How It Works

With the new telecom technology, sound is converted into digital packets and transported over the same wires that carry a company's data from one location to another. Since most of their branches are already wired for data, banks are well positioned to move to Internet telephony.

Voice traffic can share data networks because Internet Protocol (IP) makes more efficient use of a cable than
traditional telephone switching. As a result, when voice traffic is moved to a company's data network, a host of savings can result.

For example, putting voice on existing data networks reduces the number of phone lines needed for each office, eliminates the need for separate voice and data cabling to each desk inside each facility, and enables more efficient management of communications systems. The cost of wiring new buildings is slashed. The number of toll calls from one office to another, which by some estimates account for more than half the phone calls made at many banks, is drastically reduced, thus reducing the monthly phone bill. Much conference calling, a particularly expensive use of the public carrier's lines, is moved to the internal system.

There are different levels of service within the general IP category. Some of the lower-cost (and also lower-benefit) implementations continue to use existing phones and switching gear. Calls are converted into an IP format for the trip along a company's data network between two company locations and then changed back into traditional telephone formatting when they reach the destination building. The term "VoIP" is typically used to describe these systems.
More expansive and ambitious implementations tend to be labeled "IP Telephony." These systems use Internet protocols throughout, including specially designed phones and switching systems. Some banks are deploying a mix of the two approaches.

— Bill Stoneman