It stands to reason that some of the most prominent chief executive officers in the financial industry have the future on their minds. But a recent book by Charles B. Wendel, "The New Financiers: Profiles of the Leaders Who Are Reshaping the Financial Services Industry" (Irwin Professional Publishing, Burr Ridge, Ill.), includes CEO opinions on technology trends and related strategies that can be at least as revealing as those of the many high-tech pundits whose insights more commonly command the attention of the media. Mr. Wendel, president of Financial Institutions Consulting, New York, conversed at length with more than a dozen industry leaders. From those discussions his associate, Jennifer Warner, fashioned the following colloquy. All of your companies have successful track records. To remain leaders, what will your institutions have to do differently in the future? L.M. BAKER Jr., Wachovia Corp: In decades past, one of the critical elements for excellent performance was staying out of trouble. We still have to stay out of trouble, but in the future we will be judged by the service we can provide for people. The economy has changed, demographic makeup has shifted, the demands and desires of our customers have evolved, the pace of change has increased. Now banks are judged on the range and quality of service they provide their customers. WALTER V. SHIPLEY, Chase Manhattan Corp.: Two broad transformations are taking place in our business. The retail consumer side has the delivery system issue and investment requirements. On the other side is the move from traditional commercial banking to investment banking. Both changes require capital and size to be able to make them happen. TERRENCE A. LARSEN, CoreStates Financial Corp.: We don't try to make heroic judgments about the future. Broader kinds of trends are quite easy to forecast from the demographics. We know what is going to happen to our customer base, what their financial condition is going to look like, and what their needs are going to be - in the broad sense. Judging the products and services they are going to need is critical. What will be the role of branches? LAWRENCE M. COSS, Green Tree Financial Corp.: There is an evolution taking place in banking. I was at a Merrill Lynch conference where they said 38% of the customers did not go to a branch. A finance company would tell you we are opening more branches because we are filling the need the banker left when he reduced his branches. What people want from their bank today is the ability to get money out of the cash machines, and what they most desire is the ability to make deposits there. RICHARD M. KOVACEVICH, Norwest Corp.: I want to be very clear on this. I am skeptical that any us know with certainty how financial services are going to change. It is too great a risk to bet that you know and to invest all your money on that bet. My preference would be described more as incrementalism. I don't know when or if branches will disappear. I don't really care. It will be whatever it turns out to be. What I do believe is that branches will not disappear overnight. SHIPLEY: For years my analogy has been that the branch delivery system is to financial services what the railroads were to transportation 100 years ago. The railroad was the way to transport people, just as the physical branch is a way to deliver financial products to consumers. There is a role for railroads today; there will be a role for branches in the future. But the impact of new technology represented by the airplane and the automobile is equivalent to the impact that computers and telecommunications will have on the delivery of financial services. JOHN B. McCOY, Banc One Corp.: Will we have as many branches five years from now as we have today, ignoring acquisitions? I can't imagine that we will. I also see us doing different things in those branches, from financial consulting to insurance sales or whatever. At the same time, you have to build other channels, whether it's over the telephone, in the mail, or over the Internet. LARSEN: We don't go to an extreme and push (all customers) in one direction. There are going to be different branches for different people. There will be a branch-banking structure, but it is almost certain to be different than today. KOVACEVICH: All this talk about (the negative future of) branches is based on two assumptions, which are extremely poor assumptions: that the branches are only for transactions, as opposed to a sales opportunity; and that a reduction or a change in transactions will occur without any impact on revenue. Both assumptions are totally fallacious. Reduction of branches is a cost strategy in the long run. This war is going to be won or lost on the field of revenue, not cost. H. EUGENE LOCKHART, MasterCard International: The governing factor determining branch population is not the consumer. It's the small-business customer. Why? Because the small businesses have to deposit cash and checks received. And by the way, if bankers would start thinking about small businesses, they would create the technology that would allow small- business customers to achieve those transactions and not have to go to a branch. ROBERT T. HERRES, United Services Automobile Association: I agree with the expectation that branch banking is doomed. There are always going to be people who want to go into the bank and want somebody to hold their hand. But that number is going to get smaller and smaller, probably over 10 to 15 years. As the computer-literate generation gets into the mid-career or mature phase of life, you are going to find branch banks closing fast. What will be the role of technology in the alteration of the branch business? GARY C. WENDT, GE Capital Corp.: There are two things today that everyone has available in the financial services business. One is inexpensive capital because of commoditization through securitization, and the other is technology. Technology is the overwhelming driver of the change in this industry today. LOCKHART: If bankers are smart, they are thinking about a branch population that by the year 2000 is less than half of what it is today. The sad reality is that the number of U.S. branches actually went up in 1994 by about 10%. SANFORD I. WEILL, Travelers Group: What I disagree with is that technology will replace the need for service and hand-holding, simply because financial products are complicated. While technology will gain importance, create efficiencies, and deliver more information, the greater amount of information that will be delivered is going to require more interaction with real live people, rather than 800 numbers. LOCKHART: You must start with the consumer. If you start anywhere else - with the branch staff or the corporate staff - you come to the wrong conclusion. LARSEN: It is a lot easier to work with customers than trying to decide by ourselves whether or not there are going to be any branches, or if everything is going to be on a PC, over a phone, or whatever. BAKER: Many of the products available in the future will be purchased via computer modem or by phone. Technology is revolutionizing the way we serve our customers. We are focusing considerable time and resources on finding ways to serve our customers beyond the traditional physical locations. A personal banker might begin to take on the role of a financial or investment counselor, someone who specializes in determining customer needs. KOVACEVICH: I think there is still something personal in financial services that is going to continue to be a very important element, especially if you already have the customer. Now, if you don't offer the alternative delivery systems, you may lose them. WEILL: I don't think computers will take over the world. They will provide more information, which will enable more things to be done, but the need for real, live, intelligent, educated interface will always be there.