Integration Issues in CoreStates-Meridian Deal

CoreStates Financial Corp. would face significant challenges in technology integration, particularly on the retail side, in absorbing Meridian Bancorp.

P. Sue Perotty, group executive vice president and head of retail banking at Reading, Pa.-based Meridian, said the banks will probably take a "best of breed" approach to choosing systems.

She declined to say which systems are likely to survive, saying such speculation would be premature - the merger deal was announced just last week.

However, she stressed that systems decisions would be driven by goals the merged CoreStates would set for the next five years, not by which systems work best now. "If we focus on what we do today, we're going to stumble," she said.

One tough decision would involve the infrastructure for the merged bank's customer information.

Meridian has aggressively developed an information warehouse that allows the $15 billion-asset bank to identify and profile its most profitable customers.

CoreStates, based in Philadelphia, operates a very different system, said Ms. Perotty.

The banks have often put their technology dollars to different uses, she said, and the merger will give them an opportunity to complement each other in some ways.

For example, CoreStates has built a strong third-party processing business that provides retail and wholesale lockbox, check processing, and credit card processing services to financial institutions.

Since the bank has developed technology prowess in these areas, it probably will absorb Meridian's fee-based services, said Lawrence A. Willis, executive vice president at First Manhattan Consulting Group.

More potential conflicts exist on the retail side, since CoreStates and Meridian each are heavily entrenched in their own self-service banking strategies, said Ms. Perotty.

Meridian, which CoreStates president Charles L. Coltman 3d called an electronic banking leader in an American Banker interview the summer, operates a debit card program that ranks 10th in the nation.

CoreStates, meanwhile, is also strong in the debit card arena. It is part owner of Electronic Payment Services Inc., the Delaware-based company that operates the MAC electronic banking network and several processing businesses.

Analysts also said the merger is likely to accelerate the combined bank's push into alternative delivery.

CoreStates already has begun to invest, through Electronic Payment Systems, in smart cards, which are transaction cards that feature a computer chip. The company plans to run a trial early next year involving 50,000 cards and an undisclosed number of banks.

CoreStates, along with 10 other financial institutions, also has partial ownership of a smart card venture, called SmartCash, which is working to build a nationwide network meant to let customers use smart cards in place of cash for small purchases.

In choosing between competing systems and products, the banks will compare such factors as functionality, scalability, price points, and platform efficiencies, Ms. Perotty said.

"We have been ferocious competitors in every single business segment," she said. "If the same energy we used to compete against each other can now be turned to bringing us to a common competitive position, I wouldn't know how to beat it."

Thomas McCandless, a regional bank analyst with PaineWebber, called CoreStates a "savvy integrator," and said the bank will probably accomplish system consolidation goals ahead of schedule.

Throughout the system selection process, Ms. Perotty is to work closely with Rosemarie B. Greco, president and chief executive of CoreStates' lead bank, and Robert N. Gilmore, CoreStates chief processing services officer, as well as other members of the conversion processing team.

Mr. Greco and Mr. Gilmore are both slated to be part of the merged bank's management group. No decision has been announced on the role of Meridian chief technology officer William Fenimore in the conversion, Meridian officials said.

Jeffrey Zack contributed to this article.

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