SEI Corp. has developed a mutual fund processing service that links banks' trust and brokerage operations with mutual fund companies.

The service, called FundWeb, is the culmination of a yearlong effort that aimed at automating mutual funds trades. Mutual fund trading is costly because it relies heavily on faxes and telephones and involves much data reentry.

Based on the findings of focus groups with several banks, SEI estimates the new service will reduce processing costs by about 75%.

The median cost of each trade is about $40, industry executives said.

SEI, based in Wayne, Pa., plans to launch the service during the third quarter. It hopes to be processing about a million transactions monthly by mid-1997.

"Banks no longer need to be hindered by costly, time-consuming administrative work when processing mutual fund transactions," said Rick Lieb, president of SEI's investment services and systems group.

SEI still is ironing out contractual arrangements with the Depository Trust Co., New York, and with DST Systems Inc., St. Louis. Collectively the three companies deal with about 80% of the nation's mutual fund companies.

DST Systems' primary business is providing mutual fund shareholder record keeping for transfer agency systems. More than 2,000 mutual fund companies representing over 35 million shareholder accounts use its software.

The Depository Trust Co. operates an electronic book entry system for securities transfers and a national clearing house for settling trades.

"We are always looking for ways to automate people's systems to make it easier to buy and sell mutual funds," said Randall S. Gore, a vice president at DST Systems.

FundWeb would use a proprietary network to gather trade information from financial institutions and funnel the data to DST Systems or to Depository Trust - depending on the processing preference of the bank.

SEI would provide both omnibus accounting and sub-accounting services. The latter allows detailed breakdowns of a single enterprise-wide bank account into individual portfolios.

The services will compete with a product developed by Fidelity Investments, Boston, and Broadway & Seymour Inc., Charlotte, N.C.. The Fidelity service links Broadway & Seymour's bank customers with Fidelity's clearing operations.

"We are anticipating that the price to our clients will be about half of what we've seen others charging," said Ann Luther, an executive vice president at SEI.

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