For Walter E. Leonard Jr., worrying about technology goes with the job. But the Wachovia Corp. executive vice president avows that there's a lot more to worry about these days than ever before.

"In the 1980s, we were all constrained by technology," Mr. Leonard recalled. "It could not do everything in the world; it was very limited. What's happened since then is that the range of choices is infinite. And now we're out of that comfort zone."

Mr. Leonard is not alone in feeling the discomfort that technology is causing banks in the 1990s. While many in the industry agree that technologically savvy banks can hurtle past the competition, recognition is growing among bankers, consultants, and analysts that the price of technology missteps is getting steeper.

The day when a bank that falls behind on technology investments can quickly catch up may be coming to a close, say observers. Banks that bet on the wrong systems or technology strategies will see ever-larger amounts of money go down the drain.

"The reluctance to spend the money to get competitive in some of these areas is going to work, probably, the same way that credit-quality problems did in the late 1980s," when some institutions were left with little choice but to be acquired, said Anthony Davis of Dean Witter Reynolds Inc.

Already, several major bank companies, including Boatmen's Bancshares late this summer, have cited the likely need to spend hugely for technology as a key factor in deciding to sell. Few will be surprised if more banks reach the same crossroads. Even the chairman of one of the country's largest, most acquisitive banks, NationsBank's Hugh L. McColl Jr., has said he's scared of the technological change sweeping the industry.

"The only way to be a high-performing institution that gives attractive return to shareholders is to pick winning strategies and abandon bad ones very quickly," said Mr. Leonard, Wachovia's top technology officer. "It is so intuitively obvious that you have to have the right technology to be highly competitive in the future that it almost goes without saying."

That it is said - often and with great urgency - speaks volumes about the importance technology now assumes for U.S. banks. Industrywide spending on technology - $18.6 billion this year, according to an American Bankers Association/Ernst & Young survey - continues to outpace inflation.

And significantly, the technology decisions banks are making now don't just involve the back room. Rather, they directly affect how customers deal with the bank. That's true of a laundry list of hot retail banking technologies: data warehouses, call centers, PC banking, loan kiosks, automated teller machines, smart cards, and platform automation.

"Technology investments now touch the customer, they touch the market," said Donald R. Hollis, a former First Chicago executive vice president who is now president of DRH Strategic Consulting Inc. "And CEOs are concerned about their market."

Just below the surface rages another debate that has been going on for years. Big banks have long pointed to the benefits of scale in technology. But small banks insist the falling cost of PCs and software packages, along with greater outsourcing options, allows them to offer the same services as their bigger competitors.

As bank technology consultant Arthur Gillis puts it, "Excellence in management of technology dispels the notion of economies of scale."

But here's the rub: Both sides may be right.

Small banks now can afford to invest in information systems that rival those of bigger players, say industry experts. But they'll have less margin for error if they make a significant technological blunder. In other words, the main advantage of scale may not be cost savings but a greater ability to regain one's footing after a stumble.

James McCormick, president of First Manhattan Consulting Group, said he expects much of the battle to be played out in retail technologies aimed at generating profitable new accounts and maximizing the profitability of existing accounts.

"Numerous CEOs in banks that we are supporting now in this regard would say, 'This is the big one. I either do this right . . . or I end up selling the bank,' " said Mr. McCormick. "It's that simple."

"A bank that ignores any strategic variable in its planning is running great risk," said Mr. Hollis, the consultant. "Always has been so, always will be so. Technology wasn't always high on that list. But it's now pari passu with other major factors."

Why have the stakes become so high? Mr. McCormick argued that harnessing the power of the newer retail systems - data warehouses, profitability systems, and advanced customer information files - involves a learning curve that previous technology applications did not.

"You don't throw that switch and get as good as the other guys in three months, six months, 12 months, or 15 months," he said. "You're behind, and you're in trouble. And you may never have time to catch up."

The kind of data base marketing techniques pioneered by credit card companies, he noted, involve accumulating knowledge on a range of customer behaviors and preferences. A number of companies, notably Signet Banking Corp. in Richmond, Va., are trying to build comparable information-based systems for other retail products.

"What you learn in the second year builds on what you learned in the first year, and so on, and so on," said Mr. McCormick. "So time is really important."

Another danger, he said, is spending too much time and money trying to build a perfect system that can do everything. This can happen when management doesn't consider exactly what it wants from systems, and falls prey to suppliers who offer the moon.

"It's amazing what the vendors have got the banks doing right now," said Mr. McCormick. "It's technology on a hope and a prayer."

David Partridge, director of Towers-Perrin's financial institution's practice in San Francisco, said banks' efforts to catch up technologically are also hampered by their continued reliance on mainframe computers, which don't allow easy capture of information about customers or households.

Most systems aren't built to support relationship banking, said Mr. Partridge. "All banks claim to be relationship bankers, but nine out of 10 aren't really," he said.

While struggling with these technologies may trip up some bank companies, experts stressed that the consequences would not be as visible or obvious as, say, at a bank that makes too many bad loans.

"It's not ever going to be that direct or that conspicuous," said Dean Witter's Mr. Davis. "What you'll find is, the company that hasn't done a very good job choosing investments is going to find that it doesn't make the efficiency and profitability progress that the better practitioners do. Its stock price is going to begin to lag because profits are going to begin to lag because customer growth is going to begin to lag."

Indeed, even assessing the impact of technology will remain difficult for years to come, say experts. While Wall Street is eager for more detailed information about technology initiatives' returns on investment, they aren't holding their breath.

"I don't know if we are ever going to be able to determine that project XYZ, which costs $32 million to enhance the customer information file and install it systemwide, produced a 16.1% return on investment," said Mr. Davis, who recently released a report rating the technology prowess of the banks Dean Witter covers.

Mr. McCormick agreed. "If the market and the analysts went on this as a total harangue, it would take three years to be looking at comparable technology expenditures from one bank to another," he said.

Some bankers doubt that technology will emerge as a key factor driving bank consolidations.

Vince Berta, chief executive of Trans Financial Inc., Bowling Green, Ky., for example, was skeptical that technology would drive a bank company as large as Boatmen's ($41 billion of assets) to seek a buyer.

Trans Financial, with $1.6 billion of assets, has been effectively able to launch key technology initiatives, said Mr. Berta. The bank has spent $1.6 million on imaging systems and plans to spend another $1 million during the next five years on a document warehouse.

And while some say lack of scale is not a hindrance, others note that size is not necessarily a boon. Mr. Leonard characterized the technology at Citicorp as "average" despite the company's having outspent the industry during the 1980s.

"They didn't overwhelm us all with their technology," he said. "The money didn't help."

So how do banks avoid stumbling? By paying strict attention to strategy and execution.

"Organizations have invested in and implemented technology solutions," said Robert E. Hall, chief executive of Action Systems, a Dallas-based consulting firm. "What they have not installed is the competence."

Technology is changing so rapidly, he said, that banks can no longer rely on traditional top-down management structures.

"What we're really having to do today is create an organization where the executives, managers, and the front lines are learning almost simultaneously," said Mr. Hall. "The old model of simply yelling out the orders is not the same as the model of learning."

Banks are also banding together to share development costs, gain benefits of scale, and stave off competition from nonbanks. One recent example is the Integrion Financial Network, in which International Business Machines Corp. joined 15 big banks to create a processing infrastructure for home banking.

But Mr. Leonard of Wachovia said banks must choose a winning strategy. "Now technology can do anything, and I've got to now pick which thing I want to do," he said, "That's riskier."

Wachovia is in the midst of a major effort to upgrade its customer relationship information system. But Mr. Leonard, who calls it the next phase of a system the bank began to build more than two decades ago, is confident the company has chosen the right path.

"I worry about being sure that we are in fact implementing the appropriate technologies to support the business strategy," he added. "But am I worried that we can do it, or execute it, or is it the right thing to do? No."

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