Magazine article American Banker

KeyCorp's Strategy: Lag Behind, Then Leapfrog

Magazine article American Banker

KeyCorp's Strategy: Lag Behind, Then Leapfrog

Article excerpt

If banking technology were a race, Allen J. Gula would feel comfortable in the middle of the pack-at least for now.

The chairman and chief executive officer of Key Services Corp., KeyCorp's information technology and support unit, said establishing the company as a technological pacesetter ranks low on his list of priorities.

"I'd rather be last-then leapfrog and end up with something better," he said.

In an era when strategists and technologists tend to emphasize product- development speed and "time to market," Mr. Gula's is a voice of caution. Although development speed is important, he said, "I want to make sure that I have the infrastructure in place, the right product sets, the right kinds of solutions before I introduce" a service.

That attitude attracts criticism.

Jay Tejera, managing director and bank analyst at Dain Bosworth Inc. in Minneapolis, said banks "need to be on the leading edge or near it because when there is a breakthrough it will involve a significant change of market share."

Aggressively rolling out alternative delivery products, he added, can play a significant role in attracting desirable customers. "If you're there the fastest ... you can have all the business," Mr. Tejera said.

Octavio Marenzi, an analyst at Needham, Mass.-based Meridien Research Inc., said KeyCorp is not alone in avoiding the so-called "bleeding edge." But "it becomes a dangerous strategy to say, 'I'm going to wait a couple of years because that way I have a lower risk.' Customers are more and more demanding in the kind of technology they want."

Home banking is one area that will pit deliberation against the conventional wisdom.

Compared with most banking companies in its peer group, $72 billion- asset KeyCorp has been slow to market with personal computer offerings.

The Cleveland-based superregional has a Web site, but it is mostly informational. KeyCorp was discouraged from a proprietary, dial-up PC banking service after "seeing the headaches it would create," Mr. Gula said.

KeyCorp customers can download account data into personal financial management software programs like Intuit Inc.'s Quicken or Microsoft Corp.'s Money. But they will not be able to do meaningful business through the bank's Web site for several months.

Though many major banking companies have extensive PC programs, Mr. Gula said he does not worry about falling behind or suffering significant customer defections.

"With the Internet, I felt pretty comfortable in lagging, simply because there aren't a lot of people demanding it yet," he said.

KeyCorp is devoting extra development time to a Web site that would offer basic banking services while helping the company market and sell new products.

When fully developed, the site will be tied into a data base that records and analyzes each customer contact. …

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