Bankers see big savings potential in back office.

Few international-banking and payment-services executives question the link between technology and profitability, but there is less agreement on where the next advances will be found, according to a survey by the Swift organization.

In the survey, conducted in October during the global banking network's "Sibos '94" conference in Boston, 30% of more than 300 respondents said the back office would be "extremely important, to their organizations' performance over the next five years.

Another 59% answered "important" or "significantly important" on that question, leaving only about one respondent in 10 saying the back office would have little or no impact on over-all performance.

Similarly, 89% agreed with the statement that increased back-office efficiencies are "an area of great potential cost reduction," and 74%o agreed that more efficient clearing and settlement of international securities - a possible contribution of the Swift network - "represents one of the greatest areas for cost reduction."

Swift - formally the Society for Worldwide Interbank Financial Telecommunication, viewed the results as confirmation that financial institutions worldwide recognize the strategic importance of back-office operations and technology.

While the survey, a promotion co-sponsored by American Banker, was not scientific - responses were voluntary, entered at interactive terminals in the Sibos '94 convention area - it attracted a relatively even mix of operations bankers and those in marketing and business functions.

The operations people took a generally more expensive view of technology's importance than the marketing people, but only as a matter of degree. The groups were in synch, if total responses of "important," "significantly important," and extremely important," are taken into account.

There was more of a dis-agreement according to job title. As has been observed in U.S. reports on banking technology like the recently published effort of American Banker, Andersen Consulting, and the Tower Group, senior executives are more skeptical about technology investments and their returns.

Of 46 executive vice presidents and senior vice presidents in the Swift poll, 78% said the back office would be important, significantly important, or extremely important to their companies, overall performance - well below the 89% for all respondent.

Conversely, 22% of the senior group gave either of the two lowest responses on the scale - somewhat important (11%) and not important (11%).

At the vice president level, only 10% fell into those lowest categories, as did only 8% of managers.

On the statement that increased back-office efficiency is a major cost-cutting opportunity, the executive and senior vice presidents were just about average, with 88% agreeing or strongly agreeing. But their number "strongly agreeing" was 67%, a full 15 percentage points greater than the total sample - a sign that higher-ranking executives are expecting more results.

"Advances in technology, plus the increasing volume of cross-border payments and emerging markets, add up to tremendous opportunity, but also a volatile mix of challenge and risk," said Leonard H. Schrank, chief executive officer of Swift, which is based in La Hulpe, Belgium.

"As a result," he added, "we are seeing our customers increase their speed, volume, and security - all key functions delivered by their back-office operations."

Swift attracted 3,000 people to the Boston conference, its first in the U.S. in 12 years. They included 1,600 banker-delegates. The bulk of those participating in the computerized survey came from North America (about 95), the United Kingdom (60), and the rest of Europe (110).

In aggregate, the respondents were lukewarm about several emerging-technology developments' potential back-office impact. None of those mentioned - electronic-data interchange, new communications networks, multimedia, client/server, imaging, and increased standardization - scored better than 3.27 on a scale of 1 (most important) to 6 (least important).

Multimedia, the combination of voice, data, and video communications, scored 3.27, even though 18% of respondents assigned it the worst score of 6. Another 21% rated it "1," or most important.

By contrast, imaging systems had the worst aggregate score, 3.73, with 13% rating it a "1" but only 7% a "6."

The, other scores were: improved communications 3.34 (14 voting "1" on the six-point scale), client/server 3.47 (18%), electronic-data interchange 3.51 (16%), and increased standards 3.66 (17%).

Among other survey findings:

* 74% agreed or strongly agreed that customers are satisfied with their service for outgoing cross-border payments, and 73% said the same about incoming cross-border payments.

* 71% agreed or strongly agreed that lack of international compatibility for securities confirmations and settlements was a major impediment.

* 78% saw inefficiencies in cross-border securities clearing and settlement as a growing source of risk to the world's financial system.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER