Chemical Banking Corp. has hired International Business Machines Corp. to help solve nagging retail systems problems it has experienced since it began absorbing Manufacturers Hanover Corp. branches earlier this year.
Internal service quality reports obtained by the American Banker summarized Chemical's subpar systems performance in the second quarter.
The documents indicate that IBM has been working with Chemical's retail banking and technology personnel to help restore normal service. The bank has been hit hard by computer outages in recent months.
Signs of Trouble
Bank executives declined comment on both the hiring of IBM and ongoing systems consolidation trouble. But the service quality report said the IBM study "will be broad-based and address opportunities for improvement in systems architecture, operations, and control within the retail environment."
Chemical's retail operations have been showing signs of trouble for months, starting with declining service levels at the bank's more than 1,000 automated teller machines.
More recently, customers have noted more pervasive problems, including repeated outages in the systems that furnish tellers, platform workers, and customer service representatives with information about customer accounts.
Because of the problems I've had, I've been kind of active on the customer service line, and in the eight or nine times I've called [in late August], the systems have been out three times," said Peter Douglas, a Chemical customer and public relations executive in Manhattan.
According to the internal reports, Chemical recorded over 46 hours of on-line outages in its customer service department in July alone. Of that number, 31 hours of outages occurred on weekdays during normal business hours.
The systems malfunctions, which have been at their worst since the former Manufacturers Hanover branches were officially switched to Chemical computer systems, have resulted in the bank's customer service group missing its performance goals in 10 of the 12 months ending July 31, the reports said.
Other areas where computer systems missed their service goals for the entire second quarter include the New York branches, the New York ATMs, and the bankwide demand deposit system, according to the reports.
Bankers and consultants said that, given the breadth of the conversion process, many of the service level outages would be acceptable if they lasted for short periods. The Chemical-Manufacturers Hanover merger is, after all, one of the largest technical undertakings in the history of U.S. banking.
However, they say, the persistence of Chemical's problems shows that the bank does not have a handle on a solution,
And the fact that the computer difficulties are rooted in so many different areas - the core application software from Systematics Financial Services Inc., the bank's computer hardware, the network services - are making Chemical's call for outside help from IBM an absolute necessity.
"When you're dealing with the volume of transactions that they are, there's no way to test it but in the real world, and the results of those tests can be unfortunate," said George Dinardo, former chief technologist at Mellon Bank Corp., now a consultant with Coopers & Lybrand in New York.
An example of the persistence of Chemical's problems can be seen in the branch systems. According to Chemical Bank documents, the New York branch system availability for tellers and platform personnel averaged about 92.3% for the second quarter.
While that performance level appears high, it translates into branch systems being down about 45 minutes per day over the three-month period, assuming a 10-hour work day. The report notes, "When the systems are down, the branch is blind and must act in the absence of key customer information. Down time inevitably slows customer servicing and can lead to denying customers access to their funds."
While some of the branch outages may have occurred during off-peak hours and were thus invisible to customers, experts said that outages usually come during high-volume periods when the system is stressed.
What Role for IBM?
Since both IBM and Chemical declined to comment, it remains unclear what IBM'S role will be after the two-month study of the bank's systems.
Chemical executives said privately that while the bank's customer approval ratings are dropping, it has not yet lost a significant number of customers as a result of its computer problems.