Chemical Banking Corp.'s recent automated teller machine troubles have their root in hardware failures and poor controls over ATM card issuance, according to the bank's executives.

But Chemical officials declined to say when they thought the service problems would subside, angering some cash-starved customers.

"I called the customer Service line to ask if these troubles would last long, and they said they don't know," said one Chemical customer as she waited in line for help at the 55 Water St. branch in Manhattan. "If they don't know, who does?"

As reported recently in this newspaper, such scenes have become more common at Chemical since its merger with manufacturers Hanover.

Chemical's ATMs, which usually function more than 98% of the time, have been working at an average "up time" rate of 95% in recent months, according to internal reports.

While it might not appear to be a big problem having 5% of the bank's nearly 1,000 machines down at any one time, in densely populated New York City, that performance level is not acceptable, Chemical officials admitted.

At Odds with Ad Campaign

The service lapses also represent a marketing nightmare for a bank that is touting service quality as the centerplece of its current advertising campaign.

In a larger context, Chemical's ATM problems also highlight how difficult it is to keep merger - related operational changes from affecting customers.

"We try to minimize the amount of [merger-related] change felt by customers," said Ronald A. Braco, vice president and director of electronic banking at Chemical. "The ATMs are not currently meeting our internal service standards, but we're working hard to fix that."

Card Issuance Problems

The problem most commonly cited in an informal sampling of Chemical's ATM users was the inability to get cash from the machines. Chemical executives said this problem is being caused by poor management controls over issuing ATM cards.

Specifically, employees at about 215 branches of the bank - the old Chemical branches - were recently empowered to issue ATM cards on the spot. But the training in card issuance procedures did not prepare these employees to handle the volume of requests for new and temporary cards they were required to process.

As a result, some cards have been inadvertently deactivated, frustrating customers who tried to use them. Other customers received multiple cards, which created confusion as to which card was usable.

Special Requests

Chemical Bank executives admit that training procedures could have been better. But they point out that the issuance troubles were exacerbated by an unexpectedly large jump in the number of requests for temporary cards and personal identification number changes.

In May, Chemical handled about 30,000 such requests. In June, when its branches received card issuance capabilities, the requests for "status changes" more than doubled to 67,000.

"The floodgate opened, and frankly, we weren't prepared for it," Chemical's Mr. Braco said.

Chemical Bank is working hard to remedy the problems stemming from inexperience with branch-based card issuance. Over the past few weeks, representatives from all 411 Chemical branches were retrained on issuance procedures.

An Aging Fleet

But the troubles with Chemical's ATM services do not end with card issuance. The bank also said that the aging cash machines manufactured by Omron Systems of America Inc. that make up about a third of the bank's 950 ATMs have been experiencing a much higher number of outages than its newer terminals from NCR Corp.

Chemical has already begun to address this problem. So far this year, it has discarded 100 Omrons in favor of new NCR machines with touch-sensitive screens. Bank officials said the plan is to replace every Omron ATM with a new NCR unit by the end of 1994.

The NCR terminals carry a guarantee of 99% availability, and Chemical executives indicated that the machines they have installed so far have exceeded that performance level.

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