Aug. 3 — Chase Manhattan Bank NA will introduce a telephone bill-paying service next week that is designed to attract upwardly mobile, middle-to-upper income consumers in the New York market where there has been only one other, much smaller entrant in this growing facet of electronic funds transfer.
Beginning Monday, Chase will be the largest financial institution in the United States to provide a telephone banking service. It will be priced and marketed to appeal primarily to "upscale" individuals whom Chase has targeted as the most profitable segment of its highly competitive retail market, bank officials said at a press conference Thursday.
The service, called Bank-by-Phone, has an odd twist: Chase customers in an eight-state region of the Northeast, stretching from eastern Pennsylvania and New Jersey to Vermont and New Hampshire, will be able to pay their bills or transfer funds between accounts by calling a toll-free number at Chase's data processing center on Long Island.
At first glance, this appears to be a step in the direction of national retail banking. Many banks of Chase's stature are interested in it but it is currently denied to them legally.
Roger O'Sullivan, vice president in charge of new product development, said the interstate factor is just a coincidence. "It so happened that the WATS line we bought to cover Connecticut also covered everything but Maine too," Mr. O'Sullivan told the press conference. He added that customer convenience, and the need to keep customer costs down, prompted Chase to buy a wide-area telephone service to handle Bank-by-Phone.
The $46.9 billion-deposit Chase's Bank-by-Phone announcement has major implications on the national and local levels, regardless of whether the WATS line is a play for interstate banking.
First, Chase has been closely watched over the last year and a half by other financial institutions waiting to see if the nation's third largest commercial bank could find a way to enter telephone bill paying cost-effectively and profitably. Over the past year and a half, it was no secret in the industry that New York's second largest bank was examining telephone banking possibilities very closely, but that it felt technology had not advanced far enough to automate the service's operation sufficiently.
Bank-by-Phone utilizes an advanced automated voice response system manufactured by Wavetek, and like other systems of this kind Chase will accommodate customers with rotary dial telephones or with Touch-Tone phones. The latter allow users to enter payment data directly into the computer, which cuts Chase's operating cost. For these people, the system uses a recorded voice to provide an up-to-date balance and to repeat transaction details so the caller can double-check before hanging up. The system can store payment information up to 90 days in advance of when the check is to be sent, or indefinitely for fixed, recurring payments to be made each month.
Total capital expense for the first year of the program was $850,000, a staff of 14 people will be required for customer service and data capture for the first year's projected unprofitable volume of 20,000 accounts, and a profit is expected in three to five years at a targeted volume of more than 125,000 accounts, Mr. O'Sullivan revealed.
"I am confident that this new service and others yet to be developed will continue to heighten our efficiency and, equally important, will be of real benefit to our retail customers who remain a very important part of our customer base," proclaimed Thomas G. Labrecque, executive vice president. He stressed that "Chase will continue to be in the forefront with quality services which are technically innovative, efficiently delivered and at a profit to the institution."
