Executives at Chase Manhattan Corp. say they have seen the future of consumer banking-and it isn't branches.

As other banking companies piece together sprawling multistate networks, Chase is tilting decidedly toward technology. Taking a cue from nonbanks like Fidelity Investments and Charles Schwab & Co., Chase is investing in mail, telephone, personal computer, and Internet distribution to serve and profit from its 32 million U.S. retail customers.

"When life was simple, people used to go into the branches and talk to the tellers about their needs," said Walter V. Shipley, chairman and chief executive officer. "People don't go into the branches anymore."

For that reason, $367 billion-asset Chase has limited its U.S. retail network to 500 branches in the New York metropolitan region and 125 in urban Texas. But thanks to technology, it considers itself a national consumer bank.

As Chase executives see it, if a credit card holder in, say, Spokane, Wash., can log on to the Internet and talk to Chase, the bank has a good chance of selling a mortgage or a mutual fund. Or if a mortgage borrower in Chicago can call a customer-service center to check on a payment, Chase can offer that person a home equity line.

"We are in the beginnings of a wholesale change," said Thomas G. Labrecque, president and chief operating officer. "In the year 2005, a lot of what a customer gets he isn't going to walk into brick-and-mortar to get."

"Whether it's the Internet, whether it's through your cable television, you know you're going to do a lot of things without leaving your living room," he added.

Chase, like banks everywhere, is looking to balance consumers' needs for convenience with its own desire to maximize efficiency in a slow-growing business. It is trying to deploy new technologies without alienating desirable customers.

It seeks to contrast itself with peers that are both branching and deploying technology on a grand scale. It wants to be seen as more like Fidelity and Schwab in the investments arena and MBNA Corp. and Countrywide Credit Industries in consumer lending.

"We are a hybrid using a lot of Fidelity techniques," Mr. Labrecque said. "Technology distribution systems are going to be a much larger part of the business."

Fidelity, the Boston-based mutual fund giant with 79 offices in 65 cities, offers a product menu that Mr. Labrecque says is almost identical to Chase's-investments, mortgages, checking accounts, brokerage services, and consumer loans. So Chase executives studied Fidelity's marketing tactics and adopted many of them.

"We have a lot of phone and PC-based access to the bank, and so do they," Mr. Labrecque said. "We are utilizing a whole set of distribution systems that are based on branches, digital systems, and mail."

Touchstone Concepts

At the heart of Chase's "branchless" approach are three concepts that retail bankers have struggled to make work: cross-selling, data mining, and branding.

Using a vast customer data file that has been under construction since the 1996 merger with Chemical Banking Corp., Chase bankers have been studying ways to cross-sell more products to credit card, mortgage, investment, and consumer finance customers.

"Calls will come into the mortgage company or the credit card company, and that customer's whole relationship with the bank will appear on the screen," Mr. Shipley said. "All of a sudden, that salesperson will be like a teller. It's a tremendous opportunity."

It is also one that no bank has yet to successfully exploit.

"You can't set your sights too high," said Edward E. Furash, chairman of Furash & Co., Washington. Banks cannot indiscriminately push products to every customer who calls in, he said.

Cross-selling is particularly challenging to Chase, given that 20 million of its 32 million U.S. customers are credit card holders rather than depositors. That stands in stark contrast to the proposed BankAmerica- NationsBank and Wells Fargo-Norwest combinations, which would have higher percentages of depositors.

The new BankAmerica would serve 29 million retail customers through 4,800 branches in 22 states; the post-merger Wells would have 20 million customers and 2,800 branches in 21 states.

"At Chase, cards and mortgages pull the load," said Michael Mayo, an analyst at Credit Suisse First Boston.

"Checking accounts have historically been the hub of the banking relationship," Mr. Mayo said. "Those are some of the most stable products a bank offers. A bank with a checking account customer has a strong hold on that customer. The hold on a card or a mortgage customer just isn't as strong."

What's in a Name?

Chase is also betting that its brand-a 199-year-old name closely linked in this century to the Rockefeller family-can help its national ambitions. Mr. Labrecque said the storied moniker is helping to build name recognition as far away as California, where the bank tested third in household recognition behind Wells and BankAmerica.

But corporate identity consultants say Chase's association with America's elite may do little to help it win the hearts and wallets of consumers outside its home market.

"In corporate, they are much better known," said Alvin Schechter, chairman of Interbrand-Schechter, New York. "In retail, they are known in the metro New York area."

Chase has the lead in New York in deposit share, according to Sheshunoff Information Services, and it has 188 mortgage offices in 39 states. But relatively few consumers beyond New York see its octagon logo or hear its name day to day.

"They have an aspiration for nationwide banking, and it's not clear that that's viable," said Lawrence Cohn, an analyst at Ryan, Beck & Co. "Even if they have the brand, I don't think that anyone would call Chase a national bank."

"I don't sense that there's any really active debate in Chase about the strategy of building a domestic bank," he added. "And I'm disappointed with that."

Heavy Hitter

Despite the limited reach of its branches, Chase's individual consumer businesses rank among the nation's largest in their fields. Last year they brought in $1.039 billion in pretax earnings, 30% of Chase's total.

"We could spin off any one of these businesses and they could be very successful on their own," Mr. Shipley boasts.

In automobile loans by noncaptive firms, in home equity loans, and in student loans Chase ranks first among U.S. providers. In mortgage origination it ranks third.

In credit cards Chase ranks fourth but has said it wants to overtake Citicorp as No. 1.

Chase is also nurturing one of the largest bank-owned mutual fund families. Its $39 billion-asset Vista Fund complex ranks fourth among bank mutual funds, according to Lipper Analytical Services.

Chase has $180 billion of assets under management for individuals, retirement plans, and other institutions. Mr. Labrecque said it wants to double that in three years.

It has also been building its remote banking capabilities, which now include 1,800 automated teller machines and an on-line banking service with 250,000 enrolled users.

Still, Mr. Cohn and other analysts said they would like to see Chase expand its branch network via mergers, naming First Union Corp., Mellon Bank Corp., and the new Banc One Corp. as attractive partners.

"To have a strong domestic base, you need more customers and more deposits," Mr. Cohn said.

But Chase executives say they have no interest in paying a premium for a bank outside of their market. Though they said they are more open to an in- market merger that would enable Chase to close branches and slash costs, they declined to comment on any particular targets.

Meanwhile, Chase officials said they would not waiver from their branchless approach.

"We have a set of distribution systems that work for us; Nations has one that works for them," Mr. Labrecque said. "Just because no one's ever done it before doesn't mean it can't be done."

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