Bankers are wrestling with their technology as excitedly and rambunctiously as ever, and it looks like technology is winning.

Never have financial institutions spent more money on processing and information systems.

Never have these expenditures and their underlying strategies been viewed as more critical for current competitiveness or future survival.

Never have senior managers sounded more personally invested in such hot buttons as call centers and data warehouses, alternative delivery and the Internet. And that goes all the way up to the chief executive officers once known for their wariness, skepticism, and computer illiteracy. Some now view Microsoft Corp. as an actual or potential competitor and even seem to relish the confrontation.

Could they be succumbing to the hype that has put Microsoft's Redmond, Wash., campus and Silicon Valley, Calif., at the center of the corporate universe?

Or are bankers forthrightly confronting a new reality, that "technology is the product," as First Union Corp. chairman Edward E. Crutchfield recently put it?

Has the pendulum swung too far toward an indiscriminate embrace of technology and away from the financial discipline that prevailed when bank earnings and economic growth were less forgiving?

Yes, yes, and maybe, say the experts.

"There is a lot of hype, a lot of neat new ideas," said William M. Fenimore Jr., managing director of Integrion Financial Network, the home banking consortium of 18 banks, International Business Machines Corp., and Visa U.S.A.

"We have to sort through the hype and get at what is real, and that means understanding what customers really want from us," said Mr. Fenimore, a former CoreStates Financial Corp. officer.

"When CEOs talk to me, I often think there should be a couch in the room," said M. Arthur Gillis, a Dallas-based consultant and trenchant observer of the bank automation scene. He said that in "letting it all out" the bankers place technology among their top five concerns alongside merger and acquisition decisions, hitting earnings targets, retaining and gaining customers, and matters relating to personal tenure.

"Banking is still a darn good business," Mr. Gillis said, "if only its managers would pay attention to it" and not be distracted by "scapegoats" like Microsoft. "The most important thing to focus on is the customers."

Such comments indicate that amid the unmistakable acceptance of many things technological and the debates about how dangerous Microsoft might be or how much the year-2000 software fix will cost, there is also a fair amount of soul-searching.

"A lot of issues run through retail banking, alternative distribution being one of the big ones," said Peter Carroll, managing director of the consulting firm Oliver Wyman & Co., New York. "The problem is that alternative distribution strategies were put in place on the assumption that they would be cheaper. But costs go up, not down," because electronic networks have added to the transaction load without displacing entrenched costs.

"There was a simple acceptance of technology as a panacea," Mr. Carroll said. "It turned out not to be."

Some industry firebrands say they can get past those problems.

Wells Fargo Bank executive vice president Dudley Nigg complained during the Bank Administration Institute's retail delivery conference last month that bankers are not thinking enough like the high-tech people they should be becoming.

"Sure, we are very profitable today, but we won't be around," he warned. "We have to take a longer-term view," like that of a technology company-he did not name it-that is not expecting to make money in its electronic commerce business for 10 years.

"The question is not whether we can make money at this today," Mr. Nigg said, "but can we survive long term not doing this?"

"The electronic commerce investment is a focus on the customer in the future," said William M. Randle, executive vice president of Huntington Bancshares, Columbus, Ohio. "If you are not there, there will not be any customers in your future."

But at that same retail delivery conference, Fleet Financial Group senior vice president Robert B. Hedges soberly assessed the economics of home banking and alternative delivery as "remarkably immature." He suggested too many bankers have bought bills of goods from system vendors and need to manage expectations and expenditures more realistically.

"There is a lot of alchemy being sold," Mr. Hedges said. "Is this like the arms race and it's 1962 and just a question of how much money do you spend?"

It is hard to find answers in the raw, staggering numbers. Meridien Research Inc. of Needham, Mass., estimated that U.S. banking companies spent $17.6 billion last year on information technology. (They outspent the insurance industry by about $1.5 billion and the securities industry by $6.3 billion.)

To put that in perspective, commercial banks together probably spent $70 billion last year on employee salaries and benefits.

What Meridien terms "routine" financial technology spending is rising 4.7% a year. The $7 billion to $8 billion of "strategic" spending, that ever more crucial investment in the future, is climbing 17.7%.

In the same vein, George A. Bicher's research team at BT Alex. Brown found in a survey of major regional banking companies that almost half of technology expenditures were still geared toward maintenance, process improvements, and cost-cutting.

Another 19% was to improve service, and 27% was to increase revenues. Of the 27%, about 40% was allocated to traditional retail banking, indicating where the big opportunities are perceived.

"It appears that banks are not simply casting a wider net for new business but dedicating significant resources toward enhancing revenue production from the traditional customer base," said the BT Alex. Brown report. "If successful, banks would not only add to revenues but increase the profitability of customer relationships."

Even if commercial banks increased total technology spending by as much as 10% last year, they covered it at least a couple of times over with a projected $4 billion increase in aggregate net income.

In the current favorable climate, bankers have learned how to afford and live with technology. CEOs seem to be talking about it with a newfound familiarity and realism.

While chairman of Boatmen's Bancshares before he became chairman of its acquirer NationsBank Corp. last year, Andrew Craig conceded that Boatmen's had technological limits. NationsBank had resources Boatmen's could not hope to match.

CoreStates CEO Terrence A. Larsen and his boss-to-be, First Union's Mr. Crutchfield, said there was a technological factor in their recent decision to merge.

Mr. Crutchfield, in a speech to the retail delivery conference, quoted Barnett Banks chairman Charles Rice as saying much the same thing about his deal with NationsBank.

Bigness has become a virtue to many of these bankers. This despite a paucity of empirical proof that economies of scale operate in banking.

"When bankers talk about economies of scale, it is really about adjustments in capacity utilization," said Mr. Carroll. "They place too much emphasis on scale and not enough on innovation, where they can get a lot more bang for the buck."

But scale religion is spreading.

Just this week, when Fifth Third Bancorp announced its purchase of $2.8 billion-asset State Savings Co. of Columbus, Ohio, State Savings vice chairman Donald Shackelford said technology pressures that had been building for 25 years had reached the point where they influenced the merger decision.

"Being big can allow you to take a hit; you can afford to write down legacy systems," said Bank Administration Institute executive vice president Rockwell Clancy 2d.

"A large player can make some cautious investments and bets, and it will take multiple bets to retain the flexibility to move the way the market eventually will," said Patrick J. Swanick, vice chairman of KeyCorp in Cleveland. "In that sense, smaller institutions could not match up with the necessary technology investments."

And in that sense, calls like Mr. Nigg's to get high-tech religion and lengthen planning horizons do not sound so farfetched.

"Sometimes I feel like I work for a large computer," Mr. Crutchfield said. "Banks have become like giant software entities. Is this overstated? Yes, but not as much as it used to be."

Such talk at high levels "has been going on for a few years, but now the crescendo is nearing its peak," said Mr. Gillis. "A CEO doesn't want to be called a dinosaur any more. He knows technology is 'in.' And it's not just the young CEOs."

Mr. Gillis said he remembers getting laughed out of a management meeting in a Rhode Island bank, a predecessor of Fleet Financial Group, in 1971 when he proposed buying a cash dispenser for $55,000-just for a test.

Today, Terrence Murray, Mr. Gillis' boss back then, is chairman of Fleet, and the chief technology officer, Michael Zucchini, is a vice chairman.

A bank of Fleet's size is spending hundreds of millions of dollars on technology, has thousands of automated teller machines, is serving tens of thousands of customers via personal computers, and has made strategic investments in ventures like Integrion-all presumably in keeping with Mr. Hedges' admonition that it "practice and try a lot of things ... and not get caught choosing 'one right way' that proves incorrect."

In a further show of technical grounding and common cause, many of Mr. Murray's peers-though not he, in this instance-sit on the board of the Banking Industry Technology Secretariat. The Bankers Roundtable organized that group in 1996 to present a unified industry front on emerging technical and payment system issues. CEOs like Mr. Crutchfield, David Coulter of BankAmerica Corp., Hugh McColl of NationsBank, and John Reed of Citicorp are part of it.

Out at the front lines, "the real problem in banking is people," said Mr. Gillis. CEOs simply have to buy technology because "high school graduates just aren't ready to handle customer-related jobs that require some thinking, analysis, and judgment."

But bankers are still bankers and may not yet merit membership in whatever clubs Bill Gates belongs to.

"We get no credit for research and development the way pharmaceutical or software companies do," said Mr. Swanick of KeyCorp. "Anything that detracts from short-term results gets a lot of scrutiny."

"Doing new stuff takes patience and I don't know if banks have the luxury," said Robert Hall, CEO of Action Systems in Dallas. "If a bank has a bad quarter, the executive team could be out. A company in the technology field isn't in danger of being bought if it has a couple of bad quarters in a row.

"It's not that bankers are not smart or capable enough. They are just playing in a different ball game."

Even if big banks can "buy patience," said Mr. Clancy of BAI, they can't break free of short-term earnings pressures.

"It is well and good to invest in multiyear projects, but too often they suffer from a lack of clear objectives," said Charles Wendel, president of Financial Institutions Consulting, New York. "If I approve a construction project, I want to know there will be a building at the end. If I approve a tech project, it often just leads to another tech project."

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