Bank chief executives remain wary about big investments in systems. But there is one technology that they are positively sold on as a means for reaching customers. It's relatively cheap and the payback is clear. In a word, it's the telephone.

Consider these comments about call centers bank chiefs have made to Management Strategies over the last year.

This just takes a touch-tone phone, said George A. Schaefer Jr. of Cincinnati's Fifth Third Bancorp. It's low cost, tremendously efficient, and tremendously effective.

Or U.S. Bancorp's Gerry B. Cameron: (Some) 27% of our people get their personal loans over the phone. I wouldn't be a bit surprised to see that number exceed 50% or 60% before long.

Or Midlantic Corp.'s Garry J. Scheuring: We have improved customer access to (our) product line with a 24-hour-a-day, seven-day-a-week phone center.

Call centers equipped with automated voice response units to handle customer calls around the clock have become ubiquitous in the industry, and the volume of inbound calls has been rising. Chemical Banking Corp., for example, now receives about 3 million calls each month, about 80% of which are handled automatically.

Industrywide, 17% of all contacts that customers initiated with banks last year were over the telephone, according to a survey by The Tower Group, Andersen Consulting, and American Banker. That figure is expected to rise to 28% by 1997 and to 32% by the turn of the century.

What's more, bank call centers have become more sophisticated. It's not just a convenient way for customers to check balances, confirm the last five checks cleared, or even transfer funds between accounts. More than 11,000 Fifth Third customers, for example, use a touch-tone telephone to pay their bills.

But perhaps even more significantly, a growing number of banks are expanding their call centers not to just handle routine requests but to become an integral part of their strategy to more conveniently deliver bank products.

Our position is to look at the call center as a support for all alternatives, said Sally M. Handlon, vice president of retail delivery administration at Meridian Bancorp.

The Reading, Pa.-based bank's call center now receives about 700,000 calls each month, more than double the monthly volume in 1992. Applications for nearly 40% of all consumer loans and credit lines that are ultimately approved are taken over the phone. And about 60% of those loans are from customers who don't already bank with Meridian.

The success of the call center also led the $14.8 billion-asset bank last year to staff its toll-free sales line 24 hours a day. So customers so inclined can now apply for a loan at, say, 3 a.m.

The results, said Ms. Handlon, have been dramatic. In the 30 days after the service was made available late last June, the group of 30 employees handled 13,000 inbound sales - as opposed to service - calls that resulted in $2 million of approved loans.

By the end of the first sixth months, said Ms. Handlon, in excess of $21 million in approved loans had come through that line.

The volume of monthly sales calls has also increased to about 27,000. Ms. Handlon added that the service was introduced with no widespread advertising or promotion.

Because the service is relatively new, and customers are still learning about it, Ms. Handlon said, Meridian has yet to fine-tune how many people are needed at different times of the day.

When we started, our customers pretty much dwindled after about 10 p.m., she said. We're pretty busy now until about 2 in the morning. And we have a period from about 2 a.m. to 4:30 a.m. that is relatively quiet o maybe only (eight or nine) calls every half hour.

And then by 5 a.m., the volume begins to increase again. During the slow hours, Meridian staffs the center with two or three people.

To handle the phones around the clock, Meridian needed to increase its call center staff by 12 to 15 people. Today, 30 employees work nine-hour to 10-hour shifts four days a week.

Because the center's employees handle a wide variety of calls, Meridian also devoted extensive resources to training.

We did not have cross-trained people before this that did both sales and service, said Ms. Handlon. We needed to broaden their base of knowledge about banking in general. A better understanding of the bank, the Meridian organization. And then how to access information about the organization.

Employee training sessions took five weeks, plus two additional weeks of fielding calls in the presence of a trainer.

Beyond greater customer convenience, Meridian also views the phone center as a key part of its evolving retail delivery strategy. What we're trying to do is look at those locations where the Meridian name or (those of other affiliates) might be readily recognized, but it's just not convenient for someone to get to a branch location, said Ms. Handlon. The goal is to draw in new customers without expensive investments in brick and mortar.

The success of telephone delivery is also being weighed in decisions about the future of Meridian's branch network. As we look at developing or reevaluating our traditional delivery, we're looking at what opportunities the phone center has to support the branches, she continued. If there are situations where we've got to consolidate, can we bridge the move for that customer through the phone?

Ms. Handlon said, however, that the bank does not regard the Direct Access phone center as a replacement for a branch. Today, for example, consumer loans applied for over the phone continue to be closed in offices.

Looking to the future, Ms. Handlon also sees a need to upgrade the center's technology. The automated voice response unit, she said, is a first or second generation system that uses so-called dumb terminals linked to a mainframe.

There are great opportunities now opening up in the arena of LAN- based systems to support call centers, she said.

Meridian has not set a timetable for enhancing the system. But Ms. Handlon noted that the existing technology has enabled the bank to do a great deal. We basically can do (nearly) anything a branch does, she said, adding that, it seems like the more lines you add, the more ports you add, you can never satisfy the demand that is out there.

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