A veteran banking technology executive is using microwave technology to build a long-range wireless data network for banks.
John A. Burns, the chairman and chief executive of ERF Enterprise Network Services Inc., a League City, Tex., subsidiary of ERF Wireless Inc., says six financial companies are using his systems for their internal data networks. Last week he announced he had signed a second customer for his more ambitious plan, to use the same wireless technology to construct a nationwide network for the banking industry.
"We're going to create the financial network of the future," Mr. Burns said in an interview. "Everybody's going to need high-speed broadband within five years to keep up."
First Federal Bank of Louisiana, in Lake Charles, is setting up an internal ERF network using the vendor's BranchNet product to connect 14 branches. James M. Fazende, the $546 million-asset thrift's chief operating officer, said he expects ERF's wireless network to deliver 20 megabytes of bandwidth — effectively the equivalent of 14 high-capacity T-1 lines between branches — at the cost of one T-1.
Growing demand for data transmission — for digital check images and to address concerns about disaster-recovery capability — drove First Federal to seek more capacity, Mr. Fazende said.
"We felt an urgent need to get more bandwidth one way or another," he said. "Going with a conventional wired network, unlike what we have now, was just cost-prohibitive."
First Federal was the first company to sign up for ERF's planned national network, US-BankNet. The first portion of that network went live in Louisiana last month.
ERF said the five other banks using BranchNet include two others in Louisiana.
The systems transmit data using microwave signals, which can travel up to 35 miles. Companies can use several transmitters strung across the countryside to deliver data over longer distances. ERF has a deal to place its networking gear on towers owned by the Louisiana State Police.
When talking about wireless networks, bankers and regulators are quick to raise questions about data security. Mr. Burns said that ERF's networks use hardware and software to encrypt data, and the encryption devices in each branch are monitored continually from outside to guard against tampering. The systems have passed audits by federal and state regulators.
ERF is focusing on the Gulf Coast, both to provide services in an area that is prone to hurricanes and other disasters and also to build out its envisioned interbank network.
The company's network underwent a trial by fire when Hurricane Rita struck the Louisiana coast in September 2005, Mr. Burns said. "Our backbone all stayed up. It was beautiful."
Mr. Burns made his name in the banking technology industry as the founder of FundsXpress Financial Network Inc. of Austin. FundsXpress, which had 500 financial customers, was sold to First Data Corp. last month. Mr. Burns left FundsXpress in 2005.
Mr. Fazende said Hurricane Rita played a part in First Federal's decision to go wireless.
"Our northern branches were having problems because our data center at the main office was down," he said. "We had generators but no phones."
First Federal outsources its core processing to a data center in Houston, but "there were internal ancillary applications that we didn't have access to," such as loan processing systems, he said.
The hurricane also taught the company an important lesson about where to place its transmitters in the field. "There's a lot of debris blowing around at the 100-foot level," Mr. Burns said. Towers with lattice designs "present a huge flat face to the wind," he said, which could trap a flying piece fo plywood, for example, or sheet metal, and could easily knock a tower down.
ERF now places its transmitters on simple poles, to cut the chances of them being blown down.
Iberville Bank of Plaquemine, La., began using BranchNet in October, connecting 13 branches across six parishes and an operations center in West Baton Rouge, covering an area spanning 60 miles north to south and 25 miles east to west. Last week it became the second financial company to agree to use US-BankNet. ERF says it is in talks with a third.
James D. LaBauve, the senior vice president of operations and security at the privately owned Iberville, said the $217 million-asset unit of A. Wilbert's Sons Lumber and Shingle Co. wanted to reduce costs by processing checks as images but was turned off by the expense.
"The more bandwidth you buy, the more expensive it is," he said. "We couldn't cost-justify the bandwidth."
After setting up the ERF network, Iberville moved immediately to branch capture of check images, which went live in December. It plans to add merchant capture by August.
Iberville plans to use voice-over Internet protocol to replace branch phone systems with a central call center and to adopt videoconferencing to reduce travel for employees.
Two Iberville are using digital cameras for surveillance. "All of those images are transmitted to my laptop at my office," Mr. LaBauve said. Iberville is considering using similar systems at all of its branches, he said.
The bank is testing a way to transmit security video to state or local police in the event of a robbery or other crisis.
Dispatchers "would be able to send those images down to the laptops of the police units responding to the call," Mr. LaBauve said.
Iberville is able to test all these ideas because the network is the bank's property, Mr. LaBauve said. "We own that system. Once we pay for it, our cost is practically nonexistent. We don't have to rent telephone lines."
