Chase pumps up its e-biz might

In the last 16 months, Chase Manhatten Corp, the second-largest US bank, has engineered an impressive turnaround from being an e-business lightweight to a force to be reckoned with. How did it achieve this?
Written by Matt Villano, Contributor

Let's play word association. When you hear "Chase Manhattan Corp.," do you think "financial giant"? "Global behemoth," perhaps? How about "e-business lightweight"?

The $400 billion enterprise, the second-largest bank in the United States, is certainly a financial services force to be reckoned with. Until recently, however, even top Chase officials admit that the company was a bit of an e-business pipsqueak.

"Last year at this time, we were a 90-pound weakling in the area of e-business," said Fred Loder, director of the New York-based bank's Internet Management Group, the division responsible for the creation and maintenance of its e-business website, Chase.com. "Today, we're leaner and meaner, and we have a lot more meat on our bones."

Indeed, in the last 16 months, Chase has engineered an impressive e-business turnaround. Not only has the bank relaunched its core Chase Online Banking site, but it has also beefed up its e-business profile with a slew of new online applications that are making it easier for consumers to manage all their accounts in one online location and to engage in e-commerce. Those new applications include e-wallets that store credit card information for easy shopping and account aggregation services that make it easier for customers to manage their entire portfolios - even accounts at other institutions - at the Chase site. Chase has even launched its own e-tailing site for consumers. And the bank has assumed a business-to-business leadership role, providing financial services to several e-marketplaces, heading a financial services industry authentication standard initiative and an online bill payment initiative.

As a result, Chase, once not much more than an e-business bystander, has caught up with major competitors such as Citi Group Inc. (No. 18 on the FastTrack 500) and Wells Fargo & Co. (No. 206) and, experts say, is on the verge of surging ahead. Already, Chase has more than 75 million online customers. That ability to go from e-business laggard to leader in a few months earned Chase Manhattan the No. 3 position on this year's eWeek FastTrack 500 list of top e-business innovators.

Why did Chase have so much catching up to do? After all, here's a company that spends $3 billion on IT annually. A quarter of Chase's 70,000 employees have some hands-on technology responsibility. The problem, Chase officials said, wasn't a shortage of resources but a lack of coordination. For years, the four major product companies of the bank had existed separately online, managing their websites and e-business programs as they saw fit. As a result, the company had no continuity among divisions and no central corporate authority to coordinate overarching e-business initiatives. The regional banking sites, for instance, were flashy and dynamic, while the home finance site was mostly text-based and hard to navigate. For users, this translated into a confusing and sometimes frustrating online experience.

All that changed 16 months ago when Chase's top IT honcho, Executive Vice President Denis O'Leary, created a centralized Internet Management Group and named Loder to run it. Reporting directly to O'Leary, Loder and Director of Engineering Gary Dong restructured the entire chain of e-business command, funneling all e-business efforts taking place in the credit card, Chase home finance, regional banking and diversified consumer services divisions through one organization and one site, Chase.com. That allowed Loder's team not only to design a single site with a consistent look and feel but also to begin rolling out a rich set of new services that could be targeted at all 50 million Chase customers.

Once the centralized organization was in place, the first task was to revamp the company's core online banking site. Loder's group not only did a make-over on the site's look and feel, it also beefed up security and began partnering with leading-edge e-commerce technology vendors to provide customers with advanced services. The group partnered The Brodia Group to offer e-wallets and signed a deal with Yodlee.com Inc., another service provider, to offer account aggregation for free. Using a combination of screen scraping and direct Web site links, the service allows customers to manage all their financial accounts on the Chase site. Finally, this summer, as part of a partnership with Shopnow.com, the company even launched ChaseShop.com, a shopping portal to link customers to some 30,000 e-commerce merchants. Already, said Maria Veltre, senior vice president for consumer services Internet marketing, ChaseShop.com has established itself as the most popular part of the Chase site.

"The goal was to make Chase.com a one-stop shopping effort," Veltre said. "People log on to balance their checkbooks and pay their bills, so we figured that people would like the opportunity to do a little shopping at the same time. I'd say we figured right."

Chase also figured right about something else: Business customers would see the bank as a logical partner to help them connect online with other businesses. So, Chase in the last year has rolled out an impressive array of hosted B2B services, many of which it has already arranged to serve e-marketplaces in addition to more traditional business customers. Those B2B offerings include bPurchase.com, a hosted e-procurement site for small and medium-size businesses, and Chase ePassport, a hosted digital certificate service that businesses can use to confirm the identity of online trading partners.

But Chase's B2B efforts haven't stopped there. The company's internally developed WorkSpace online collaboration software is being used to bring together corporations that bank with Chase in virtual meeting places, providing them with the ability to execute transactions between one another electronically. In conjunction with this service, the bank also offers a Web-based application called Chase Space, an information portal for corporate CEOs and chief financial officers, which allows them to track stock information and manage personal investments - sort of like My Yahoo for top executives.

This array of new e-business capability, of course, hasn't come without major Chase investment in new IT infrastructure. While officials decline to say exactly how much, a good deal of the company's IT spending has been diverted to Chase.com upgrades. Among other things, the company has expanded its backbone network by rolling out Gigabit Ethernet technology as well as deploying lots of Solaris servers to host everything from customer information databases to authentication, analysis and content. In addition, Chase upgraded security, adding a new set of firewalls and monitoring and failure detection systems.

Chase's efforts to build secure e-business haven't focused on just inside the bank. In fact, industry experts say, one of Chase's most important claims to e-business leadership is an industrywide security initiative that the bank is leading. Called Identrus, it's an effort to establish standards for identifying and authenticating prospective B2B e-commerce trading partners on the Web. The guidelines are still under development, but Avivah Litan, an analyst at Gartner Group Inc., in Stamford, Conn., said that when they're released next year, Chase will assume a lead role in their adoption across the financial services industry.

"In the scheme of everything, many people tend to overlook the importance of an effort like this," Litan said. "Security is hard and ugly work, but it's important. Chase has done a good job with this so far, and that can only bode well for the future. Their name will be synonymous with security and in the world of e-business. And that's definitely not bad for customer acquisition and trust."

Not bad at all when you consider Chase's image just a year ago as an e-business lightweight.

Of course, leaders at Chase know, perhaps better than anyone, that you can't afford to relax and slow the pace of e-business innovation. A motivated competitor is certain to gain on you. In the next year, Chase plans to deploy new customer service applications that will enable Chase representatives to interact with customers with both audio and video, transmitting voice over IP. In addition, the bank is planning new wireless applications, due for release next spring, that will let customers access banking information from cellular phones.

Such initiatives may take a back seat, however, to what is likely to be the top priority next year at Chase: completing the proposed $31 billion acquisition of J.P. Morgan & Co. Inc. That, observers say, will mean not only integrating Chase's back-end banking applications with those of J.P. Morgan (which are currently outsourced), it will also mean merging J.P. Morgan's Web-based banking initiatives with the new Chase.com.

With the merger pending, Chase officials won't speculate on how and when it will all come together. But one thing is clear: Once it does, you won't hear anyone calling Chase an e-business lightweight.

eWEEK FastTrack 5OO

The Chase Manhattan Corp.
New York
Product/service: Financial services
FastTrack indicators: E-com merce applications, data warehouses, broadband networking, security excellence, Web-based collaboration, wealth of online product and service information
Employees: 70,000 worldwide

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