This spring, Carlo De Benedetti, chairman of Ing. C. Olivetti & Co., made a formal visit to the headquarters of the Italian Bankers Association at Palazzo Altieri in Rome.

The visit was no routine event. It was the recognition of what is quickly becoming a success story involving Italian banks and the country's leading computer firm.

Last year, Italian banks invested $3.26 billion in information technology, up 10% from 1990 and almost 30% since 1988. Moreover, investments are expected to jump another 30% by the end of 1993.

It is estimated that Italy's top eight banks will budget $130 million annually, equivalent to 4% of operating costs for information systems over the next few years.

And Olivetti, the leading supplier to the Italian banking sector in personal computers with a 49.2% market share and in software and services with a 41% market share, stands to make substantial gains.

The Italian banking sector, which accounted for 32.5% of Olivetti's domestic sales in 1991, pushed sales in that sector up 38% since 1989 to $1.31 billion in 1991.

Italian banks have been generally trying to modernize the banking system and close the technology gap that was leaving Italian banking behind the rest of Europe. Today, however, heavy investments in information technology are being largely spurred by new legislation and reforms within the Italian banking system itself.

One such reform, the liberalization of procedures for authorizing new branches, has led to a boom in new branch openings. A large majority of new branches are highly automated minibranches with a staff size as low as four.

"Deregulation on new branch openings gave Olivetti the opportunity to develop what we call a banking shop," said Roberto Zucolin, Olivetti's industrial marketing director for the banking division. He said that the 100-square-meter, totally automated branches have 14 turnkey systems and a wide range of self-service terminals.

He said Olivetti provides project planning, architectural design, systems integration, project implementation, and maintenance for the "banking shops."

Olivetti has developed and installed 70 of these minibranches for banks in Italy.

'Electronic Lounges'

At Cassa di Risparmio delle Province Lombarde or Cariplo, director general Sandro Molinari said the bank has always been a front-runner in information technology in Italy. While Cariplo develops their own software in-house, the bank's self-service "electronic lounges" are equipped with Olivetti ATM and other automated teller equipment.

"Since the early '80, we've been moving simpler banking operations to the bank's Caripersonal ATMs," said Mr. Molinari. "Today, customers can make even very sophisticated operations electronically at Cariplo, but we are not going to be satisfied. The bank of the future does not mean merely increasing the quantity of automated services, but more importantly, the quality of services offered," Mr. Molinari underlined.

Standardization in the '90s

A further consequence of the banking reforms has been the concentration of Italy's highly fragmented and regionalized banking sector into fewer and larger multiservice banking groups either through mergers, acquisitions, or the creation of banking consortia.

"For the new bank holding groups this has meant the integration and standardization of information systems," notes Mr. Ziccolin at Olivetti. "And in some cases, the development of a whole new system," he adds.

One case in point is the Banco di Roma merger. Cesare Geronzi, director general of the new Banco di Roma Holding, said that a study on information technology was a crucial part of the prospectus on the merger of the three Rome-based banks. It was decided to create a bridge system ad hoc to facilitate the merger and avoid problems for customers until the new system is in place within one or two years.

Mr. Geronzi explained that the new information system was developed as an answer to two main problems resulting from the merger: an exuberance of personnel in Rome (around 20,000 employees) and the need for territorial expansion by opening small branches.

"Given the inflexibility of human resources in Italy, we are able to achieve our double objective by diverting all the administrative operations and bureaucratic procedures from the outlying subsidiaries and branches and concentrating it at headquarters in Rome, while at the same time freeing personnel in those regions to open new minibranches and concentrate on commercial banking efforts," he explained.

In this way, Mr. Geronzi added, duplications will be eliminated and productivity will increase as well.

Banco di Roma said it plans to spend $290 million over the next 18 months in information technology.

"We strongly believe in self-service banking," said Mr. Geronzi. "We are working at a rapid pace to install POS and ATM centers."

At San Paolo Group Holding, joint chief executive Alfonso Jozzo said that information technology was playing an increasingly important role in the strategy to become Italy's leading European bank. He said that as they acquire banks abroad, priority is given to linking up the new bank to the information and accounting systems at Turin headquarters to maximize the efficiency of cross-border transactions for customers.

Mr. Zuccolin said that Olivetti has been studying a European banking system that would set standards for information technology for the next three years. He said that Olivetti, together with a U.S. partner, will soon announce a broad accord in this area.

Technologies of the Future

In a glimpse of banking technology of the future, Mr. Zuccolin described the development of a telematic briefcase. The briefcase is in an experimental phase and is being tested by the regional savings bank, Casse di Risparmio di Verona, in door-to-door marketing. The banker can link up his customer and bank branch via cellular phone, while at the same time building a data base on his customer's needs.

Home banking is also on the ris e in Italy, but major developments will be stalled until the Italian telecommunications system is deregulated.

Currently, Olivetti is investing in the multimedia sector for banking. Last month, Olivetti, together with the Italian Bankers Association, did a seminar to sensitize banks to the possibilities and advantages of multimedia systems for the sale of specialized products such as insurance, or for counseling on investments and loans.

Olivetti has developed a 20-square-meter prefabricated kiosk, equipped with multimedia interfacing alongside traditional ATM self-service facilities. The Ivrea-based company said the kosks will be ideal at highway rest areas and at department stores.

Services-Oriented Approach

Italian banking executives said that heightened competition -- stimulated by the central bank and industry deregulation -- has forced them to seek ways of increasing efficiency, productivity, and quality. They said they are looking to the information technology industry to supply solutions to those needs.

"The future of the Italian banking market is in services," stresses Mr. Zuccolin. "The problem is complex for Italian banks that have not been oriented toward retail banking," he said, adding that "Olivetti's job is to help change the bank while allowing the bank to continue doing its job as a bank."

Olivetti said that its U.S. subsidiary, ISC-Bunker Ramo, won a contract from Citibank to equip its 500 branches with automation systems. The company said the automatuion project, to be on-line by 1994, has an estimated value of $25 million.

Last month, Olivetti won a $300 million contract from McDonald's Corp. to install personal computer system in its 8,800 fast-food outlets across the United States.

Olivetti's open systems architecture, allowing specially tailored functions and full integration with existing information systems, was the basis for selection by both companies, an industry source said.

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