When Douglas E. Ebert became chief executive officer of Michigan National Corp. in 1995, he probably did not expect his duties to include exporting.
Yet the Farmington Hills-based banking company plans next year to send a profitability system it is currently developing to a group of overseas banks that, like Michigan National, are owned by National Australia Bank.
This role as system incubator speaks to how Michigan National's efforts to upgrade technology have paid off under Mr. Ebert.
"Historically people have used technology as a way of avoiding costs," said Mr. Ebert, 51, in a recent interview at the bank's headquarters. "We try to use technology as a way of gaining share of wallet and addressing customer needs."
The developing profitability system is a manifestation of this philosophy.
Based on an enterprisewide data warehouse, the profitability system will let $9 billion-asset Michigan National assess "customer, product, organization, and channel profitability," Mr. Ebert said.
Due to be completed in June 1998, the system will become the basis for similar systems at six other National Australia units: the flagship National Australia Bank, Bank of New Zealand, Clydesdale Bank in Scotland, Yorkshire Bank in England, National Irish Bank, and Northern Bank in Ireland.
Why was Michigan National chosen to design the system? "We were the most aggressive in pushing for it," Mr. Ebert said.
The bank and its parent have also thrust themselves into smart card leadership.
National Australia was one of the "global founders" of Mondex International, the electronic cash venture now controlled by MasterCard International Inc. Michigan National has taken a 10% stake in Mondex USA, and this summer it is beginning an internal pilot in which Mondex cards will be used at cafeterias in the headquarters building and its operations center in Lansing, Mich.
Mr. Ebert said the bank plans to roll out a public smart card application in the fourth quarter.
Though bullish on the potential of cards with embedded computer chips, Mr. Ebert sees hurdles to rapid acceptance.
"The big negative is, who is going to be paying for the equipment at the merchant level," he said. "Merchants don't like having to have multiple devices, multiple computers, and multiple screens. They want a system where they don't care whether it's a credit card, debit card, proprietary card, or smart card."
He said his discussions with MasterCard merchants had demonstrated that they recognize the benefits of smart cards but need more exposure through pilots before they will be ready to make the leap.
"With every pilot, everybody learns-the participants and nonparticipants," Mr. Ebert said.
One of the kinks that pilots should work out is whether access to smart cards should be controlled by personal identification numbers or by some other means, such as biometric identification.
"Those are the kinds of technologies that you have to experiment with to find the right solutions," Mr. Ebert said.
Though the work with smart cards and profitability measurement may put a progressive sheen on Michigan National's image, Mr. Ebert is quick to bring it down to earth.
"I'd rather be a rapid follower than a bleeding leader," he said.
One of the ways the bank hopes to limit its risk-taking is by entering partnerships with other companies. One tangible example is Michigan National's membership in Integrion Financial Network, the IBM-led consortium of banks that aims to develop affordable home banking systems and is now carrying out the first phase of its pilots.
The Michigan bank was also one of the first to piggyback its home banking services on personal financial management software from Microsoft Corp. and Intuit Inc.
For Internet banking, Michigan National operates a mostly informational Web site, but soon it plans to add some transaction capabilities.
On the corporate side, it is replacing a cash management product based on an aging DOS-based operating system with a version of Microsoft's Windows.
In May, it introduced a system that captures check images at the point of processing, and it recently implemented part of its "cash flow optimizer," which lets customers move money between credit and checking accounts.
In addition, the bank has operated a call center in Lansing for 10 years, and last year it upgraded the voice response unit and telephony switch.
Mr. Ebert said call volume could grow 40% more before another upgrading would be necessary.
"We are in the process of installing a whole bunch of new PCs," he said, "which will probably give us another 15% capacity in terms of speed of response. And as we get into data warehousing, we anticipate having some pop-up screens to provide faster information."
About 80% of calls are handled by the automated phone system, and 20% by live operators. All customer service representatives are given sales goals as part of the bank's effort to increase its revenue.
The call center handles nine million calls a year.
Though managing myriad technology projects is difficult, Michigan National does not have a technology advisory board. Mr. Ebert said such a group would probably not do anything to boost the staff's interest in technology.
"We have no problem getting the staff wired into technology," he said. "The challenge is to afford the kind of technology they all want to have."
In the near term, the bank is focusing on improving its retail technology in order to attract more customers.
"I think we will continue to see more growth on the consumer side next year than we will on the commercial," Mr. Ebert said, quickly noting that "historically we have been a commercial bank."
In addition to upgrading technologies, the retail focus will involve renewed commitments to advertising, marketing, and product development.
Mr. Ebert said supermarket branches figure prominently in his plans for retail growth. Two years ago, Michigan National had no supermarket outlets. It now has 21, and Mr. Ebert said he expects the total to double in the next three years.
"Supermarket banking ... is a less capital-intensive mechanism for expanding our distribution centers," he said. A branch based in a supermarket or other store location typically costs about $200,000, compared with $500,000 to $2 million for a full-service branch.
In-store branches have other advantages, including giving the bank "access to a greater number of potential buyers," Mr. Ebert said.
"We have found in the course of the past year that loan sales and deposit sales have been higher at the supermarkets than at the existing branches," he said.
Though retail efforts will occupy much of the bank's energy and resources during the next few years, Mr. Ebert said, he also wants to improve Michigan National's small-business banking performance.
Competition from megabanks is stiff in almost every area Michigan National has addressed, but Mr. Ebert's background affords him some insight into the way a larger bank approaches its business. Between 1968 and 1990 he worked at Manufacturers Hanover Corp. in New York. Hanover was acquired by Chemical Bank in 1991.
After leaving Hanover, he spent about three years heading up smaller institutions-Southeast Banking Corp. in Miami and Lincoln Financial Corp. in Fort Wayne, Ind.-before moving to Michigan National as president and chief operating officer in 1993.
When National Australia bought Michigan National in 1995, he was promoted to president and CEO.
Though the bank had been underperforming through much of the early 1990s, Mr. Ebert does not view himself as a turnaround artist.
"My last three assignments all involved one degree of turnaround or another, but most of my banking career has been focused on building and growing," he said.
For the bank to continue to grow, Mr. Ebert said, he believes it must diversify its offerings.
"We don't view ourselves any longer as a traditional bank," he said.
"We sell annuities, investment management capabilities, insurance, mortgages. We do merchant processing, home banking, and will issue stored- value cards and smart cards."
For all this ambition, Mr. Ebert said he understands that Michigan National lacks the resources to develop and run all its offerings on its own.
For this reason, he is open to outsourcing and partnerships with technology companies in certain situations.
"We've got no problem with outsourcing processing or buying someone else's products instead of manufacturing them on our own," Mr. Ebert said. "Processing is not critical for us to control."
