Habitually trying to stay a technological step ahead of much bigger rivals, Huntington Bancshares is on to what it believes is the next big thing in interactive banking.
Having come to the conclusion that today's back offices and customer data bases are inadequate for the rapidly emerging wired world, Huntington has devised what it considers a unique way to tie all the systems and customer access points together.
It could take years for the Columbus, Ohio, company to build such a full-scale system and prove its worth, and skeptics will scoff at a regional bank's ability to pull it off.
But since July 28, Huntington has had an ace in the hole: U.S. Letters Patent No. 5,787,403.
The Bank-Centric Service Platform Network and System, as the patent is titled, reflects some idealistic thinking about how a bank can shore up-or reclaim-its central position in consumers' financial lives.
Underlying Huntington's design is an assumption that "people are gravitating toward Internet connectivity faster than anyone could have predicted," said William M. Randle, the architect of Huntington's branchless banking strategies and initiator of the patent application.
Huntington itself, which recently passed the 100,000 mark in Internet accounts, expects to have 20% of its customers on-line by yearend and 50% in three to five years. Mr. Randle concedes that the patented idea is too big for a Huntington to put into action on its own, and it has begun to explore "partnering" opportunities with consultants and technology providers.
"To get everything in the bank connected may not be a six-month or even a 12-month deal," Mr. Randle said in a recent interview. But he said "E- bank," the shorthand he has been using for several years to describe this vision, will begin to take shape at his bank in pilot form this year.
Although Internet banking software is widely available and can be quickly deployed, Mr. Randle and other bankers have been frustrated by the complexity of linking the remote channels with the all-important storehouses of customer data in back-office computers, many of them inflexible legacy systems from an earlier era.
Mr. Randle warns that banks will be consigned to oblivion unless they can deal with and analyze back-office data instantaneously, or in "real time," and act quickly on what they learn in a "customer-centric" way.
If the concept is well executed, Mr. Randle said, then consumers could come to view their banks as conduits or portals out to the wider on-line world of financial and other information services.
"You can't do this with a batch-oriented back room," he said, referring to the ingrained practice of accumulating a day's transactions for processing in bulk at a later hour. A further problem is that data mining projects, meant to glean analytical and marketing insights from customer and transaction files, can take weeks or months to complete, raising questions about accuracy and strategic validity.
Mr. Randle said in the interest of getting "real-time data out front," he wants to "change the conceptual framework entirely."
He said, "To fully engage the information age, all the direct access methods-telephone call centers, voice response units, personal computers, Internet kiosks, smart cards-have to be tied together on a robust platform with something like E-bank, with a data base or operating system that is real-time-oriented."
The answer, according to the patent, lies in a refinement of middleware, a class of software that gets disparate computer systems to talk to one another. Middleware has become especially crucial in linking otherwise incompatible platforms over the Internet, corporate intranets, or virtual private networks.
In theory, the linkages would be from back office to front, in real time, "going across the entire distribution system and every touch point in the bank," said Gary Meshell, executive vice president of Perot Systems Corp.'s consulting subsidiary, Benton International, which has gotten a close-up look at the Huntington proposal.
Mr. Meshell said this is an attempt to solve operating and data- distribution problems "from the middle out, rather than from the transaction in." The latter describes most available Internet banking systems, he said, which are difficult to link to relational data base technology and ultimately to product sales.
"The transaction activity they handle is limited, and none are focused on the relationship-management aspect," said Mr. Meshell, who Mr. Randle said is one of the first outsiders who grasped the implications and potential of E-bank.
"With the data warehouse and data marts (special-purpose subsets of warehouses) out front, they can be accessed from anywhere on the network," Mr. Randle said. "The real revolution is thinking about a real-time world rather than a batch world. We have a whole executive management team focused on this real-time design."
Lofty ambition is nothing new for Mr. Randle, a veteran bank marketer who came to Columbus almost 10 years ago. Pushed and supported by Huntington chairman Frank Wobst, he has built a reputation for innovation that would not be expected of a $28.2 billion-asset bank holding company.
Securities analysts have been generally positive about Huntington's performance, but they are more likely to speculate about the bank's takeover candidacy than the possible paybacks from research and development. Huntington is trying to change those attitudes by explicitly integrating electronic delivery systems into retail strategy and linking them to efficiency improvements.
Huntington has set a goal of lowering its overhead-cost indicator, the efficiency ratio, to 49% in 1999 from 54.9% in 1997, leaning heavily on "increased use of direct access," Mr. Randle said.
Mr. Randle spearheaded the telephone-based banking project that made Huntington one of the country's first "direct banks" in 1992. It was one of the early investors in Security First Network Bank, the pioneering Internet bank soon to be sold to Royal Bank of Canada, and it launched its own Web service in 1996.
Last year Mr. Randle was promoted to executive vice president and was assigned line responsibility for the virtual banking channels, giving them the same status in the management hierarchy as Huntington's geographical regions.
Mr. Randle has gone down the patent road before, with admittedly mixed results. In the early 1990s he worked closely with a group of AT&T Corp. scientists on a screen telephone for access to banking and information services. The souped-up phones never took hold, and the rise of the Internet's World Wide Web overtook the AT&T Smart Phone's networking capabilities.
When the project met its demise and Huntington settled its accounts with the phone company, the bank and Mr. Randle had screen phone patents in their possession and the outlines of what was to become the bank-controlled E-bank gateway to outside channels.
Mr. Randle said he recognized then that there had to be an "aggregation platform," or bridges between all internal systems and external product and data sources. Some of those offerings might be by competitors, but if such referrals met account holders' demands, they could help a bank to retain and build on its customer relationships.
In another sense ahead of its time, the failed screen-phone venture provided an introduction into "thin client, fat server" computing-an elementary consumer device relying on a network for links to rich data bases-that has become an Internet-era standard.
The notions of real-time data base management, the customization that can result from customer knowledge, and the bank-as-gatekeeper role converge with the current trend toward portals to the Internet. Companies including America Online, Yahoo!, Excite, and Netscape Communications are vying to be such entranceways, and Mr. Randle does not want to see banks and their services lost in that shuffle.
Writing in a recent issue of The Industry Standard, an Internet magazine published by International Data Group, Bob Davis, president of the search engine company Lycos, said "successful hubs" will have to do "more than just aggregate information. Those that combine a well-known brand with an experience that meets the emotional needs of consumers will win in the end."
Banks have been struggling to gain customer intimacy in part because of legacy systems' limitations. In one attempt to overcome those obstacles, the Dallas-based consulting firm Action Systems formed a coalition of technology companies including Hewlett-Packard Co., Exchange Applications Inc., and Thinking Machines Corp. to get backroom data out to the front retail banking lines. The group called itself the Relationship Optimization Solution Set.
Mr. Meshell, who is based in New York for Benton International, said it makes sense to try to solve the problem "across the enterprise," but the task is so complex that banks might have to rely on joint ventures or utilities to put the pieces together.
Pehong Chen, president and chief executive officer of BroadVision Inc. in Redwood City, Calif., said his company has made major strides doing just that, linking its One to One marketing systems for Internet clients with legacy data bases. Customers include American Airlines, Citicorp, and Banco Santander.
BroadVision this month announced a marketing and strategic alliance with Security First Technologies, the affiliate of Security First Network Bank that Huntington helped launch. Mr. Chen said he cautions Huntington, or any other bank, not to try to do too much on its own. "We will be talking to them," he said.
"We wouldn't be doing this if it were not for the overwhelming success of the direct bank and Internet banking," Mr. Randle said. "If you believe half our customers will be on-line in three to five years, how can you not believe in this?"