The Bank Administration Institute dared to schedule its "branchless banking" conference in steamy Orlando the last week in June.
That it was off-peak for Disney World and Sea World did not deter almost 300 people from attending. The topic is at least as hot as the Florida summer.
Perhaps the weather only encouraged the crowd to keep indoors and focused. Most were still around at the end last Wednesday to hear Keith L. Myers, senior vice president of USAA Federal Savings Bank, describe how that prototypical "direct bank" succeeds at doing virtually everything via mail, telephone, and, increasingly, personal computer.
The $4.8 billion-asset USAA is so effective, so far ahead of the pack, and so proud of itself that it doesn't mind disclosing transaction numbers. In April the bank fielded 467,322 telephone calls, almost half that number with automatic voice response systems; took in 88,898 mail deposits; and posted 146,486 check and cash card transactions. In May, it approved and booked 7,200 consumer loans, most by phone in five minutes or less.
Mr. Myers said USAA's reputation for customer service - for one recent award, see page 13 - stems from a total commitment to quality, friendliness, and continuous improvement.
"From the top down, the question we ask is, how do we make it better for the customer?" said Mr. Myers, who runs operations. "For the customer, it has to be more convenient to do business with us via phone, mail, and PC than it is to get in a car and drive to a bank."
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Another speaker, John B. Benton, raised unusual questions about another branchless trendsetter, First Direct in the United Kingdom.
An autonomous offshoot of London-based Midland Bank, First Direct predates the USAA banking model but borrowed some ideas from USAA's parent, United Services Automobile Association, the mutual insurance company serving current and former military officers and their families.
Mr. Benton, chairman of Benton International in Torrance, Calif., said Midland's approach to alternative delivery may not have been sufficiently aggressive. Despite First Direct's marketing success, the parent company is still saddled with its traditional cost structure.
"The stand-alone direct banking strategy may not be the best way to drive costs down," the consultant said. "First Direct has $750 million in deposits and 500,000 customers after seven years, but that's not much in a $350 billion holding company" - HSBC Holdings of London and Hong Kong.
Mr. Benton suggested keeping a direct banking hybrid under the control of the chief of retail banking and "importing" its benefits into the main bank as soon as they prove out.
In envisioning the bank of the future, Mr. Benton sounded much like Mr. Myers of USAA: "The customer comes first; the needs of the bank come second."
Mr. Benton presented a prospective 21st-century mission statement, built around customer focus and five other broad categories: economic and financial issues, process thinking, technology utilization, personnel development, and business alliances.
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Amid the hunger for information about remote banking, telephone call centers, and new ways of thinking about branches, James J. McDermott may have seemed an unlikely keynote speaker. But the president of New York- based Keefe, Bruyette & Woods Inc. was up to speed.
Reflecting a newfound technology awareness among banking analysts, Mr. McDermott lent his support to "cutting-edge delivery systems." They can address banks' needs for both efficiencies and revenues while providing opportunities for marketing and differentiation.
"This won't be the homogeneous industry we've grown up with," Mr. McDermott said. "The industry must redefine itself or perish ... And the competition today looks a lot different. Telephone companies, cable companies, and a wide variety of intermediaries are going after the customer.
"The idea now is to get started. I'm concerned that a number of bankers don't appreciate the urgency of the situation. They think, 'we've gotten through every crisis of the last 100 years, and we'll overcome this challenge as well.'"
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The Bank Administration Institute used the conference to unveil "The Information Superhighway and Retail Banking," Volume One of a two-part study it commissioned from Boston Consulting Group.
Urgency was a key word. David Van L. Taylor, the Chicago-based institute's executive vice president and point man on the study, introduced it by pointing to several conclusions, including: "Nonbank players are already ahead of most banks," and "The banking industry should avoid the mistakes of the past (in which it) often reacted too slowly."
Mr. Taylor said he knew the message was getting out late last week when he heard that one of the top executives of a big New York bank, after reading American Banker's article on the study, ordered a subordinate to get hold of it.
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Apart from, but related to, the information highway report, Boston Consulting Group surveyed senior executives at the top 200 U.S. banks and found them generally daunted, perplexed, and willing to admit their limitations in dealing with distribution issues.
The bankers expressed concerns about their ability to sell new products, build electronic delivery systems, and manage customer information. They expected the number of ways they distribute services to at least double in the next 10 years and said branches, though reconfigured, will continue to be crucial to serving customers.
Six out of 10 rated themselves fair or poor at tracking sales inquiries or responses, and half said they were fair or poor at identifying target customers. They identified direct marketers and mutual fund companies - including Fidelity, Charles Schwab, USAA, and Vanguard - as the biggest competitive threats.
Bobby Mehta, vice president of Boston Consulting Group's financial services practice and co-author of the institute study, told the direct banking conference, "It's the nontraditional competitors that you have to watch out for - telecommunications companies and others interested in secure payment systems and the information that goes with them."
On the recurring theme of "the customer comes first," Mr. Mehta said the trend is establishing itself in interactive services: "Until now, the talk has been mostly about what the technology can do. But the nature of investments is changing from hardware and technology to determining what products and services consumers will actually buy."
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Mr. Mehta and other speakers listed telecommunications companies such as AT&T, MCI, and the Baby Bells among the new competitive breeds.
Tom Lindsay, director of retail delivery systems at AT&T Global Information Solutions, the former NCR Corp., took exception.
"I'd refer to us more as partners," Mr. Lindsay said at one of the conference's product briefing sessions. "We are dedicated to the financial industry and see this as an area of focus."
AT&T, International Business Machines Corp., and Unisys Corp. headed the list of 19 exhibiting vendors, but the resemblance to more traditional bank technology conferences ended there.
International Banking Technologies and National Commerce Bank Services pushed their supermarket banking programs, Broadway & Seymour Inc. its retail bank automation platform in progress, Deluxe Data Systems the sp/Architect direct banking software, Checkfree Corp. its bill payment system, and Early Cloud & Co. its telephone banking and marketing systems.
Other names were less familiar, and several were from the burgeoning market data business: Bullseye Data Base Marketing of Tulsa, Okla.; Customer Potential Management Corp. of East Peoria, Ill.; Fusion Marketing Group of Memphis; Marketing Profiles Inc. of Orlando; and Smartline of Buffalo.
Indicating the emerging nature of direct banking, several exhibitors were either in start-up mode or could not discuss recent sales progress because of nondisclosure agreements.
This was true of Innovonics Inc.'s PC Pay system and Corona Corp.'s leading-edge speech recognition system. Corona is a nine-month-old spinoff of SRI International's speech laboratory in Menlo Park, Calif. Its VIP Banking system is used by the SRI Credit Union and has been sold to three companies under nondisclosure.
