The unprecedented scale of the pending merger of Chemical Banking Corp. and Chase Manhattan Corp. would pose a systems consolidation challenge for the combined retail bank.

But before that consolidation could take place, the new Chase would have to decide on a core retail processing system - a tough decision by most accounts.

Chemical and Chase have made relatively recent commitments to different retail software packages, and industry experts are split on which is best suited for the huge number of transactions that the resulting $300 billion- asset institution would generate.

Chase has used retail software from a number of vendors, a principal one being Hogan Systems Inc.

Chemical, after a lengthy review of retail platform options at the time of its merger with Manufacturers Hanover Corp., opted for Hanover's system, which was developed by Alltel Information Services Inc., formerly Systematics Information Services.

Some observers, including Lawrence A. Willis of First Manhattan Consulting Group in New York, say they believe Alltel would be the best retail solution, because it already has been through a large-scale consolidation effort.

"Given the size of Chemical's operations, the stability of the platform, and the experience the bank has with the system, the probability is high that they would choose this platform," said Mr. Willis, an executive vice president at First Manhattan.

He added that the Alltel system proved through the Chemical-Hanover merger that it could handle a significant rise in transaction volume.

This suggests that the system would be able to adapt to the increased workload of the Chase-Chemical merger.

However, Chemical did experience some trouble with Alltel's core application software when it absorbed Hanover's branches in 1993.

Internal documents from Chemical indicated that glitches in the software were at least partially responsible for a rash of system outages at the branches and at the bank's automated teller machines.

Some say these problems - which have since been fixed - raise questions about whether the software could handle an even bigger load of transactions.

But Mr. Willis said there was "nothing unusual" about the assorted computer outages Chemical suffered that year. Such mishaps are to be expected during large systems conversions, he said.

Ken Mathis, a partner and financial services consultant with Coopers & Lybrand, agreed that Alltel, which is based in Little Rock, has "an inside track" because of Chemical's familiarity with it.

He pointed out that a decision to use Alltel might make it easier for the banks to realize some of the $1.5 billion a year in savings they hope the merger will achieve by 1999.

By using a familiar retail delivery system, the banks would be able to cut costs more quickly, he said.

"Since Chemical is comfortable with the Systematics system, why not run with it and take some costs out early?"

But William Bradway, a technology analyst with Wellesley, Mass.-based Tower Group, said he believes both the Alltel and Hogan systems are strong contenders. He said it is too early to divine a winner.

Mr. Bradway pointed out that Chemical is faced with a different type of decision than the one it made during the Hanover merger.

At that time, Chemical was essentially comparing the Alltel system to its proprietary system. "Now the bank is facing a choice between two strong packages," Mr. Bradway said.

He added that Hogan has a stronger presence among the top 25 U.S. banks.

Though split on the subject of core software, the analysts agreed that the standardization of the applications surrounding the core processing would be problematic.

For example, many technology decisions lie ahead in such retail areas as credit cards and mortgages, which are national businesses in both banks.

In addition, the banks would probably likely face a quandary in the check processing area.

Both have begun migrating to check imaging systems, which streamline operations by replacing paper checks with digitized pictures that can be processed more quickly.

However, they have committed to different hardware vendors - Chase to Unisys Corp. and Chemical to International Business Machines Corp. - which can complicate an already tough decision.

It is unclear whether a merged bank would be able to extricate itself from the financial commitments involved in the image processing systems. Chase earlier this year inked a $460 million outsourcing deal for check processing with Fiserv Inc., and Chemical just last month purchased a $50 million dollar in-house system from IBM.

Chase has also announced significant investments in so-called middleware technology that gives call-center representatives access to core applications to support customer inquiries. It is unclear how much of this would be carried over to the Chemical side, analysts said.

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