Where The Money Is

Beyond revenue opportunities, banks have another reason for branch renewal. Following an interruption of several years, the mergers and acquisitions wave that characterized the industry for two decades has returned. It's burst back to life in recent months with the megamergers of Bank of America and FleetBoston, as well as J.P. Morgan Chase and Bank One.

It's easy for such banks to merge in name only, missing out on some of the business advantages for which they merged. During the late '90s, Key was expanding geographically and became the first bank to operate as a single, nationwide bank. But calling itself a national bank was one thing; becoming one was another. "When you grow through acquisition, you're stuck with all these different systems, even within a single channel," CIO Bob Rickert says. Thus, a deposit made at a branch in Albany, N.Y., might not show up on the system of a branch in Cleveland until the next day. This was clearly unacceptable from a customer-service viewpoint.

The technology strategy Key pursued was to build proprietary middleware, called Key Server, that pulls together information from systems across geographic regions and makes it available through any channel. Integration challenges are tough, but critical to a bank's competitive advantage, Rickert says.

Not everyone follows Key's approach of developing middleware in-house. ATB is developing middleware using IBM's WebSphere application server, Casey says. Other banking middleware providers include Eontec, Harland Financial Solutions, and Sanchez Computer Associates (recently acquired by Fidelity National Financial), which have incorporated standards-based software such as Java 2 Enterprise Edition in their products. "The guiding principle is to provide one version of the truth," says Anuj Dhanda, CIO of retail and wholesale banking at PNC Financial Services Group Inc.

A major impetus for the merger of Bank of America and FleetBoston was to reap $1.1 billion in projected cost savings by integrating their retail operations. Fleet's retail systems will be converted to Bank of America's sometime next year. Whether it achieves that goal will depend on organizational as well as technological skills. For example, Fleet was on the verge of completing a business-transformation project when the merger was disclosed; that and other projects have been killed or placed on hold, says Joe Paolantonio, director of banking operations at Fleet. Still, a sledgehammer approach to integration is preferable to one in which the parties waste time haggling over details while competitors figure out ways to grab their customers. "If you're a competitor, you're asking, 'What can we do while they're distracted?'" Key's Rickert says.

For the banking industry, the distractions of technology fads such as online-only subsidiaries have passed. Now that banks have once again accepted branches as an indispensable channel, bankers can focus on the right technology and information to make sure brick and mortar equals sales and profit.

Continue to the sidebar: Online Ties: Web Banking Makes Customers Less Fickle