GIVEN HAWAII's REPUTATION as a laid-back tropical paradise, some may be surprised to find it is emerging as a nerve center for global electronic commerce.

The Bank of Hawaii, the banking subsidiary of $12 billion-asset Bancorp Hawaii, has taken advantage of its strategic location to build an electronic funds transfer business that provides a gateway to the Pacific Rim for other banks and corporate customers. "We have a lot of corporate customers who are running businesses on Hawaii, on the U.S. mainland, and throughout the South Pacific, and all have unique transfer needs,"' said Lee Moriwaki, vice president of operations at the Honolulu-based institution. "Our mix of business is weighted much more toward both international and domestic funds transfers as opposed to focusing mainly on domestic funds transfers, as most U.S. banks handle." Mr. Moriwaki said the bank faces a unique challenge running a funds transfer operation from Honolulu. "The time difference between where we are and the East Coast, where the Federal Reserve system is, causes a compression of our work day" which begins at 8:30 a.m., he said.

He noted that the Fedwire closes at 12:30 p.m. Honolulu time. "That leaves us with a fourhour window to process the transfers," he said. On average, the bank handles 7,000 transfers a week, 3,000 of which consists of funds moving outside of the United States. A few years ago, the bank had been using a PC-based system to handle the 8,000 transactions a month it was then generating. But as business in the Pacific Rim and Asia boomed during the late 1980s, management saw the transaction volume increasing rapidly. "The communications technology was becoming more and more sophisticated -- which allowed our existing and new customers to request the service more frequently," said Mr. Moriwaki. "We got up to 25,000 transactions per month on a personal computer and realized we had gone beyond the capabilities of the [PC] technology. "We needed to find an automated system that would maximize our efficiency which would allow us to process a day's work in half a day," he continued.

By 1990, management realized they needed a new, more powerful system to meet the growing volume while improving efficiency and reducing costs.

Toward the end of 1990, the bank found a system from Waltham, Mass.-based Logica North America Inc. to handle its operation. Bank Electronic Support System -- or Bess, as it is commonly known -- operates on a Tandem Computer Inc. mainframe. The system links the bank to the Fedwire and Swift (Society for Worldwide Interbank Financial Telecommunication) networks. "When we were running the personal computer system, there was a lot of manual intervention which took place in order for the transactions to work," Mr. Moriwaki said. "Now through the use of Bess, all of the traffic has been automated and the efficiency of the operation has increased."

The bank handles a wide variety of transactions through the system for both commercial and retail customers.

"Banks are using our services because there is no other way for them to conduct the transactions and move the funds throughout the Pacific Islands or Asian countries without our network," said Mr. Moriwaki. "We are acting as the gateway for the Pacific Rim for many financial and commercial institutions because of our existing correspondent relationship and own branch network."

Sandy Fukumoto, director of the funds transfer operation, said: "Many New York banks need to get funds to Pacific island branches and they will come to us through the Fed, and we will pay the funds through a telex for them."

"Bess has enabled us to increase the efficiency of the operation because we no longer have to move from one system to the next to conduct the transaction," said Ms. Fukumoto. "It allows us to handle everything in one fell swoop."

Brett Erensel, an analyst with UBS Securities Inc. in New York, said, 'They have built a unique franchise which consists of relationships with many different banks and offers the institutions services that were previously out of reach.

"The funds transfer business is a perfect example of a service which many customers need, yet the Bank of Hawaii is the only one in the region that offers it," he added. The bank conducts approximately 16,000 incoming and 14,000 outgoing transactions monthly.

About three-quarters of the incoming transactions involve corporations that do business in Hawaii and elsewhere. The remaining 25% are retail transactions such as gifts and the funds of people relocating to Hawaii.

Some 85 % of the outgoing volume consists of corporate transactions. The rest are retail transactions involving Bank of Hawaii depositors who are moving money back into the bank.

One of the benefits the bank reaps from Bess is the ability to handle the growth of the operation without adding to the staff.

"When the volume peaked on the old personal computer system, we had 30 full-time equivalents in the department," said Mr. Moriwaki. "Since the installation of the system, we have been able to streamline our operation and reduce our staff to under 20."

The bank plans to cut the staff an additional 35% by 1997, even though it expects transaction volume to grow.

Mr. Moriwaki said the bank is replacing fulltime employees with "peak time operators" who work only in the mornings to meet the Fedwire time requirements.

The bank also plans to take its operation to what it calls the "next level" of the funds transfer business -- maximizing a function known as straight-through processing.

That function involves incoming wires. It gives the bank the ability to either credit a customer's account directly or forward it to the proper destination without manual intervention.

"The format and content of the wire are structured completely without the need for further handling once it is issued," said Mr. Moriwaki. "In order to do this, we will need to expand on our relationships with customers to ensure the wires are received in the proper format.

"Although we are not sure when we will be able to offer the service, we feel it will increase our opportunities in the funds transfer business," he said.

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