Nearly two years after the merger with Manufacturers Hanover Corp., officials of Chemical Bankig Corp. said this week they expect to complete consolidation of two important electronic wholesale banking systems by mid-1994.

One of the myriad systems combinations required by the December 1991 merger of Chemical and Hanover, this consolidation is of interest because it affects the oldest and most widely used electronic banking system in the country.

Working Out the Kinks

Chemical officials said merger of the two banks' electronic access systems for cash management is going smoothly but has been slowed by efforts to improve the resulting system's capabilities.

"If we were simply doing a merger, it wouldn't have taken this long," said Manuel A. Linares, senior vice president of the Chemlink Services electronic banking unit.

More than 6,000 corporations use Chemical's and Hanover's electronic access systems for cash management. Chemical's system, which is called Chemlink, was introduced 20 years ago and is believed to be the first such system marketed by a bank.

Initially, the system gave companies the ability to use what by today's standards is simple technology to retrieve account information and execute funds transfers. Customers used teletype terminals to dial into mainframe computers operated for Chemical by a General Electric Co. unit.

Improvements Made

The GE mainframe computers, in turn, retrieved account information from and forwarded transaction instructions to Chemical's computers.

Over the years, the Chemlink customer interface has been upgraded to support DOS-based personal computers and video display terminals, but the core of the mainframe system has remained basically the same.

Hanover's Transcend system was designed in 1990 and employs modern mainframe communications and relational data base management technology.

In the consolidation, Chemical decided to follow its best-of-breed merger strategy and keep what it thought was the best features of Transcend and Chemlink. The surviving mainframe portion of the electronic banking system will be from Transcend, and the surviving customer interface will come from Chemlink. The combined system will carry the Chemlink name.

Users of the old Chemlink system began obtaining services from the Transcend mainframe system this quarter. Users of the Transcend system will obtain the Chemlink PC interface by the middle of next year.

By ending the time-sharing agreement with GE, Chemical will cut operational costs, Mr. Linares said.

The technical improvements will make it possible for Chemlink to give customers access to a wider range of customized reports and let them execute a broader range of banking transactions electronically. Support for Miscrosoft Corp.'s Windows operating environment is also due next year.

These changes are inteded to boost a unit that is an important source of revenue -- and an important part of Chemical's relationship banking strategy. Mr. Linares said his unit pulls in revenues of $40 million to $50 million a year and is "very profitable."

|Lead Product' for Sales

Most of those revenues are from the Chemlink and Transcend product lines. A Chemical spokeswoman said that Chemlink has become the bank's "lead product" for the middle market. This means it is the service sales representatives' most frequently touted product when they are trying to land a client, in hopes of selling other services, as well.

Mr. Linares said his unit's revenues are growing "slightly less" than the industry growth rate of 4% to 5%. But growth has been constrained by lackluster demand from large corporations, he said, while sales to mid-sized companies are very strong.

By the end of next year, Mr. Linares added, Chemical will have spent $10 million since the merger to combine and improve electronic access systems for cash management.

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