FRAMINGHAM, Mass. – Emerging alert and notification technology will be make it easier for credit unions to reach out to new members and stay in more profitable touch with older ones. Financial Insights analyst Richard J. Bell expects the leading medium to large financial institutions in the country to deploy alert and notification systems over the next two years. And credit unions tend to follow closely behind that leading edge. "This technology is a key, perhaps the key, component of innovative, exception-based services that will redefine banking in the future," Bell says. The premise of exception-based banking is that many retail financial activities (for instance, direct deposit, automatic debit and debit card use) no longer need consumer action, only notice. So routine events generate notifications while any exceptions to normal account activity generate alerts. Alert and notification technology can call on the single channel media of telephone and e-mail and can add multi-channel approaches including SMS on cell phones, instant messaging on computers and fax. The systems already have shown strong operational performance when applied to credit card services, reducing fraud and welcoming new customers, Bell says. But, Bell believes, "the technology's long-term potential lies elsewhere. Alert and notification services provide a new, low-cost tool for contacting customers and engaging in a two-way, needs-focused dialogue that promises significant marketing and sales advantages." Among the benefits of alert and notification systems, as used today, are: * Reduce fraud thresholds, so a credit card issuer can detect more frauds and detect them earlier. * Encourage on-time payments and prompt collections, possibly saving the expense of hiring an agent. * Divert calls from more expensive staff by contacting members up front about account items received or changes in credit limits. * Avoid lost business by sending out automatic status notices for loan applications or credit line extensions. * Give early adopters at least a temporary marketplace advantage by enhancing the interactivity of common products such as checking accounts. * Improve renewal rates, and lower renewal costs, of such products as certificates of deposit. * Ensure that high value sales are assigned to agents while following up lesser prospects by automation. * Take advantage of new product opportunities such as consumer "cash management" and automated account management. Alert and notification systems require several software engines. Based on rules, member preferences and institutional controls, an event detection rules engine monitors data sources at the financial institution. As transactions and other data are entered, this engine generates an event stream, which it queues to the alert and notification generation engine. This second engine selects a notification script and delivery channels, which are processed by the communications engine and in the case of interactive communications, a response engine. Bell says, "While alert and notification based services are conceptually simple, their effective use is not. Financial service institutions should at least initially leverage the experience and skills of vendors experienced with the subtleties of this emerging technology." The Financial Insights analyst also calls for financial institutions to "rethink a wide range of business processes for communicating and interacting" with consumers as they consider alert and notification systems. Here is his advice on adoption: * Start with simple, high-ROI uses of the technology. Fraud reduction, collections and courtesy billing reminders will achieve positive near-term returns while the institution becomes more familiar with alert and notifications. * Make sure that the system fits into the institution's overall product and delivery infrastructure, especially where contact centers and the Internet are involved. The alert and notification process naturally demands an integrated multi-channel, multi-product approach. * Expect service and utility of existing products to improve, but don't stop there. "Over time, financial institutions should move toward an exception-based retail-banking model," Bell says. -

[email protected]