Telecommunications Spending Balloons, as Banks Upgrade Systems and Services
Tucker, Tracey, American Banker
At banks, the electronic ties that bind are getting stronger and a lot more costly.
Banks will spend $4.1 billion on telecommunications this year, again placing the industry among the top consumers of communications systems and services, according to American Banker's annual survey on bank technology.
The study, conducted by Payment Systems Inc., a Tampa-based research firm, found that telecommunications spending at nearly three-quarters of large banks jumped an average of 20% over the last year. That rate of growth was also posted by two-thirds of smaller institutions.
The survey also found that nearly 60% of banks expect spending to rise in 1997, although the average increase will drop to about 14%. The anticipated drop, observers said, will come largely as a result of recent federal deregulation of the telecommunications industry.
Much of the telecommunications spending is allocated for the upgrade of communications infrastructure, such as network backbones, said Leon Majors, a management information consultant at Payment Systems.
As banks grow by acquisition, they must integrate institutions that have operated on different systems, Mr. Majors said, a complex task requiring the realignment and consolidation of telecommunications equipment and services.
What's more, he added, banks are expanding alternative delivery channels to customers that rely heavily upon phone lines and a myriad of switching and routing technologies.
The most popular channel so far is the telephone itself. Equipped with automated voice-response units to handle customer inquiries around the clock, call centers have become almost ubiquitous in the banking industry. Financial institutions continue to pour money into this area to keep up with the rising volume of inbound calls and to handle more sophisticated transactions. Advanced call centers now support not only balance inquiries and the transfer of funds, but also bill payment and the selling of loans, investment services, and other financial products.
"We spent a couple of million dollars in hardware applications in 1996 just on our call centers," said James J. Collison, vice president of telecommunications at Philadelphia-based CoreStates Financial Corp. Like most big banks, $44 billion-asset CoreStates uses its automated phone system as an entry point for home banking and other remote services. So keeping the systems up to date is essential.
"The need for quality call centers has become critical to supporting customer preferences and the concept of anytime, anyplace banking," said Joseph S. Pendleton 3d, senior vice president of alternative delivery planning at CoreStates.
CoreStates' automated systems, which handle about two million calls a month, have recently been enhanced to take loan applications and verify checks. There are plans to increase capacity and add voice-recognition capabilities, which allow callers to communicate without using touch-tone commands.
Another bank planning improvements to its call centers is Chase Manhattan Corp., which operates centers in Hicksville, N.Y., Tampa, and Tempe, Ariz.
"We have reached a point where we now want to create even larger virtual call centers to balance traffic, improve service, and allow for more specialized attention," said Chris Karadimas, senior vice president in the bank's information technology and operations group.
One change, he explained, might involve connecting a call from a Cantonese-speaking customer in New York to Hong Kong at certain times of the day, creating a global call center.
"We also see the need for interaction between call centers and the Internet," he added.
The development of Internet applications has also caused a flurry of activity, as banks rush to offer services over the World Wide Web, the graphical portion of the Internet.
"Being open to the outside world is the next big development," said Timothy Meier, senior vice president of technology management at $32 billion-asset U. …