Vincent Hui is guiding one of Hong Kong’s leading banks through a CRM revolution that gives customers account access anytime, anywhere.

By Stephen Poole

Hong Kong, a former British Crown colony and now a Special Administrative Region (SAR) of China, is one of the world’s most important international banking centers, and it shows. As of November 2001, there were 148 licensed banks, 48 restricted license banks and 55 deposit-taking companies, not to mention 114 local offices of overseas banking institutions representing 39 countries and 77 of the world’s 100 largest banks. Not surprisingly, Hong Kong ranks as the world’s ninth largest international banking center in external transaction volume and is the seventh largest foreign exchange market.

In an economy as robust and competitive as Hong Kong’s, a successful bank must constantly seek out new markets, embrace new technologies and place the needs of its customers at the forefront of new business strategies and partnership development. That’s precisely what the Bank of East Asia (BEA) has done for more than 80 years. As a result, it has emerged as the largest independent local bank in Hong Kong, with 124 branches in Hong Kong and 15 outlets in mainland China, plus a strong presence in Southeast Asia, the United States, Canada, the United Kingdom and the British Virgin Islands.

Banking without borders
There are much larger overseas banks based in Hong Kong, to be sure, but what BEA lacks in sheer size it makes up for in its willingness to innovate and improve customer service whenever possible. In just the last two years, BEA has garnered an impressive array of awards, including “Best Domestic Bank in Hong Kong” (Euromoney Awards for Excellence 2000), “Best Retail Bank” (2001 Omega Outstanding Technology and Financial Enterprise Awards), “2001 Best Retail Bank for Hong Kong” (The Asian Banker Excellence in Retail Financial Services Award) and “Best New Business Venture—Cyberbanking and Cybertrading” (Asian Banking Awards 2000).

To learn what has helped transform BEA into one of the region’s leading-edge banking and financial institutions, we spoke with Vincent Hui, who heads up BEA’s e-Distribution Department. Alhough Hui has been employed by BEA for more than 20 years, he has spent the last six years becoming intimately involved in the company’s forays into technology that allow customers to easily access and control a wide variety of accounts.

Except for the period when Japan occupied Hong Kong during World War II, BEA had experienced steady growth since its inception, particularly in regard to foreign currency deposits. But it was the acquisition of the United Chinese Bank Limited that put BEA—and Hui—on the road to 21st-century banking. After that purchase in 1995, BEA needed someone to develop interbranch transactions that would allow customers of both banks to transact across branches. Hui, who was in the Organizations and Methods department at the time, was tagged for the job.

“With Bank of East Asia and United Chinese Bank integrating their computer systems, customers of both banks could enjoy a series of the group’s Interbranch Services through the combined local branch network of the two banks,” he says.

Hui’s experience with the Interbranch Services project proved an ideal stepping stone for his work on BEA’s next endeavor, the East Asia Supreme Account (EASA), an “all in one” service that allowed customers to access a variety of accounts through a single account number. Hui notes that “BEA wasn’t the first to introduce an ‘all in one’ account, but the ones that preceded it simply integrated current savings and deposit information—it was quite primitive. So before we rolled out the East Asia Supreme Account, we did a great deal of research as to how we could make it as useful and friendly as possible to our customers.”

Besides the convenient ability to view all EASA transactions from a single statement, one of the most compelling features of the EASA was its overdraft protection, which calculated customers’ total available account balances in real time and shifted money between accounts so they could avoid the dreaded “insufficient funds” message whenever possible. Hui notes this feature was particularly important when EASA was introduced in 1999 because of that year’s booming real-estate market.

“When we rolled out the Supreme Account service, the property market in Hong Kong was extremely active,” he says, “and it was very reassuring for our customers to know they could write a check for up to 80% of their total account balances and that the bank would automatically transfer funds from other accounts to cover a possible overdraft.” And the same protection applied when customers opted to send automatic payments from their savings account: Available funds would be transferred in real time from other available account balances to prevent an overdraft fee.

The East Asia Supreme Account was an unqualified success, and for his contributions Hui was appointed head of BEA’s Electronic Banking Department. “At that time, Electronic Banking was a very small department, just taking care of corporate customers who used dial-up connections for different kinds of transactions,” he says. “But as new technologies such as mobile phones, the Internet and PDAs began to gain prominence, BEA envisioned a solution that would integrate all the electronic media distribution channels of the bank.” As a result, BEA decided that all its products and services would go through two major channels: Branch Distribution and e-Distribution.

Anytime account access
Thus was born BEA’s Cyberbanking service, which gave its customers the opportunity to manage all their accounts—checking, savings, stocks, consumer loans, mortgages, credit cards, retirement funds and more—through a myriad of electronic telecommunications channels. But Hong Kong banks are, as a rule, cautious, and Hui says much analysis was devoted to the viability of each channel before it was included in the Cyberbanking system. He points out that “if a channel has few or no users, it is not an effective channel to deliver our banking services. We had to make sure that each channel was very effective at delivering anything our customers desire.”

A good example of BEA’s strategy is Cyberbanking’s mobile-phone access. Mobile-phone penetration is huge in the Hong Kong market, making it a critical component of the Cyberbanking plan. For mobile-phone access, BEA settled on the wildly popular Short-Messaging System (SMS), then managed to convince two rivals—CSL and Hutchison, who between them control over half the mobile-phone market in Hong Kong—to join forces in providing BEA’s customers access to their Cyberbanking accounts.

Another exciting access channel introduced with Cyberbanking is the PowerPhone. “When you arrive in Hong Kong, you can find a pay phone called the PowerPhone that was developed by a Hong Kong company,” says Hui. “There’s a screen on the face of the unit that jumps to a page with a touch-screen operation that lets you connect to BEA and perform any banking function you like. BEA and PowerPhone worked closely for a long time, because it is in a public setting and the pay phone is a third-party system. We had to make sure that the security over this channel is very stringent and met the end-to-end security requirements of the bank.”

What's in the box?

For its data warehouse, BEA chose the NCR 4800 MPP Dual-Node platform with an 80x18 GB external disk array. For its CRM solution, the company selected the Teradata Database, Teradata’s Financial Services Logical Data Model (FS-LDM), Teradata’s Behavior Explorer—Product View and Teradata’s Relationship Optimizer.

Other Cyberbanking distribution methods include the BEA Kiosk, a standalone affair that allows users to perform a wide variety of financial transactions, including stock trading and even making suggestions; Internet-on-TV Banking, for those unfamiliar with PC Internet technology (Hui says BEA is the only bank offering this type of TV/Internet connection); PDA, currently available for PocketPCs using the MS Windows CE platform, which lags behind Palm but is quietly growing in popularity; and, of course, the Internet.

But while the introduction of new access channels achieved the desired effect of many new customers, Hui says it also meant BEA faced a new challenge. “It introduced the issue of CRM,” he says. “When you’re providing so many channels to your customers, you want to know their behavior. With so many new customers, you want to know their background. You have to know your customers before you can offer other products to them. We needed a data warehouse and some tools to extract information, not only to manage customer relations through such a vast number of channels, but also to make our automated outbound dialing for telemarketing more efficient.”

It’s all in the platform
The question of CRM reached critical mass after BEA purchased First Pacific Bank in December 2000 (the merger became official in April 2002). With that acquisition, BEA was maintaining a larger customer base, and CRM was given top priority—quite understandable given the cutthroat Hong Kong banking market, where keeping current customers is just as important as bringing in new ones.

Metropolitan moneymaker

One crucial reason for Hong Kong’s move into the international banking spotlight is geography. Because natural resources are limited, Hong Kong has a thriving free-market economy based on international trade that brings in foreign currency at an extremely brisk rate. Another is its relationship with China. Even before Hong Kong became an SAR in 1997, it already had extensive trade and investment ties with China. According to a report issued by the British Hong Kong and Shanghai Banking Corporation in 1997, 50% of Chinese exports were handled by Hong Kong companies, and 22% of all of China’s trading was done with Hong Kong. Perhaps the most important factor in Hong Kong’s rise as a banking megacenter is the country’s inviting tax system. Business profits are currently taxed at a maximum rate of 16%. Workers pay a maximum of 15% tax on salaries, and their net income is made even more powerful by the absence of any sales tax, withholding tax or value-added tax. Foreign investors, meanwhile, are drawn to Hong Kong’s financial sector by the appeal of no taxes on interest or capital gains, as well as the fact that income arising outside Hong Kong is untaxed. In a study conducted by the Heritage Foundation in 2001, Hong Kong ranked first in economic freedom among the world’s various banking environments. Of course, individual customers are the lifeblood of any successful retail bank, and here again Hong Kong proves to be a fertile environment. Although the SAR encompasses a mere 402 square miles (not counting 19 square miles of water), its population of more than 7 million is roughly equivalent to that of the state of Virginia, which is nearly 100 times larger than Hong Kong.

Hui says that BEA fully realized that a data warehouse featuring powerful data mining tools was vital to its CRM solution, and that it was vitally important to choose the right platform, because the company would be forced to live with its decision for years to come. “Half our IT department began to evaluate different kinds of solutions in Hong Kong,” says Hui, “and while there were many CRM solutions on the market, there weren’t very many tailored for banking.”

After narrowing the field down to three or four finalists—all global companies with longtime experience in building data warehouses—BEA chose Teradata to help it move into new markets and the new millennium. The project began in January 2001 and went into production in September of that year.

When asked why BEA selected Teradata, Hui says, “The first reason is because of the people. Every time the bank considers choosing a solution or acquiring a new system for development, the most important aspect is the people. What use is it to have a very good system if you don’t have the people behind it to help you develop it to meet your needs? The system is built by those people, after all, so they are critical. Everyone we talked to at Teradata—consultants, the project manager, even the marketing staff—was extremely committed and devoted to helping us push the system forward.”

Another reason behind the decision was Teradata’s ability to offer extremely in-depth consulting. “CRM, data warehousing, data mining—all these systems are new to the bank, and it would be very difficult for our own staff to develop something totally new to them (without) guidance during the development stages,” he points out. “The quality of the consulting is very important. Teradata’s consultants were doing a lot of development with other banks. It has a very good reputation in the banking industry. It seemed they were very specialized in providing CRM solutions for banks, and we definitely needed something that was specialized for the banking industry.”

Teradata’s experience in creating data warehouse solutions for the banking industry also meant it would require less customization and thus be quicker to implement and easier to use. “Some of Teradata’s competitors are very strong in database technology, but the database was developed for generic use, and none of them had a total solution developed specifically for banks in Hong Kong,” says Hui. “Because the Teradata solution was developed for a number of banks, many of its typical features already meet our specific needs.”

Last but not least, says Hui, BEA was impressed with the NCR Worldmark servers. “We did a lot of evaluation of system platforms,” he says, “and we found that the WorldMark has the best features in terms of scalability and also stability. It offers a lot of flexibility when it comes to adding CPUs, memory and disk space.”

CRM: the icing on the cake
Bank of East Asia has every reason to believe it will need to expand the power and capabilities of its data warehouse. “After the World Trade Organization Ministerial Conference in 2001 (when China was admitted and the market opened), the whole world is ready to charge into the China market, and it’s a great opportunity for us in the banking industry,” Hui says.

He continues, “CRM will be a very critical component because whenever the customers log onto an electronic medium, we want to provide a consistent service level. And CRM will be able to provide us the latest information about customers’ behavior so we will know exactly what they need and we can provide the service. That is what makes us different from foreign banks.”

And if BEA’s recent success is any indication, this ability to respond to customers’ needs will drive its future success as China emerges as the world’s single largest financial marketplace. T

Stephen Poole has written about computers and technology for a variety of national print magazines and Webzines since 1988.