Time was when a branch was the focal point of a bank's retail operations and the primary venue by which consumers transacted their financial business. Relying on a minimum of technological gadgetry, bank tellers took in deposits and doled out cash to customers, while their colleagues seated at desks across the lobby diligently typed up loan, new account and assorted other documents, which ultimately got re-keyed into a mainframe computer system situated in the bank's backroom.
But those times have past. New competitors, industry consolidation and alternative delivery vehicles have combined to change the face of branch banking forever. The traditional brick-and-mortar branch is now only one of many vehicles used by banks to deliver consumer financial services. And increasingly, bankers, with the help of new automated tools, are transforming their branches into more than just transaction processing centers; branches, in effect, are becoming sales and service centers.
Brick-and-mortar branches still handle the preponderance of consumer financial transactions-61% of all retail transactions are processed through branches, according to research conducted last year for the American Bankers Association by Ernst & Young. But increasingly, bankers are looking to shift transactions to alternative delivery channels, such as automated teller machines, home banking services and teler phone service centers. According to the Ernst & Young survey, the share of retail transactions processed at the bank branch level will drop to 44% by 1997, while alternative delivery channels divvy up the lost share.
Despite the growing appeal of alternative delivery vehicles, however, bankers aren't about to abandon brick and mortar altogether. Too many customers are hooked on branches. Besides, note banking experts, branches, with their personal touch and hometown feel, are what distinguish banks from nonbank financial services providers.
Rather than scrap branch networks entirely, growing numbers of banks are investing in new automated systems that promise to enhance the overall efficiency of branches and provide branch personnel with more opportunities to sell their bank's products. In 1994 alone, banks forked over nearly $800 million for branch automation and branch applications software, according to research by Mentis Corp., Salisbury, MD.
Nearly all banks with assets of $1 billion or more (960/o) either have automated teller systems in place or are planning to install such systems within the next two years, according to the ABA'S 1995 National Retail Operations and Automation Survey; over 92% of those banks have or are planning to install automated systems to support platform operations.
"We've been trying to grow our business without growing our staff at the same rate, and we've been able to do that with automation," notes Daniel Ryan, information systems director at Laredo National Bank, a $1.5-billion-asset bank in Laredo, TX.
"Even if at some point the branch network were to be reduced, we would still want to make the branch more efficient and improve sales opportunities," explains Alan Singer, director of sales and service technology at Barnett Technologies Inc., Jacksonville, FL, the technology arm of Barnett Banks inc. An early convert to branch automation (it installed its first automated teller system in 1991) Barnett claims 56% higher deposit levels than its major Florida competitor banks, despite reduced staffing. "I think that speaks to the efficiencies we've been able to achieve," says Singer.
Branches Remain Popular
"The fact is that there are lots of market segments that want to go into a branch and sit down and be serviced," says Alan Schulman, information services project leader at Bank South, Atlanta. The $7.7-billion-institution, with 157 offices throughout Georgia, is in the midst of a massive re-engineering of its retail delivery network, which includes upgrading its current branch automation system. Among other things, Bank South's plan calls for equipping virtually every employee in its branches with personal computers networked together and running client-server applications.
Client-server technology is all the rage in banking these days, and branch automation is no exception. The latest twist in the continuing pursuit of faster and more flexible computing techniques. Client-server represents a major shift in the way information is processed and distributed throughout the organization. With client-server technology, much of the data and logic traditionally stored on centralized host computer systems is moved directly into the branch network for quick and easy access by sales and teller-station personnel.
"The technology that can be put in the branch, such as client-server technology, has made it easy in terms of cost to do lots of things banks couldn't do in the past," explains Bob Berini, marketing executive for retail banking at IBM Corp. in Charlotte, NC.
The new opportunities presented by client-server technology constituted a key factor in Bank South's decision to embrace the technology, says Schulman. But he doesn't buy the suggestion that cost is a minor consideration. The SouthNet project, nearly two-years in the making, has required costly changes in the way Bank South supports its branch network, including the hiring and training of new technology support personnel. "Having a common base for all of your applications means you have to have somebody take care of that base," says Schulman. "When you get right down to it, it's the absolute magnitude of the detail that makes a project like this so much trouble."
Among the many details that must be worked out in a bank's decision to automate is what operating system should be used to run its branch applications. For Bank South, the decision came down on the side of Microsoft Corp.'s Windows, but other banks have opted for IBM'S OS/2 operating system, and still others have committed to Unix. Each features a graphical interface that aims to engage customers in the sales presentation process, and by extension improve sales.
Not surprisingly, each operating system has its champions and its detractors. IBM'S Berini claims OS/2, particularly in its latest incarnation, OS/2 Warp, is best suited to branch automation. OS/2, Berini insists, has a proven history of experience in distributed networking environments, notably on the server side; OS/2 Warp fits well into the client environment. "It works, and we've been at it long enough now that OS/2 is very strong," he says.
What makes OS/2 particularly appealing, Berini adds, is the fact that it supports Windows and DOS programs as well as native OS/2 applications. "It's a more robust operating environment," he boasts. To buttress this claim, Berini says "most of the top 100 banks" in the country either have implemented, are in the process of implementing of are planning to implement OS/2 in their branch networks.
First Bank Sold on OS/2
First Bank System Inc., the $26-billion-asset holding company based in Minneapolis, is among those in the process of implementing OS/2 Warp. The bank already uses OS/2 on the server side of its platform operations; last month it was scheduled to begin a roll-out of OS/2 Warp to 2,500 workstations that had been operating under DOS. "We made a commitment to OS/2 when they were the only game in town," explains Terry Sandvik, president of the FBS Business Technology Center, the holding company's information services group. "At this point, we don't see any need to change."
But it's not entirely clear that OS/2 can extend its reach outside the top 100 banks. Eight out of 10 PCs today are shipped with Windows, notes Kurt Madden, vice president for distributed systems at the Fresno, CA, offices of Flserv Inc. "It's the defacto standard for the desktop today," says Madden. OS/2, he adds, is better suited for the server environment.
Executives at Unisys Corp. seem to agree that Microsoft ultimately will win the war for control of the branch desktop, but they're hedging their bets, just in case. "We believe that (Windows) NT as a server operating system and Windows at the client end will be the dominant operating configuration in the future," says Tony Fernicola, vice president for sales and marketing within Unisys' financial delivery business unit. "However, recognizing that our target market includes all banks, we've created OS/2 products at the server level."
Unisys also offers Unix products, though few banks have purchased them, Fernicola adds.
Champions of Unix say the importance of that system should not be underestimated.
When it comes to really big client-server configurations, for example, Unix is the most plausible operating system, says Rob Theis, director of global financial services at Sun Microsystems Inc., Mountain View, CA. "Unix provides you with the ability to manage an enterprise-wide network and to administer that from an enterprise-wide base," explains Theis. "It's not that easy to do that from Windows or OS/2."
Unlike the Windows or OS/2 environments, in which both client and servers are PCs, the Unix server typically runs on a minicomputer and the client runs on dedicated workstations. Although it has had limited application in branch banking environments, Unix has proven itself in mission-critical functions" like trading, notes Ed Thompson, senior vice president at Broadway "Seymour, a Charlotte, NC, software house. "From a server perspective, Unix will be dominant," predicts Thompson.
Not so, counters FIserv's Madden. Unix doesn't have the market presence in banking that other operating systems enjoy, and the learning curve is too steep for most bankers to want to make the switch.
What banks want, or at least should want, from technology are tools that help them sell better. For many bankers, the concept of selling is a new one, but one that likely will make the difference between the ultimate success or failure of their branch automation projects.
"Many banks get the software right, but they never get the sales culture right," observes Evan Mannakee, executive vice president at Financial Training Resources, a Lombard, IL, training and consulting firm. "Only those banks that understand the basics of how to do business at a desk have a chance of succeeding."
In the current rush to off-load branch transactions to alternative delivery vehicles and automate those routines that are left behind, Mannakee suggests that many bankers forget that the way to make money is through face-to-face interviews with customers. "It's a very simple insight that can result in huge profits," says-mannakee.
Huntington Bancshares Inc., Columbus, OH, is one of several exceptions to this trend. Although the company has invested millions of dollars in telephone banking and advanced self-service banking centers, it also has invested heavily in automated systems that support its branches and sales training.
"Face-to-face interaction is what's most important to us. Software and technology helps us support that, but it's not the end in itself," explains Sue Trissel, retail sales training coordinator at Huntington.
Since customers visit branches less frequently than they once did, it is imperative that branch personnel make the most of the time they have with them. Branch automation, when it works, can make those few minutes fruitful.
"It literally helps us manage and refine the sales process to maximize sales capacity," says Kevin Kabat, executive vice president for retail administration and corporate technology at Old Kent Bank and Trust, Grand Rapids, MI. A $10.9-billion-asset bank with 220 branches in two states, Old Kent this spring began rolling out a new and improved system that Kabat describes as matching the sales culture Old Kent has developed since implementing its first branch automation system in the late 1980s. Among other things, the upgraded branches feature reception desks that handle routine questions (such as requests for deposit slips) and identify cross-selling prospects.
"It allows us to do triage, in essence," says Kabat. "As a result, we can fill the queue with the best sales opportunities and people."
And the system, which includes features such as a data warehouse and customer profiling capabilities, helps bank personnel reap the most from the sales time they have with customers, suggests Kabat.
The latest generation of branch automation systems now being installed by banks incorporate tools that can help pull together data from disparate sources scattered throughout the bank, or even from outside sources, and consolidate that information into a detailed cross-functional database.
Bankers who have embraced this new approach to selling say it makes the most sense in the new branch sales environment. "You have to be provided with the information at the desktop in order to make effective sales presentations," says Bank South's Schulman. Also important, says Schulman, are the graphical interfaces that seem to be the hallmark of most of the PC-based systems that are being hawked by branch automation vendors today. "It helps grab the customer's attention," he says.
In addition, it's generally easier to train sales representatives on graphically-oriented systems, notes Matt Chapman, chairman and chief executive of CFI ProServices, Portland, OR.
For those banks angling to get the biggest bang for their training dollars, the focus is not so much on using the specific technology being installed at the teller and platform stations as it is on selling.
"We don't get lots of payback from technology training, but from sales training," says Kabat of old Kent.
And selling is the name of the game today.
"As an industry, we have to be able to cut costs and increase the profitability of branches," observes Bob Landry, an analyst with the Tower Group, a Wellesley, MA, consulting firm. "The fastest way you can do that is by increasing sales."