Chase Manhattan Corp. is expanding a system designed to pinpoint problems in its investment services area before they affect customers.
The system has helped Chase to send dividend payments out more quickly, and to reduce the amount of bond and equities trades that fail to be completed from 18% to 8% of all trades.
The system is being used in Chase's global securities services unit, which manages $799 billion of assets. By some measures, Chase, with $243 billion of cross-border assets under management, is the largest global custodian in the world.
With its far-flung network of subcustodian banks, and the many brokers in different countries that it must do business with, Chase cannot always guarantee the same standards of service around the world. The new system, called Account Service Planning and Administration, was designed to iron out those differences, and give Chase greater control over its network.
Even before the new system was developed, 90% of dividends were paid on time, says its designer, bank vice president Arthur Certosimo.
But any one customer might have received only 80% of his dividend payments on time, Mr. Certosimo says. The performance problems frequently are centered in just a few locations. If the problems there were resolved, the performance statistics for the customer would improve dramatically, he added.
The system was designed to locate those anomalies. Chase began using it in the fall of 1992 to scan through thousands of transactions for those that do not fall within certain parameters of good performance.
Transaction data, including dividend payments and trade data, are sent at the end of each month into an executive management system, which uses a relational data base.
At a personal computer, a customer service manager can view the overall timeliness of dividend payments, or the failure rates of trades.
Locating the Problem
Then the banker can "drill down" to view error rates by country, and can further specify to see if the problems occur on the purchase or sale side of a transaction, or with equities or bonds.
By gathering this level of detail, the banker often can determine if the problem is with a broker, a subcustodian, or within the bank itself. Frequently, Mr. Certosimo says, the problem is resolved with a call to the broker in the relevant country.
Costs $1 Million a Year to Run
The system also flags any fall-off in performance. If a decline in the number of dividend collections made on a timely basis is noticed, the system can be used to look at collections by country or by customer account, and isolate the problem.
When the source of the problem - which could be a subcustodian - has been located, Chase calls the customer to explain the problem and how it is being handled.
Mr. Certosimo says that customers are often alerted before they have become aware of the problem themselves.
The system costs about $1 million per year to run, Mr. Certosimo says. It is used not only by service managers but by production managers, who use it to settle trades.
Helps Anticipate Volume Jumps
The system is still being put into production in Chase's nine regional service units around the world. The number of managers using it will grow from the current 100 to 250 by the end of the year.
Mr. Certosimo says the system also allows the bank to chart their customers' increases in volume. Sometimes this enables the bank to see trends over a period of time, so that it can anticipate a need for greater capacity.
Now, Chase wants to modify the software for use in other business lines, such as cash management.