A billion here, a billion there...

By James M. Culberson, Jr.,

chairman,

First National Bank & Trust Co.,

Asheboro, N.C.

Last year banks and thrifts spent $20.8 billion on information and communications technology, according to the Mentis Corp. Did we get our money's worth?

I've been thinking about this lately, particularly after two experiences, one in Atlanta and another in San Francisco, when I wasn't able to obtain cash from an ATM. Now, my minor difficulties at the ATM don't represent a technology problem on the scale of, say, hackers invading the Internet or international criminals laundering drug money through banks. The result for me was pretty simple and straightforward. I didn't get my money.

But the two ATM incidents caused me to wonder how such experiences affect our customers. Do they shrug off these minor frustrations as quirks in technology, as when a vending machine refuses to vend? Or do they curse the machine, disparage the bank and consider moving their business to another institution?

Actually, the industry is doing a credible job of keeping its ATMs in good working order. Average industry-wide ATM downtime for maintenance and repair is about 11-12 minutes per day, according to the ABA's 1995 National Retail Operations & Automation Survey Report. On average it takes only about 30-45 minutes to repair a malfunctioning ATM.

Still, I'm concerned that as we send more of our customers to ATMs, telephones and PCs to do their banking, we're opening ourselves up to a whole new variety of dissatisfied customer, and one we may not hear from very often. Guerilla Marketing Newsletter reports that the average business hears nothing from 96% of its unhappy customers, and each unhappy customer tells at least 9 other people.

Many banks are encouraging their customers to use the ATM and other technology to do their banking. Some are opening automated kiosks. Others have implemented teller fees on certain accounts or created incentives for customers to use ATMs or some other form of electronic banking--anything to get them away from those more costly teller transactions.

But if we're sending our customers to the ATM and encouraging them to use the telephone or the PC in increasing numbers, we had better make certain they work. The advent of smart cards and other new forms of electronic commerce, such as use of the Internet, will only raise the bar higher.

If our customers lose confidence in our technology, how long will it take for them to lose confidence in us?

I see this increasingly as a top management issue for the latter half of the '90s. We are all responsible for making certain our banks get the best technology in place to maintain profits, improve efficiency and keep the customers happy. It's incumbent on us to make sure the technology works, and works well.

How does this emerging emphasis on technology stack up with the traditional community-bank strategy of maintaining close personal relationships with customers? Building personal relationships is a tried and true strategy, and one I personally advocate for all banks. Yet transactions through bank branches will decline by nearly one-third by 1998, while transactions at telephone banking centers should increase by 50% over the same period, according to a study by Ernst & Young LLP and the ABA. Already, nearly half of all banking transactions today no longer involve human interaction.

A growing number of bank customers seem willing to trade personal contact for greater convenience. An Andersen Consulting Strategic Services study last year concluded that the three primary drivers for bank customers of all ages and income levels are price, speed and delivery channel, not personal service. "Most customers would trade the personal relationship in a nanosecond for lower prices and higher transaction speeds," says Miscall Elliott, an Andersen Consulting partner.

In the future, maintaining good relationships with our customers will almost certainly involve electronics in one way or another.

Which gets back to my original point. Our ability to keep the systems working and efficient is critically important to the image of our banks and the industry itself. I haven't been really happy with our bank's telephone system. I thought we could make it better. What I learned is that we could make it better--by spending more money. As every banker knows, quality costs money and top quality costs even more money. Yet I believe that any investment that makes our technology work more efficiently and reliably, and keeps the customer satisfied, is worth every nickel.

The clear message for bankers is that more and more of our customers want to do at least some of their banking from another location. It's up to us to help them do it.

The personal relationship in banking isn't dead, but it's going through a make-over. Savvy bankers will find new ways to use the ATM, the telephone, the PC, the Internet and other forms of electronic communications to make the personal relationship work even better than before.

Let's just make sure that the machines work better, too.