Technology makes money, finally

Vermont Business Magazine, Jan 01, 1996 by Sopper, Frank, Andrews, Richard

In the early 1960s, my father would sidle into our local bank on the pretext of making a deposit. The vice president, who was also the chief loan administrator, had an office by the door where he balefully monitored the comings and goings. My father was in the process of launching an environmental engineering venture in an era when no one had heard of the environment, nor was he an engineer. The vice president was a by-the-book guy, and what my father was trying to pull off wasn't in the book.

The bank's president, Mr Oliver, had his office in the back. On a lucky day, his door would be open; he would be alone; and Dad could make his pitch. Dad was always asking for more money than he could support, for projects that, in 1963, were as likely as putting a man on the moon.

Mr Oliver had a standard response to my father's proposals. Dad used to come home and gleefully imitate his reaction. We would bait him, "What did Mr Oliver say, Dad?" My father would put on Mr Oliver's countenance of dismay, slap his forehead and say, "Oh bejesus."

It became a family joke. When we were older and asked my father for cash, he would slap his forehead and say, "Oh bejesus," just like Mr Oliver. It's what I thought bankers did. You paid your interest and you got a performance with your loan.

Of course, Mr Oliver always managed to put his horror aside and write the loans. Dad's collateral was his ambition and his sacred honor. Mr Oliver made loans against it. My Father, for his part, went out and made money, made the payments, created jobs, paid taxes.

That's personal banking.

Sometime in the 1980s, a major banking chain bought the local bank. Mr Oliver left to become treasurer of the Boston Red Sox, and banking became a lot less fun. On the other hand, the new bank had a network of ATM machines and offered a credit card.

That's modern banking.

POST MODERN BANKING

During the 1980s and 1990s, big banks like Citibank or Wells Fargo gained competitive advantage over smaller ones. Banks with big central computers and highly automated transaction processing ate up the competition. Like alien body snatchers, bank chains sucked the innards out of friendly small town banks and re-animated them. The alien banks were efficient, offered more services, but, to many, lost the home-town touch.

What the banks also lost in the process, according to Thomas J Pruitt, executive vice president and chief financial officer of Banknorth Group, was their relevance. Customers, he said, can do virtually all of their banking without a bank. Merrill Lynch can invest their money and let them write checks off it. General Motors can write a car loan. Sears can offer a credit card.

What the big players don't do as well is fund crazy ideas. Try going to Sears to get a loan to build a baseball stadium in the cow pasture. See if General Motors will go for the idea of manufacturing a bacteria that will protect strawberry plants from frost. Maybe Wells Fargo will accept your ambition and sacred honor as collateral.

Oh bejesus.

REINVENTING BANKING

Technological change is causing many bankers to believe that the future calls for a return to old fashioned banking with a high-tech twist. Joe Boutin, CEO of Merchant's Bank, has shivered the timbers of his operation in his quest back to the future.

Dudley Davis, Boutin's predecessor at Merchant's, was the kind of banker who took ambition and honor as collateral. However, Merchant's operating-costs were well above the industry average, and the bank was in difficulty. Boutin is determined to maintain an old-fashioned level of customer service, but through the use of high-tech tools, bring the costs of that service down to manageable levels. In the strange way pets and their masters begin to resemble each other, technologies and corporate cultures create inter-resemblances. For example, in the 1980s, the computers that processed banking operations were large, bulky, and centralized. So were the banks.

Now, however, according to Boutin, a computer the size of a home stereo system can drive a bank with $600 million in assets. In addition, he said, Merchants will reduce all the information currently stored in a 40-foot by 20-foot packed filing room into three disks in a digital storage unit the size of a juke box. He hopes these light, efficient, and fast machines will create a corporate culture to match.

TAKING OUT A LOAN FROM THE TELLER

Boutin isn't leaving the re-creation of a corporate culture to chance. He has hired banking guru John M Floyd of Houston, TX, to ride herd on the make over.

Floyd is not a typical consultant. He's no corporate seagull who flies in, squawks a lot, makes a mess, and flies out again. Floyd has settled in to an office at Merchants and has had as many as 18 of his own people working side by side with the Merchants people. Floyd and his associates interviewed Merchants's 550 employees and made 700 to 800 recommendations. Approximately a third of those recommendations involved major restructurings, said Boutin. As a result, he said, Floyd can be perceived negatively by the staff.