A growing number of big banks are committing millions of dollars to transform their prosaic telephone service operations into souped-up sales and service centers that can in many ways replace branches.

Technologically sophisticated banks such as PNC Bank Corp., Keycorp, and Barnett Banks have made the restructuring of call centers one of their biggest priorities.

"The call center is evolving from a necessary evil to a strategic marketing weapon," said Patrick J. Swanick, executive vice president of consumer banking and call center services at Keycorp. "The call center is where much of our investment and our emphasis lies."

"Banks are restructuring and closing branches, and what is clearly replacing them is the telephone," said Robert Landry, technology consultant at Tower Group, Wellesley, Mass.

Keycorp says that its call centers generate the sales of many branches at 20% the cost.

And as the Cleveland-based superregional closes between 20% and 30% of its 1,400 branches over the next five years, the call center will be relied on to pick up the slack.

Similarly, PNC has been quoted as saying that its new centralized telephone service center will be able in the near future to generate the equivalent of 200 branches' worth of sales. The Pittsburgh company also plans to close some 30% of its branches over the next two to three years - in a move unrelated to any in-market merger.

But as banks push their customers to rely less on the local branch and more heavily on the telephone and the ATM, they are finding they must give the call center more sophisticated tools than it has had before - the type of tools that historically have been reserved for platform personnel in the branch.

In a typical call center, a customer service representative must maneuver through many different computer systems to answer a single customer's questions about several accounts.

The representative probably spends more time accessing data than talking to the customer. And if the customer wants to be transferred to the mortgage department, or to find out where the nearest ATM is, the telephone representative must look through printed brochures.

All of that takes up precious time.

Such delays cost a bank about $10,000 per rep over a year's time, said Robert J. Pavone, vice president of Genesis Solutions, a Huntington, N.Y.- based unit of CFI ProServices Inc.

"That's computer time, 800-telephone charge time, salaries, facilities - all that eats into your profitability," Mr. Pavone said.

"Banks have realized that if they harness technology to answer customers' questions, the customer service representatives will be more productive, and the customer will feel the bank is more responsive."

In the new call centers, all of this information is on-line, and service representatives are calling up screens containing customer profiles - not just single customer accounts.

Barnett recently announced plans to use object-oriented technology from International Business Machines Corp. to aid telemarketers in its call centers.

Object-oriented systems, which are compartmentalized pieces of software that can be easily accessed and modified, will give sales reps faster and more comprehensive views of customers' banking habits and requirements, the bank said.

"As banks redesign the way they deliver banking services during the next decade, object-oriented technology will play an extremely important role," said Jerry Maher, director of information technology at Barnett. "Banks must be able to introduce new products very quickly to maintain their competitive edge, and object technology will help us do that."

The Florida bank used an IBM software development tool called VisualAge for Smalltalk to design the telephone customer service application for its call center operation in Jacksonville.

The resulting system helps telemarketing representatives retrieve prospect information, and verifies the information against existing customer data residing in various Barnett computer systems. The system can also automatically dial the prospect, and guide sales reps through a product presentation.

When Keycorp developed a new customer service system to log customer contacts and create items for following up with the customer, it began by installing the system, not in its branches, but in its call center.

So far, it has been rolled out to two of the company's four telephone service centers. Eventually the system also will be installed in branches, officials said.

A platform automation system from Olivetti North America Inc. will be deployed both in the branches and in the call center's sales units. The sales system follows up on direct-mail packages, focusing on customer retention and telemarketing.

Sophisticated call centers like Keycorp's are staffed by more highly skilled employees than conventional ones, said Mr. Landry of Tower Group.

Keycorp is hiring college students or college graduates who go through a five-week training course, Mr. Swanick said.

Keycorp's four centers employ about 1,000 people, and handle a total of 130,000 calls per day. About 80% of those inquiries are service calls, and 20% sales calls, but Keycorp expects the ratio to change to 60-40.

Call volumes have grown 20% to 25% on the customer service side since 1992, bank officials added.

As those call volumes mount, some banks, such as Wells Fargo & Co. and BankAmerica Corp., have begun to charge fees for what they consider excessive use of the telephone service line. Eventually, most banks may charge such fees in order to help recoup their technology investments, Mr. Swanick said.

"We've thought about charging fees, and from time to time we've thought hard about it," Mr. Swanick said.

The reason is that the number of times a customer "visits" a bank - whether in person, by telephone, or through the ATM - has gone up, he said.

"We have people who call us every day, and they may have only $100 in the bank. With an 800 number, we're paying the bill. You've made a loss leader go further into the red by letting them contact you even more frequently."

"We need a thermostat on how often the average person interacts with the bank," Mr. Swanick said.

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