Fifth Third Bancorp said it is close to completing a system overhaul designed to transform it from a technology also-ran into an innovator.
In January the Cincinnati company expects to link its Internet systems to its automated teller machine network — something few companies have done. It already has overhauled its disaster-recovery systems, its check processing operations, and its online banking capabilities.
Greg Carmichael, Fifth Third’s chief operating officer, said there was regulatory pressure to improve the disaster-recovery systems and internal pressure to increase efficiency in multiple areas. However, he also said at least some of the motivation for the overhaul came from a more basic need: executives wanted to use personal digital assistants.
“We had some executives, at the end of the day, that were clamoring that they didn’t have the tools they thought their competitors had,” Mr. Carmichael said. “We were running in an information age, and they weren’t properly equipped with simple things like laptops and BlackBerries.
“We kind of lagged the industry until 2003,” he said.
That year Fifth Third began overhauling its Web site by installing online bill payment software from CheckFree Corp.; the site’s use has grown 40% a year since then, Mr. Carmichael said.
The company said it negotiating a deal with a security vendor to install stronger authentication and transaction monitoring software, which is expected to be in use sometime next year.
In January, Fifth Third plans to add another feature to its site. By connecting its online banking systems with its ATM network, customers will be able to use the Web site to program default ATM settings, such as whether they prefer on-screen instructions in English or Spanish and how much money they want to take out when they hit the quick-withdrawal button.
Mr. Carmichael would not reveal the cost of any of the projects.
Alenka Grealish, who manages the banking group at the Boston market research firm Celent LLC, said that using a bank’s Web site to customize its ATMs is “a brilliant idea,” and that she has not heard of any other bank that can do this.
This year Fifth Third opened a primary data center in northern Kentucky, 20 miles from Cincinnati. Mr. Carmichael said regulators had expressed concern that the old site was located at Fifth Third’s headquarters — in a well-known building above a parking garage.
Fifth Third worked with International Business Machines Corp. of Armonk, N.Y., since last year to build the new center. The work included installing dedicated, encrypted lines for transferring data to the Kentucky site and to a disaster-recovery site in Grand Rapids.
The company previously would haul 1,200 to 1,400 data tapes to the Grand Rapids site every night, but “we evolved past that” with the dedicated lines, Mr. Carmichael said.
David Bock, an IBM client executive, said Fifth Third’s project “was pretty ambitious.” The transition is largely complete, and the Kentucky center has been running for nearly six months.
He would not disclose the project’s cost, except to say, “They spent more with us over the last couple of years than a typical bank of their size does.”
One of the earliest projects in Fifth Third’s overhaul was giving clients 1,000 remote-capture scanners for making deposits by transmitting check images to the bank.
“We were a very paper-intensive environment,” Mr. Carmichael said. By the end of the conversion, “we eliminated literally 4 million to 5 million transactions” from the back-office processes.
Fifth Third also began letting customers receive image statements in the mail or view their statements solely online. Today just 30% of its 1.3 million online banking users receive statements by mail, and only 3% receive full statements that way.
The company expects to save $5.8 million of postage costs this year on statements alone, Mr. Carmichael said, and the rest of the investments in imaging and processing are expected to save it more than $120 million through 2009.
In 2004, executives finally got their wish — Fifth Third began issuing them BlackBerries, along with laptop computers whose hard drives are erased automatically after three unsuccessful attempts to access them, Mr. Carmichael said.
