Like beauty, branch automation is in the eye of the beholder.
For some, it may be installing the most cutting-edge imaging systems; for others, it is getting the first stand-alone computer for a loan officer. At its most basic, branch automation involves the transition from "dumb" workstations to "intelligent" ones, which can be used to process information on the spot.
Only 55% of community banks currently have intelligent desktop automation; 39% have dumb automation, and 6% have no automation on their platform stations. At the teller station, however, things are far less intelligent - only 29% of community banks have intelligent machines, while an astounding 60% have dumb automation. The remaining 11% are completely manual.
For at least the past 15 years, bankers have discussed the need to be more attuned to customer relationships, to build more of a sales culture and focus on the cross-selling of diverse products and services. But, as the statistics show, bankers have been loath to put powerful information tools at the point of maximum customer contact.
What happened on the road to branch automation?
Branch automation products have their origins in the explosion of functionality that the personal computer offered and the chaos that it created. In those early, wild and woolly days of PCs there were multiple, incompatible operating systems, rudimentary displays, text-based processing, and few industry standards related to network connectivity, transmission, or data processing. This chaos offered great freedom - and opportunity for vendors who could build sets of tools to solve business problems.
Branch automation solution providers addressed many of the original fundamental data and interface issues in creative and substantive ways - and often long before the computing community came to consensus. In fact, these solution providers were some of the first to address:
* Sales functions: sales tracking, data collection, and scripted product delivery presentations.
* Product delivery: document preparation, compliance, navigation, and streamlining workflow.
* User interface design: first attempts to create a more intuitive, friendlier interface.
* Data storage: retaining transactions and demographic information until the sale is made, or to batch for end-of-day processing.
* Data movement: the need to move information to and from the mainframe and the workstations. The first, basic local area networks were part of the proprietary branch automation products.
But such innovation came at a cost. Most of these solutions were created using proprietary technologies and there was no standard applied to software development, networking, or data base design and information retrieval. Some solutions even required running the software on proprietary hardware.
And then came the standards.
Microsoft's corporate slogan may be "We Set the Standard," but it has taken more than a decade to funnel rapidly advancing personal computer technology into some industrywide standards. In this respect, the much- maligned hegemony that the Redmond, Wash.-based company exerts on the industry has had some positive results. Though technologists may argue the bits and bytes of the standards being accepted, establishing consistent standards has been critical to ensure that system designs offer future compatibility.
With standards now more or less in place, the current technology available in the marketplace offers much of the same functionality historically offered by proprietary branch automation systems. The Windows interface, the growing standardization of data base architectures, and the expansion of local and wide area networks have displaced the previous proprietary data storage, data movement, and user interface solutions.
And while individual vendors still provide specialized solutions related to product delivery and sales functions, the branch automation industry is shifting and shrinking rapidly.
The major core system providers are acquiring branch automation vendors as a way of providing friendlier interfaces to their existing legacy systems. For example, Electronic Data Systems recently acquired Ampersand to establish a branch automation division, and Broadway Seymour acquired National Financial.
Other core system providers are building their own branch automation components. Fiserv is currently building a Windows-based system, dubbed Fast; M&I has built its own Sales Partner branch automation system and will be migrating it to Windows. And Alltel Information Services, formerly Systematics, is building its own platform, customer service, and CIF capabilities, and has recently established a specialized distributive products division.
You can expect these vendors - those that have built or acquired branch automation capabilities - to more tightly integrate their own core products, initiate leaner pricing strategies to reduce the use of other vendors, and increase their pressure on independent branch automation vendors.
As we discussed in the first part of this series, this business strategy is similar to the ways in which the service providers have generally responded to the emerging client/server technology: consolidate, increase price competition, and focus on a continually narrowing target market. For the short term, this strategy will work. But this may be another instance in which, as Yogi Berra once said, "It's deja vu all over again."
There are four major trends occurring among the major branch automation solution providers - adoption of consistent user interfaces, formation of new business alliances, expansion into open system architectures and focusing on a narrower target market.
Branch automation vendors are all currently developing graphical user interface products and, though few have been delivered yet, most have adopted Windows as the de facto standard.
Olivetti North America Inc. has launched an ambitious multimillion- dollar development effort to offer an open systems branch automation product called Mosaic OA.
This solution - developed at a cost of nearly $20 million - will be based on the Unix operating system, use the Windows front end and adopt the client/server computing model. By maintaining adherence to now established standards, Olivetti hopes to induce bankers to embrace this next generation of retail banking solutions by giving them the freedom to choose from thousands of third-party software applications.
Ampersand, the branch automation division of EDS, has continued to add enhancements to its Sellstation software. The newest version of this sales and relationship management program adds teller and lending applications, and provides full multimedia capabilities. Like the other products being offered, Sellstation operates in the Windows environment; unlike most of them, it also supports the creation of text, graphic, video, and sound presentations.
Fiserv, one of the largest outsourcing service providers, is developing Fast as a local solution to address the requirements of a specific client.
Developed in Fresno, Calif., by one of Fiserv's data centers, Fast has been installed in multiple sites and new functionality is currently being added and tested. Fiserv is evaluating the potential of the product and may make a decision to support it nationally. If it is introduced nationally - and this decision is yet to be made - Fiserv would likely interface Fast to several existing product offerings.
Many other vendors are developing branch automation products that conform to the new open systems standards. Broadway Seymour will soon introduce a retail sales application named Bancstar. In its first test configuration both the client workstations and network servers use IBM's OS/2 operating system.
Hogan's Branch Platform System is a major new client/server system slated to be commercially available in early 1995 which automates all parts of branch sales and deposit products account opening. It is currently being installed and tested in a large project for First Interstate Bancorp.
International Business Machines Corp. recently formed a marketing alliance with bank software maker Formation Technologies Inc. Under the agreement, IBM will directly market Formation's Pedestal loan origination and platform automation software, running on the OS/2 operating system to bank clients.
CFI ProServices Inc. has recently acquired the Genesys Solutions Group, a developer of systems for telephone-based customer service centers. As an indicator of the ways in which vendors are redefining their markets, CFI believes that this new software is a natural extension of its automation solutions as more and more banks upgrade their telephone-based customer service call centers to become an alternative delivery mechanism.
As was the case with service providers in general, branch automation vendors will be focusing an increasing part of their attention on the biggest institutions. Community banks will need to work with newer, smaller core system providers to meet their new technology needs. As we've discussed before, this shift is not necessarily bad - it gives the community banks an opportunity to leap-frog systems and do so faster and more effectively than the larger institutions.
While branch automation vendors scramble to incorporate emerging technology and maintain the old market advantages of the restricted proprietary systems, their efforts may be too little too late. In an irony so commonplace in high technology, the early innovators of the new solutions are now hampered by the nonstandardized systems they helped pioneer. Ms. Seymann is president and chief executive of M One Inc., a Phoenix-based consulting firm specializing in bank management and technology. Mr. Williams and Mr. Faulkner are managing directors at the firm.