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Wells Fargo took its first shot at creating envelope-free ATMs around 2002, but the technology wasn't up to it. Optical character recognition couldn't read the words on checks well enough, and the machines jammed too often. So the Wells Fargo IT team shelved the idea for several years.
When character recognition improved, they took another crack at it, but it still took many iterations, working with hardware makers, to overcome the jams. They had to persuade ATM makers to upgrade to faster Intel processors to provide the personalized features Wells Fargo wanted, and they had to educate customers as to how and why they should use the new machines. Now the bank has 1,852 envelope-free ATMs in California.
"It wasn't an overnight success," says Jimmy Wang, a Wells Fargo VP in the ATM technology group. But the envelope-free ATM project was typical of Wells Fargo's approach to innovation, which its leaders describe not as a particular initiative or project but as part of its constant pursuit to bring something better to customers. Says Wang, "If we had a culture of 'good enough,' we wouldn't have developed envelope free."
It's been an extraordinary year in banking, with last fall's financial crisis requiring massive taxpayer-funded bailouts that included $25 billion for Wells Fargo. (CEO John Stumpf told Bloomberg Television this month it would repay the TARP loan "shortly.") Wells Fargo also cut one of the industry's biggest deals out of the crisis by acquiring Wachovia in a government-backed deal. Amid crisis, merger integration, and intense public scrutiny, how do you keep IT teams focused on innovation?
Modjtabai describes a culture that, for a group of bankers, seems more comfortable than you'd expect with soft ROI measures when it comes to customer-facing technology. Efforts such as showing a customer's three most-common transactions on the ATM screen don't drive incremental revenue, but they're what the bank thinks it must do to keep pace with customer expectations.
"None of them are about the next three-month or six-month return," says Modjtabai. "They tend to be about continually deepening our relationship to our customer, or retaining their business, or share of wallet. A lot of it is about sustainable opportunities with the customers."
Get More Personal
In addition to expanding the envelope-free ATM effort, Wells Fargo also used data mining to personalize teller machines. It added features such as automatically showing customers their most frequent transactions, knowing they're very likely to want to do one of those transactions again. Sounds appealing, but IT had to figure out how to deliver constantly updated data. That involved a fairly simple database search, Wang says, but it takes a lot of computing power to mine all customer transactions for the past 180 days every day. So Wells Fargo runs that overnight, using otherwise idle computing capacity, and mines only the changes from the prior day.
The bank's customers aren't necessarily early adopters of technology, Modjtabai says, so Wells Fargo tends to make changes in "small steps." When it showed customers the first iterations of envelope-free ATMs, many were hesitant to use the service, Wang says. The machines are technically impressive--able to handle up to 50 bills in different denominations, facing up or down, and a stack of 30 checks at a time--and eliminate paper. But teaching customers that envelope-free deposits give faster access to funds helped increase use.
There was still a big reason many people didn't make ATM deposits: Fear. "If you have a $10,000 deposit, you often want a stamp on it to say, yes, they took it," Wang says. So the bigger breakthrough came when Wells Fargo offered the option of printing an image of the check as a receipt. "That changed a lot of behavior," Wang says, "including some people on our own staff who admitted they had never deposited a check in an ATM."
Modjtabai says Wells Fargo doesn't budget specific funds or have staff dedicated to innovation, so there isn't pressure to cut an innovation budget line during a down economy like this. Much of its innovation is focused on customer-facing projects, and those tend to continue to get funding in a downturn.
IT infrastructure is another area where Wells Fargo is innovating. Here Modjtabai's team is on a major push to cut costs and improve effectiveness through increased automation, virtualization, and consolidation, and offering more tiered IT services. Storage is a good example of tiered services, Modjtabai says: "We used to offer only tier 1 storage of all of our applications, whether or not they were tier 1, 2, or 3 applications." Now, for data that doesn't require as fast access, Wells Fargo is buying lower cost storage, which it's also finding easier to manage.
With the Wachovia acquisition, there's pressure to make operational improvements like these even faster, since IT teams already are working on nearly every system as they consolidate the two banks' systems. "In times of big changes and mergers, it gives us an opportunity to accelerate some of those initiatives," says Modjtabai.
The Opportunity Ahead
Banks need to "put what customers need in their path," says Modjtabai. Six years ago, people used cell phones to make calls, but today, they're using them to manage their lives. Wells Fargo offers mobile browser versions of its online banking, as well as text message banking. Modjtabai anticipates "huge growth" on this platform.
That leads to one of the bank's biggest challenges: delivering a consistent experience across platforms. Modjtabai leads, in addition to IT and operations, a team that's part of the company's "One Wells Fargo" initiative, whose job is to look across the company for places it's not delivering a unified customer experience.
One systems integration victory on this front is that when customers open accounts in branches, they can select certain preferences for other channels, like what the default withdrawal amounts are on their ATM screens. But there's always more work to be done. Even as Wang describes that success, he notes they never develop in a silo. "We haven't done it yet, but we're thinking, 'Why not let you select your ATM preferences from the Internet channel?'" he says.
As Wang himself might say, never "good enough."