Seeking the elimination of paper in it payment systems, Britain's Midland Bank has completed a massive automation overhaul of its 2,000 branches.

The system, which was developed at a cost approaching $110 million, rivals the biggest branch automation projects under way in the United States.

For example, BankAmerica Corp. plans to convert about 800 of Security Pacific Corp.'s branches to its branch automation system as part of the two banks' planned merger. Bank of America has already invested an estimated $100 million to install the system in its 1,300 branches.

Completion Was Pressed

The Midland system was also completed under a very aggressive schedule. The project, based on Unisys Corp. computers, software and check processing equipment, was completed in less than three years and ahead of schedule.

"Three years was an extremely exacting time frame," said Chris Thom, Midland's central operations direcor. "Instead of taking our time and looking at what the U.S. banks were doing, we brought a team on board which has successfully implemented what we were looking for."

According to Thom, the new system has reduced the number of processing errors by more than 20-fold. The system also reflects a change among Midland senior management in the perception of what a branch should do.

A Fresh Approach

"They've taken a new perspective," said Alex McBride, account director at Unisys' U.K. subsidiary. "They are the first major U.K. bank to take the paper out of the back office as well as being the first to introduce American-type concepts such as the branch [functioning] as both a teller and a seller."

The project was, in fact, the brainchild of Midland's banking and group operations chief executive, Gene Lockhart, an American who joined Midland in the late 1980s.

In the days before the system was installed, Midland branches operated much like individual processing centers. The clerks manually took deposits, noted debits, and then delivered end-of-day paperwork to a central operations center. Not only was manual processing time-consuming, from a staffing perspective it was prohibitively expensive.

Cycle Is Broken

"Because most of our retail customers made end-of-the-business-day deposits, we incurred a lot overtime." said Mr. Thom.

The new system removes the back office function from the branches and instead, organizes it around eight district service centers that then update customer information into one system. Mr. Thom reports that productivity at the branches has tripled.

"Three years ago we might have processed 300 to 500 transactions an hour, today we typically handle 1,100," he said.

Duplicate Handling Reduced

Integration has also allowed Midland to eliminate duplicate handling of items. This is particularly important in the United Kingdom, where banks accept deposits for other institutions. Third-party transactions of this nature tended to be very paper-intensive.

In addition to check processing, the new Midland technology has been designed to address the more unique and specific demands of the British marketplace.

Unlike their United States conterparts, the British retail customer tends to rely on direct account debit to pay bills for mortgages, utilities, and food.

Checking Less Common

Checks simply are not as prevalent as they are in the United States. According to Mr. Thom, debit cards are also coming into vogue. In Britain, major retailers, utilities and other companies that serve millions of customers must work in partnership with banks to establish electronic links.

Over the past several months, Midland has attracted some of Britain's largest companies, including British Telecom, the nation's primary telecommunications company, and Gateway, a major supermaket chain.

"Midland is strategically positioned to gain new retail and utility business," said Jerry McElhatton, president of Payment Systems Technology and Consulting, the company that oversaw the automation overhaul. "The new technology allows them to quote a lower price and then deliver a more efficient service. It's that simple."

The system is also equipped to take advantage of the newest developments in image processing and emerging technologies, Mr. Thom said.

Deidre Sullivan is a freelance writer based in New York City.

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