Ohio Rivals Up the Ante in Technology
At a time when banks in other regions are slashing operations budgets, the major competitors in one state - Ohio - are pouring tens of millions of dollars into some of the most ambitious technology projects in the industry.
Banc One Corp., Huntington Bancshares Inc., Fifth Third Bancorp. National City Corp., and Society Corp. - all among the most profitable banking companies in the country - also happen to be among the most innovative in technology, analysts say.
As a group, they spend more than $2 billion a year on technology. Individually, they spend more on technology than banks of comparable size in other regions, observers say.
The Ohio banks view their technology investments as critical to future success. "The institutions that will survive here must be able to service their customers in a unified, consistent, and aggressive fashion," said Timothy Ballinger, senior vice president of Midwest Payments Systems, a subsidiary of Fifth Third.
"I view the retail markets in Ohio as pretty competitive, and that means it's critical that operations and technology have a clear relationship with retail," said Harold B. Todd Jr., executive vice president of National City Corp.
The five big Ohio banking companies together have 1,413 branches in the state. They account for about a third of its $12 billion of deposits.
Until recently, each bank kept to its own part of the state, in a sort of gentleman's noncompetitive agreement. But with industry consolidation, they are repeatedly invading each other's backyards.
New Mix of Clientele
And their customers have changed. Although Ohio lost much of its steel industry in the 1980s, the state's extensive university system has contributed to the development of corridors of high-tech companies like the CompuServe information network, based in Columbus.
This influx of white-collar workers has made the banks more profitable and enabled them to introduce electronic banking products to a more receptive customer base.
As technology innovators, Banc One stands out in retail back-office systems; Huntington in image processing; and Fifth Third, Banc One, and National City in processing services for other banks.
In retail banking, Banc One's aggressive use of technology has singlehandedly intensified the competition. To some extent, the rest of the group are playing catch-up analysts say. But in other areas, the smaller players are outstripping the Columbus-based powerhouse.
With $28 billion in assets, Banc One is the largest banking company in the state. Technology serves a strategy of capturing the mass market, and enables Banc One to expand rapidly through acquisition.
Banc One uses technology to keeps tabs on how well its highly decentralized bank units are performing. Retail systems are also used to bring new banks rapidly into the fold, and to present customers with a consistent marketing approach.
"What we are constantly looking for is anomalies, either positive or negative. If we see something working well in a market, we let all the banks know it's working well and why," said John Russell, vice president of communications at Banc One.
Integrated System on Track
Banc One is nearing completion of its integrated retail banking system, one that observers say has already cost over $100 million to develop.
The retail system includes a sophisticated customer information system that is designed to give the bank even greater access to information about the profitability of products and units. The system, which has taken Banc One and its partners Norwest and EDS Corp. five years to develop, is scheduled to be in all branches in the state by first quarter 1992.
Other banks and software companies in the 1980s tried unsuccessfully to build similar systems.
Cleveland-based National City, with $23 billion in assets, holds a slight edge over Banc One in terms of deposits held across the state. National City has about 10% market share in Ohio; Banc One about 9%.
In February, National City plans to complete a project to standardize software across the bank. That effort, part of the bank's upgrade of retail banking systems, is aimed at eliminating discrepancies among systems for lending and other functions.
"We'll have commonality in procedures to provide services to customers across the bank," Mr. Todd said.
Cleveland-based Society, with $15.6 billion in assets, is beefing up its retail banking systems to help it grow through acquisition. Using advanced programming tools that automate much of the grunt work involved in software development, Society is replacing four existing teller automation systems with a new package called the On-Line Delivery System, or Olds.
Olds, which cost $10 million to develop, will give tellers and other bank personnel on-line access to customer information stored on the mainframe. The bank is testing the system in 21 branches throughout Ohio, and plans to have it rolled out to about 210 of its 350 Ohio branches by the end of first quarter 1992.
Installment Loan Solution
"Having a standard delivery system enables us to offer products and services in a consistent framework," said David R. Campbell, senior vice president, information technology group, at Society.
Society also is in first-phase testing of image processing technology for use in its installment loan division.
Columbus-based Huntington, with $12 billion in assets, is trying to differentiate itself from its competitors, particularly from Banc One, with several innovative technology and marketing approaches. The bank is rolling out a $12 million system called the Personal Banker, aimed at helping account managers cross-sell products.
But Huntington is applying the private banking concept to blue-collar and white-collar professionals.
Another first for Huntington is an marketing alliance with American Telephone and Telegraph Co. to offer other banks a specialized telephone for home banking. Citicorp has developed a similar telephone for home banking, but plans to market only to its own customers.
Check Imaging Developments
Huntington is also a pioneer in check image processing. The $8 million system, supplied by Unisys Corp., is expected to cut back-office costs in half by mid-year 1992, and to pave the way for new products.
Cincinnati-based Fifth Third, with $7.3 billion in assets, has viewed technology as a profit generator. Its subsidiary, Midwest Payments System, runs Jeanie, one of the oldest automated teller machine networks in the country, and does credit card processing for retailers such as Bloomingdale's.
At Fifth Third, the focus is on quality systems at the lowest possible cost.
On the retail side, Fifth Third already offers a sophisticated telephone banking service that allows customers to make a variety of transactions. Customers can pay their bills over the telephone, in addition to getting account information and credit card balances. Customers can verify the 20 last checks cashed.
Along these lines, Fifth Third is developing in-house an audio system that will enable customers to get balances by speaking into their telephones.