U.S. financial institutions will spend more this year on branch automation than on any other area of banking technology, several studies have concluded.

Some $653 million was budgeted for spending this year on branch automation hardware and software, according to a survey by Mentis Corp. That is twice the amount budgeted for any other technology area. The Eden, Md., research firm polled more than 2,000 banks and thrifts.

Studies from Ernst & Young and the American Bankers Association, while less specific on projected expenditures, support the Mentis findings.

This year's Ernst & Young report on on banking technology found that U.S. banks and thrifts plan to significantly increase the number of personal computers in their branch offices over the next three years. The report was based on a survey co-sponsored by American Banker.

And 61% of the respondents to the ABA survey said they planned to increase branch automation spending in 1992. The survey was taken at the trade group's annual technology conference.

Continuing Role

Despite more reliance on automated teller machines, phone banking, and other services designed to reduce routine branch work, banks still deliver most retail services through branches, the reports suggest.

In any case, bankers are redoubling their efforts to squeeze profits from their branches by increasing cross-selling opportunities and simplifying basic tasks, such as the opening of accounts.

"Bankers recognize that they can't simply make some renovations and expect revenue improvements," said James Moore, president of Mentis Corp.

"But many clearly believe that the first step in making branches more profitable involves upgrading the technology," Mr. Moore said.

Biggest Spend the Most

Despite the broader trend, the Mentis survey found the nation's biggest institutions account for most of the industry's branch automation spending.

The nation's 128 largest commercial banks and thrifts will account for more than half the money spent on branch automation this year, the Mentis survey found.

Banks with over $5 billion in deposits will spend an average of about $1.3 million on platform and teller automation upgrades.

But midsize financial institutions have also allocated significant sums for branch automation work.

According to Mentis, banks with between $250 million and $4 billion in deposits set aside about $160,000 on average for new branch automation initiatives.

Regardless of the size of the institution, much of this money is toward upgrading the terminals that teller and platform workers use as their primary tools. Many of these upgrades begin with installing networks of personal computers to replace "dumb" terminals linked to a host computer.

The American Banker/Ernst & Young survey found that the industry would be adding 246,000 PCs to teller and platform stations between now and 1995.

By 1995, the study predicts, 71% of teller stations and 91% of platform stations will be automated with PCs.

Since personal computers accept a wide range of off-the-shelf software and easily adapt to developing technologies such as image processing, bankers feel that the intelligent workstations will eventually help the bottom line by improving cross-selling and reducing the cost of handling each customer.

However, experts warn that such benefits can be obtained only if employees are well trained and are given financial incentives to take full advantage of new technologies.

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