Technology makes money, finally

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

It's this image that drives Floyd and drives the bankers who hire him. There is not much reason to bank locally. In Texas, said Floyd, there were 2,000 banks when he started his company in 1980. Now there are 800. Boutin pointed out that Citibank of New York has applied to the Vermont Banking Commission to operate here. Already, Pruitt said, Vermonters can open up accounts by mail with banks anywhere in the country.

Banknorth's strategy has been to emphasize local banking. For example, Woodstock National Bank is a Banknorth bank. Instead of subsuming it under the corporate logo, Woodstock National continues to operate symbolically as a local bank. At the same time Banknorth has an 800 telephone number customers can call to process a mortgage loan. Pruitt says the bank doesn't advertise it. "We haven't wanted to give the impression we're not an in-person community bank."

For good reason. Customers trained to use an 800 number to apply for a mortgage can just as easily dial the number of a New York, California, or Texas bank.

Floyd's job at Merchants is to give the local bank the cost effectiveness of a big bank, while maintaining the feel of old-fashioned customer service. Neither Floyd nor Boutin would confirm the exact cost of Floyd's service. Boutin said they are operating on a handshake and that Floyd's exact compensation is still being negotiated. However, Floyd will earn 50 percent of the first round of savings he produces and 15 percent of later savings. If Floyd and Associates successfully reduces Merchants approximately $48 million budget by one-third, the firm will head back to Houston with several million of that.

Floyd thinks local banks can beat the competition. Pruitt said the key is in eliminating the hassle or the customer. Since everybody can do pretty much the same thing, banks that can give the customers what they want in the most trouble-free way will be the ones that survive.

Floyd thinks the small banks will take over again in the next few years for just this reason: They are closer to the customer, and, therefore, better attuned the customers wants and more flexible in the delivery of services. The technological advantages that once only the big banks could afford, are now in the hands of the locals.

WHAT'S HOT

In Pruitt's view, a lot of the so-called advances in banking are more marketing sizzle than actual innovation. Electronic and telephone banking have been available or a while without attracting much customer interest. Even at Merchants, Boutin and Floyd agree that much of the technology for the re-engineering was already on site. It just wasn't being utilized to its potential. Floyd said the business-as-usual systems at Merchants meant that only 15 percent of the available power was being actualized.

What is new is digital imaging technology. Banks are now able to create digital images of every document from checks to mortgage agreements. Those virtual images, down to the customer's signature can be stored and moved electronically. Banks will now be able to return your checks -- or at least a digital reproductions -- without having to move, sort, and stuff the actual checks into envelopes. Their digitized images will appear on your statement. It is this technology that will create the paperless, fileless banking offices of the next few years.