Retail delivery is a hot topic-billions of dollars hot.

That explains why 10,000 people have trekked to Las Vegas for the Bank Administration Institute's annual convention on the subject, which officially starts today.

Researchers at GartnerGroup, Mentis Financial Services said banks' 1998 capital investments in consumer electronic banking technologies will total $3.7 billion.

At an annual growth rate of 11%, these expenditures on such things as automated teller machines, call centers, branch software, Internet banking, and back-end middleware would reach $5.7 billion in 2002.

That compares with an 8% annual increase for all types of technology spending.

Personal-computer and Internet banking will attract the greatest increase in investment dollars-35% annually, to $851 million by 2002, GartnerGroup Mentis said.

Capital spending on software for branches will decline by 2% a year. Branch software would still be the second-largest portion of retail technology capital spending-$1.2 billion in 2002.

Spending on ATMs, expected to increase 10% a year, would attract the largest amount of spending in 2002-$1.8 billion, or 32% of the total.

After PC and Internet banking, the fastest-growing investment area is expected to be middleware, with 27% annual increases boosting investment to $738 million by 2002.

This networking and messaging software lets institutions integrate customer information that traditionally has been stored in separate systems, sometimes derided as "silos." Institutions believe they can thus improve their knowledge of customer activity and profitability, and provide more consistent and appropriate service levels.

"If you don't have a view toward running channels in an integrated way, then it becomes much more difficult and less cost-effective to migrate customers to newer channels," said William D. Turner, a vice president in A.T. Kearney's financial institutions group.

While today institutions tend to make retail investments on a channel- by-channel basis, they are starting to take a more holistic view encompassing all channels and interactions among them. The back-end connections provided by middleware help to make that approach possible.

More banks, for example, are planning to use software installed in their call centers to also drive sales and service in their branches.

As much as 80% of branch and call center transactions overlap, according to Ian Rubin, a research analyst at Tower Group, Newton, Mass. "So banks are looking to use the same underlying technology in both places," he said.

One reason is to reduce costs. "In theory it should be cheaper, because the number of people needed to be familiar with the software and the vendor can be reduced," Mr. Rubin said.

Hibernia Bank of New Orleans recently narrowed "two to three initiatives" in its retail bank to one, said Keith Martin, senior vice president. The $13 billion-asset Hibernia was looking to upgrade customer workstations for the branch, the call center, and commercial bankers.

"There is a tremendous amount of similarity in terms of the type of data you're interfacing with" in those areas, said Mr. Martin. "They all go to the legacy system and ask the same questions."

Rather than automate the three separately, Hibernia installed software from Broadway & Seymour Inc. designed to consolidate information and processes across the different areas.

Broadway & Seymour's Touchpoint is part of a "new group" of software that cuts across departmental boundaries, said Tower Group's Mr. Rubin. Such software is starting to replace traditional offerings that automate only the branch or the call center, he said.

Hibernia's investment in Touchpoint, including new computers, came to "just north of $10 million," said Mr. Martin. The bank built its business case around increasing revenue, not saving costs through combined systems. "But certainly, if you're building one system, that's cheaper than building three or four," he said.

Hibernia has Touchpoint installed in its call center already, and is rolling it out to its 250 branches. Though the workstation screens connect to the same system, they are configured differently for the two areas. In the call center they include scripts for outbound and inbound telemarketing, while in the branches they have more sophisticated sales screens that customers can view.

Touchpoint is improving service and sales in both areas, Mr. Martin said, but the original vision of using it to also support commercial banking is falling short. The commercial banking system, used to track loan sales and customer profitability, has a different architecture than Transpoint and would take "too much money and time to convert," said Mr. Martin.

KeyCorp has made channel integration a centerpiece of its retail delivery strategy. In mid-September the $78 billion-asset bank held a press conference to announce it had linked its various retail delivery channels, letting customers receive consistent real-time information through any of them. The "middleware" it uses to accomplish this relies on regular phone lines to create the equivalent of a nationwide teleconference call.

The Cleveland-based bank, which like Hibernia runs the same software in its call center and its 976 branches, expects electronic transactions to be more than 60% of Key's expected 284 million transactions in 1999. Given the increasing importance of electronic channels, Key felt it was necessary to have updated information immediately available through all channels.

Integrating the channels was not a cost-saving move, said Michele Seyranian, senior vice president of electronic commerce. "It was done more for the convenience of the customer." They can, for example, make a withdrawal at the teller line, and immediately see the updated account information at a nearby ATM.

"People who have really noticed are those who have come to Key from other banks," Ms. Seyranian said. "They're very pleased."

Tower Group's Mr. Rubin said being able to provide consistent information through all channels is "a big step for consumer confidence."

GartnerGroup Mentis said the attention to call center technology will continue, with banks and thrifts boosting expenditures by 18% a year, to $1 billion in 2002.

On-line banking is fueling new call center investments. KeyCorp, among others, has built call centers specifically to deal with on-line banking users who have technical problems as well as more typical account questions.

The 62 people who staff Key's on-line banking call center are technically skilled, adept at the personal financial management software offered by Key, and paid more than workers in the regular call center.

"Our customers love it," said Ms. Seyranian. "They're just amazed that they're able to get that kind of support from their bank."

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