New Marching Orders

Special forces vet charged with bringing Bank of America e-commerce unit in line.

As a former captain in the U.S. Armys Special Forces, John Rosenfeld tends to draw on his military training when he leads a major corporate campaign. That kind of discipline may hold him in good stead as he guides the nations largest bank toward a new era in electronic commerce.

Since April, the former protégé of retired General Electric Chairman Jack Welch has led Bank of Americas ambitious effort to integrate its growing array of e-commerce programs, while quantifying the value of online banking and dramatically upgrading services to its more than 3 million online customers.

Moreover, Rosenfeld is charged with the task of making sure that Bank of Americas more than 150,000 employees work seamlessly with the online system to avoid confusion for the customers. The assignment could prove daunting for anyone, but Rosenfeld says his days in the military and at GE setting up e-commerce operations are proving helpful.

"My military background has been very powerful for me in getting where Ive been in the business world," Rosenfeld says. "One of the principles of war is called mass — meaning you have to apply the highest concentration of your power against the most decisive points on the battlefield."

"Theres another principle called economy of force, which means you have to limit your secondary efforts as much as possible, while not imposing risk on your main effort. Simplicity is also a principle of war," he says.

Key Launch

At General Electric Aircraft Engines, Rosenfeld was responsible for building an e-commerce system that today does more than $1 billion worth of aircraft business through the Internet. His assignment there included launching a customer Web center and establishing direct procurement links between GE and key customers.

At Bank of America, Rosenfeld is jumping into the middle of an already sophisticated system — the worlds largest online bank — and revising the model at a critical juncture for one of the most successful and profitable Internet businesses.

"I think youll see significant changes in the next six to nine months," Rosenfeld says. "We dont have time to waste."

Horse Race

Indeed, Rosenfeld will have to outpace the stage coach from Wells Fargo, which launched the first Internet banking service in 1995, six years after establishing an online presence. With a sophisticated site that includes services such as automotive purchases and brokerage services, Wells Fargo says it has attracted more than 3 million online customers, creating a horse race with Bank of America. Citibank trails those online giants, but has won awards for the quality of its services, according to Citibank.

In its early days, online banking was a novelty enjoyed only by the early adopters. These days, the service is on the verge of becoming mainstream for the less technically apt. At present, about 17 percent of Bank of Americas customers use online services, Rosenfeld says. When that percentage hits 25 percent to 30 percent — possibly within two years — a "quantum shift" will occur, in which customers will be as demanding of the online system as they are of, say, an automated teller machine.

"Were getting out of the early-adopter stage to the mass-enrollment stage," Rosenfeld says. He says his goal is to make Bank of Americas site one of the four or five that customers regularly visit — paying bills electronically, obtaining financial advice, purchasing securities and even monitoring frequent-flier miles.

Jupiter Media Metrix estimates that electronic billing and payment adoption will double in the next two years. By 2005, Jupiter predicts, more than 40 million households will view and pay their bills online.

The payoff for success could be huge. Online customers are already the most loyal, with an attrition rate 75 percent lower than offline customers. Online customers also make 34 percent fewer calls to customer service centers, carry 28 percent higher deposit balances and have 23 percent higher loan balances.

"What that tells you is that online bill-paying customers are more profitable to the bank," Rosenfeld says.

Meaningful Measure

Despite that obvious indicator, Bank of America has assigned Rosenfeld to quantifying the value of online banking to the companys bottom line. Simply counting customers is not the way to go, he says.

"In our industry, the typical measure of how big or successful you are in bringing customers online has always been the number of subscribers as a percentage of your total customers," he says. "But thats a meaningless measurement, because it only shows you how many people have signed up. Whats a much more meaningful measure is how many people are using the service, because that means youve changed behavior."

Rosenfeld works with a nucleus of about 350 employees from all sectors of the bank, but his goal is to give every employee the ability to answer any customer question without passing the caller or visitor to another office or employee.

"We dont want the customer to ever have to answer the same question twice from a second employee," Rosenfeld says. "Were not there yet, and I dont know anyone who is."