Inside a nondescript strip mall on the outskirts of Bowling Green, Ky., a back-office revolution is taking shape.
The processing facility of $1.6 billion-asset Trans Financial Bancorp houses what many bankers dream about but few actually use: a soup-to-nuts document imaging system.
Trans Financial executives say their institution is the first of its size to use imaging technology to its full potential in improving efficiency while increasing the sophistication of customer service initiatives. These include:
*A document archive into which customers can dial from home computers to retrieve check images and account statements.
*A voice response telephone center through which customers can order back-dated images.
*A library of customer information for marketing personnel to cull.
Trans Financial processes more than 3.25 million checks a month at four sites in Kentucky and Tennessee. About 50% of that volume flows through the back-office hub in Bowling Green.
Right now, the bank does not return checks with monthly statements, only pictures of them. Soon the bank will stop including even copies of imaged checks.
It's a serious public relations gamble for a bank that competes in Kentucky and Tennessee against smaller community banks that pride themselves on personalized, small- town service.
"It's a very emotional issue for a lot of customers," said Michael Borgschulte, senior vice president of customer support and leader of the imaging project. "We're the only bank in our market doing this. We felt the fear of the unknown would agitate our customers."
But Trans Financial's $1.6 million investment in imaging software and computers has paid off, executives say.
They estimate the system, developed by Document Solutions Inc., a unit of Little Falls, N.J.-based Bisys Group, has earned $250,000 annually before taxes since its installation in May 1994.
Most of that return is in the form of shorter float times. But about $70,000 was saved in postage costs, and another $165,000 by reducing full- time staff positions at the back office facility to 11 from 14.
Executives say 98% of customers have accepted that they will never see their actual checks again.
The imaging system is only the first phase of technology investments, said Vince Berta, the bank's acting president and chief executive.
Trans Financial has earmarked $800,000 for telecommunications lines to enable three remote check-capture sites to send images to Bowling Green electronically instead of by hand-held courier. Another $1 million is slated for a full-scale document warehouse by 2001. An unspecified amount will be invested in Windows-based platform and teller stations for the bank's 54 branches.
"We didn't want to take new technology and apply an old process," said Mr. Berta, who has been acting president and CEO since replacing the ousted Douglas Lester this year. "We believe what we are really buying is a customer service enhancement."
Customer service was the last thing on Mr. Borgschulte's mind when he started the imaging initiative. "For me, this was purely a check processing project," he said. "I thought it would have minor customer impact."
Lured to Kentucky in 1994 from Commerce Bancshares in Kansas City, Mo., where he was in charge of a larger item-processing operation, Mr. Borgschulte quickly convinced Trans Financial managment to invest in imaging technology.
"You get a better statement, you get a better deal on postage, but you also have to educate customers that they aren't going to get their checks back," said Mr. Borgschulte.
The installation and training didn't always go smoothly, according to bank executives. And with few banks to emulate, Trans Financial found itself forging its own path.
"We felt like forty-niners," said Mr. Borgschulte. "We'd heard some neat stories, and we knew there were some opportunities out there. But we were definitely on the pioneer trail."
The combination of high check volumes and remote data-capture sites had not yet been attempted by Document Solutions. Most of the company's 300 bank customers range between $200 million and $1 billion of assets and have single-site operations.
Executives at Document Solutions said the Trans Financial project has tested the limits of their system design. "Most banks of that size and larger utilize only a small portion of the imaging technology available," said Michael Sibley, president of the Birmingham, Ala., vendor.
Trans Financial's installment was done in phases starting in Bowling Green in May 1994. By September, the center was fully converted with a scanner, power proof-of-deposit machines, and "jukeboxes" for optical disk storage. A courtesy-amount reader capable of converting the written dollar amounts on about 45% of paper items was added a year ago.
Bank executives began to realize that the system could be of use throughout their retail business.
"We didn't just have a power proof department, we had a digital warehouse," said Mr. Borgschulte. "We realized that we had the replacement for the horse."
Big hurdles still had to be cleared, however. Major glitches occurred at a processing site in Murfreesboro, Tenn., that was converted in January 1995. Newly hired employees, a new building, new equipment, and above-average check volumes - the first day of operation was immediately after a bank holiday - combined for "big headaches," according to Mr. Borgschulte.
The early problems occurred because Trans Financial executives did not recognize the technology's bankwide impact, from the teller line to marketing, said Mr. Borgschulte.
"We did not consider the workflow in the back office operations," he said. "We did not consider the relevance of where the work came in and where it went out."
New procedures were established to fix the problems. Tellers receive demerits for inaccurate accounting. Power proof operators, who manually enter courtesy amounts not read by the optical scanner, also are monitored and demerited. They are expected to review a minimum of 3,000 checks an hour.
The workflow does not stop at the proof machines. Ultimately, the system links into a central computer that can store up to six million images. Shaped like a refrigerator, it acts as another sorter, sending data to five laser-jet printers that spit out monthly customer statements at a rate of 150 pages a minute.
Images are stored on it for 40 days. They are later moved to optical disk platters, which can store up to 400,000 images for another 60 days. The central computer is also faster than the optical disks, retrieving images in one to three seconds, compared with five to 10.
Five jukeboxes in the central command center store five optical disks each. After two months, the images are transferred to eight-millimeter cassette tapes for long-term storage at a warehouse.
The archive's main benefit has been the speed at which statements can be mailed, said Mr. Borgschulte. Three full-time workers can now issue same- day statements for the bank's 80,000 demand-deposit customers, and they can turn around statements for commercial customers in 36 hours. That compares to seven full-timers churning out retail statements in 36 hours and commercial statements in 60 hours.
The system also enables the bank to print statements with images while handling requests from the bank's research department. A customer in a branch requesting an imaged check can expect a faxed copy in two minutes, said Mr. Borgschulte.
Bank executives are adding capacity to the sorter and the jukeboxes that will enable them to house a year's worth of check images in-house before they are shipped to long-term storage.
And within 18 months, the bank's customers will be able to bring up their imaged checks through a World Wide Web site now under construction.
"The premise is that we understand the flexibility and progressiveness of our customers," said Mr. Borgschulte. "A lot of banks shy away from more high-tech solutions because they don't think their customers want them. What they really do is limit customers' opportunities."
