UJB Financial Corp. has launched a three-year, multimillion-dollar project to install personal computers throughout its 266-branch network.

While banks throughout the country are installing similar PC-based systems. UJB is somewhat unique in that the Princeton, N.J., holding company is one of only a few dozen institution to install branch automation software - called Consumer Transaction - that International Business Machines Corp. developed in the late 1980s.

While installation costs will total $33 million, top executives of the $13.5 billion-asset institution expect the new computer system to more than pay for itself by improving customer service, cutting operating costs and bolstering revenues.

|A Major Advantages

"This will give us a major advantages in what we will be able to do with our customers," said William J. Wolverton, UJB's senior vice president of retail service and sales.

But we experts cautioned that banks like UJB may find it hard to profit from branch automation for a number of reasons.

For starters, as electronic banking with automatic teller machines, home computers and telephones becomes more popular, branch traffic could decline. This means that expensive new branch computer systems may serve a dwindling clientele.

Likewise, the newest breed of branch automation software will be nearly universally deployed in a few years.

This means that any competitive advantages is likely to be fleeting.

"For the industry as a whole, the investment in branch automation is unlikely to improve profits," said Greg Schmergel, banking consultant at Ernst & Young's Center for Information Technology and Strategy in Boston.

According to the 1992 American Bankers/Ernst & Young Technology Survey, about a quarter of all tellers and half of platform workers who handle loan applications and other customers service functions use personal computer software like UJB's new system.

In 1995, about seven in 10 tellers, and nine in 10 platform workers are expected to use this type of retail banking software.

Over the next two years UJB plans to install the Consumer Transaction software in all of its 266 branches in New Jersey and Pennsylvania.

Bank officials say the new software is easier to use and works faster than the institution's current computer system, which uses more primitive software that runs on so-called controllers and dumb terminals.

As result, UJB officials said, the new software should improve branch employee productivity by at least 10%.

This will enable the bank to shed 125 of nearly 4,000 retail branch jobs over the next five years, at a savings of $22 million.

The bank could eliminate more jobs. But instead it plans to have employees use their spare time to do more sales and marketing. A key part of this effort will be a new telemarketing campaign in which employees will be asked to call lists of customers deemed likely to want certain bank products.

Platform employees will also be trained to use the Consumer Transaction software for cross-selling, a popular new concepts in which, for examples, bankers pitch a loan to a customers who opens a checking account.

Two-Way Selling Tool

The new software will aid this process by telling bankers which products a customers has, and is likely to want. Bankers will also literally turn the computer screen over to customers to show colorful displays.

"I think the important things here is that we are using technology to change behavior," said Alan N. Posencheg, chief executive of UJB's operations subsidiary, UJB Financial Service Corp., in Ridgefield Park, N.J.

UJB began a pilot test of the new software in a branch in Princeton and another in Kingston, N.J., in November 1991. And officials said the test has already proven that the investment is worthwhile.

Among other favorable findings, Mr. Wolverton said, in the pilot test the number of bank products sold per customers increased more than 15%.

This increase plays a big part in officials' expectation that the new computer system will delivered $14 million to the bank's bottom line by 1998.

UJB executives derive this sum by estimating that the new computer system will deliver at least $12 million of new revenue, and reduce operating costs by $35 million, over the next five years.

But Mr. Schmergel warned that companies often get better results from pilot tests than full commercial roll-outs of new technologies. And, he added, only time will tell if UJB's branch automation project delivers the expected returns.

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