's relationship with the bank, thus limiting the ability to cross-sell or properly resolve client issues.

About The Authors:

Joe Stensland, Executive Vice President, Product and Delivery Management, Scivantage As Executive Vice President, Product and Delivery Management, Joe Stensland is responsible for overseeing the product and market strategy for Scivantage. Joe brings to Scivantage a proven track record in successfully launching, growing and managing technology products in the financial services market.

Jim Goodwin, President, Riperian Jim Goodwin is President of Riperian, Inc., an advisory and consulting firm providing strategic, tactical and operating support to financial institutions. Riperian is focused on the intersection of Banking and Brokerage, with particular emphasis on Online Channel strategies and implementations. Riperian delivers strategic plans, product and channel assessments, and program implementation services, supported by proprietary research.