Technology has changed the face of many kinds of retailing, including retail banking.
With the advent of high-tech gadgetry at the point of sale - such as check readers - and alternative purchasing channels - like mail order outlets and computer on-line services - consumers have come to expect more from those delivering services and products.
These expectations have sent bankers who have lagged scurrying to develop new ways of doing business.
"The trick of good retailing is to make 95% of the experience gratifying, and you can only do that with technology," said Tom Hollister, group executive for retail and small-business banking at Bank of Boston.
"Customers have come to expect the kind of technologies they've seen other places," added Boxley Llewellyn, manager of retail delivery solutions at International Business Machines Corp., Charlotte, N.C. "If Kmart can read a check at the point of sale and do instant analysis, why can't their banks?"
Increasingly, bankers are heeding that clarion call to action and retooling their branches with personal computer-based systems. The goal is to justify the high cost of brick and mortar offices by creating an environment that builds relationships and nurtures sales in addition to serving customer transaction needs.
Bank of Boston, for example, is spending about $30 million on a massive upgrading of its 280-branch network.
The upgrading includes personal computers on a network, teller and platform stations running client/server applications, and a new telecommunications infrastructure to support the branches. It also includes investments in alternative delivery mechanisms, such as telephone and home banking.
The upgraded system enhances teller functionality and supports efforts by bank employees to sell more products, said Kevin Roden, director of consumer banking systems.
"The key is to get the transaction out of the way as fast as possible and sell products," said Mr. Roden.
With PCs and sophisticated data base technology, he said, the bank expects to achieve that goal and pull ahead of its competition.
Not all bankers, however, are willing to cast off the dumb terminals that have been supporting their branch operations since the early days of computerization.
Although most agree that platform operations demand the automated functionality offered by PCs, some bankers see PC technology as overkill at the teller window.
Anthony McEwen, senior vice president at National City Corp., Cleveland, is one such banker.
Mr. McEwen says he simply cannot justify the purchase of PCs to replace the controller-based teller terminals his bank installed in 1977 - though he is upgrading the bank's platform operations with Pentium PCs.
Rather, Mr. McEwen said, National City is replacing the controller that supports its teller operations with a PC operating as a local area network server and upgrading the functionality of its teller terminals to emulate PCs.
With nearly 3,600 teller stations operating across 650 branches, Mr. McEwen estimated that National City would save $15 million to $18 million by not replacing its teller terminals in the initial stages of the bank's branch system upgrading.
Mr. McEwen said he looked long and hard at the idea of replacing all of National City's branch technology with PCs - teller as well as platform stations - but he could not justify that approach on the basis of cost.
The $15 million to $18 million tab for a PC upgrading of teller stations, Mr. McEwen said, would have about doubled the cost of the automation project.
"You can make a lot of arguments for pursuing that strategy," he said. "What we couldn't make was a lot of business sense out of that strategy."
The emergence of alternative delivery mechanisms will diminish the role of the teller window, Mr. McEwen predicted, leading National City to assume a slowdown in the rate at which transaction volume increases.
"Therefore, we went after a solution that allowed us to manage cost," he said.
Research by Ernst & Young supports Mr. McEwen's predictions.
The research, done last year on behalf of the American Bankers Association, suggested that the share of retail banking transactions processed through branches would drop from 61% today to 44% by 1997.
National City is not alone in pursuing a strategy that puts purchases of new teller hardware on the back burner.
Stefan Elmquist, vice president for application systems at Network Controls International Inc., Charlotte, N.C., said it is an approach to automation that several banks have found beneficial.
NCI developed the application software National City is using to support its branch operations and also is helping other banks automate their branches.
The system, NCI Banc-Manager, was developed originally as a PC application but has been modified to support dumb terminals linked to a PC server.
Although the modified terminals lack the graphical sophistication of PCs, they incorporate most of the latter's functionality, Mr. Elmquist said.
Perhaps most importantly, a bank that takes this approach can use the same application software when it upgrades to PC technology, thereby supporting a gradual transition to PCs, Mr. Elmquist explained.
"As long as you feel dumb terminals can do the job, why not prolong the life of those and just move part of the solution over to PCs, the servers?" asked Mr. Elmquist. "That way, the bank can move the cost of the PC to tomorrow, when it can get better PCs for the price."
Bank of Boston's Mr. Roden, however, is not convinced the savings from deferring PC purchases can create value for his bank.
"The cost of the hardware is the cheapest part of the deal," he observed. A $2,500 PC amortized over a three-year planning horizon would cost the bank about $800 a year. "I think that clearly is worth it," he said.
Obviously, there is room in banking for both approaches.
"There's no question that all banks eventually will have the same PC- based technologies in their branches," observed Mr. Elmquist of NCI. "But there are two ways of getting there."
A bank can throw away all its aging computer technology and start from scratch, or it can take a gradual approach, replacing some functions and then others. In the second scenario, the teller systems usually are replaced later, Mr. Elmquist suggested.
For many banks, said Mr. Elmquist, the gradual approach is a sound business decision because, "three years from now, that PC is going to be obsolete."
And in those three years, bankers like Mr. McEwen may be able to pursue other types of automation that are not as threatened by obsolescence.
National City, for example, aims to eliminate all the paper typically created when a customer does business at the teller window - cash-in and cash-out tickets, general ledger receipts, etc.
By moving to an on-line posting environment, explained Ken Michaels, National City vice president for branch automation, the bank can save about $60,000 a month.
Mr. Michaels expects to eliminate about three million documents per month that are created by tellers in support of deposits and withdrawals. These documents must be processed by proof operators, at a cost of about two cents each.
"We simply can't afford to do that anymore," said Mr. Michaels.
With the bank's new teller system, which features an electronic journaling capability, tellers will be able to key in transaction dollar amounts directly to their terminals, and all necessary postings will be taken from that information.
Mr. Michaels conceded that details must be worked out with respect to the legal ramifications of truncating teller documents. But other financial institutions, notably several thrifts, have been truncating documents for years, he added.
With the advent of electronic journaling software for new teller systems, he suggested, it is simply a matter of time before truncation becomes commonplace at commercial banks.
Truncation, said Mr. McEwen, offers National City a major savings opportunity. It already manages its workflow processes aggressively, he said.
"There's not a whole lot of fat that any level of automation will allow us to take out of the system," he said.
Though most banks look to automation as a means of achieving staff reductions, Mr. McEwen said, "we think we've already picked that fruit."
What National City wants to do instead is enhance throughput and reduce back-office overhead. And for all banks, that is an important consideration, given the need to support multiple alternative channels.
"Banks have come to recognize the need to support multiple delivery channels," explained Bob Landry, technology analyst at the Tower Group, Wellesley, Mass.
That means not spending everything budgeted simply to automate branches. Banks should earmark portions of their automation budgets for projects like remote banking centers and home banking, Mr. Landry said.
But even in an era of automation, in which consumers can tap in to their banks via PCs or perform transactions at automated banking centers, the branch and branch employees will always play an important role because of the human factor, bankers say: When all is said and done, someone must be able to communicate with the customer.
Advice is an important part of banking, explained Bank of Boston's Mr. Hollister, "and PCs can't give you advice."
But by equipping branches with modern PC technology, bankers hope to make it easier, and cheaper, for employees to offer that advice.
Ms. Murphy is a freelance writer based in Takoma Park, Md.
