U.S. Banks Earmark $20 Billion for Reengineering in 1997; According to New Ernst & Young American Bankers Association Technology in Banking Report.

NEW YORK--(BUSINESS WIRE)--March 7, 1995--CEOs and CFOs of the top 100 U.S. banks say reengineering is their top priority to elevate customer service through new technologies such as imaging, client-server systems, mobile computing, and high-speed telecommunications networks, according to The Fourth Annual Ernst & Young/American Bankers Association Report on Technology In Banking.

The survey, released today, found that U.S. banks will spend an estimated $19.8 billion on technology in 1997 to build new high-speed digital channels that will deliver an expanded range of new and traditional bank products and services to customers. The need for more efficient ways of producing core banking services faster will encourage banks to spend $2.9 billion of these technology dollars on reengineering alone in 1997.

"U.S. banks are earmarking an unprecedented amount of capital to reengineer processes that will have a significant impact on the way customers access bank products and services," said David Shpilberg, Ernst & Young's National Director of Information Technology Consulting. "Banks moving towards this new service concept will clearly have the competitive advantage."

According to the survey, imaging was named the number one enabler of technological change by 31% percent of bank respondents, with 80% already using or planning to invest in it. "The impact of imaging on banking will be comparable to the impact of the PC," said Robert Rossettie, Partner with Ernst & Young's Financial Service Industry's Bank Consulting Practice. "Within five years, imaged documents will become the standard rather than the exception."

Survey participants anticipate a select group of advanced technologies will enable process reengineering initiatives, redefine bank customer service and achieve savings:

o E-Mail -- Ninety five percent of banks will use e-mail by 1997, while scheduling applications (56%), report writers (52%), analytical tools (42%), and groupware (41%) will grow significantly.

o Client/server architectures will further the disaggregation of technology, enabling integrated voice, data, image, and video transmission across wide area and PC local area networks.

o Integrated networks enabling desktop-to-desktop transmission of multimedia applications over local and wide area networks. Network server usage will increase by 58% annually, from an average of 32 per bank in 1994 to 126 in 1997, with mainframe transactions falling by 60% by that time.

o Fast Local and Wide Area Network Technologies such as Fiber Distributed Data Interface, Copper Distributed Data Interface, Fast Ethernet, and Asynchronous Transfer Mode, will transition bank branches into information technology nerve centers servicing bank customer service representatives with customer data.

o Intelligent software applications such as "customer lifestyle tracking" programs will increase profitability by enabling bank customer sales representatives to offer such products and services as mortgages, insurance or investment opportunities according to customer status, age, or previous inquiry.

o Data Compression will continue to play a critical role in helping banks eliminate such paper-intensive activities as loan processing and record retention. Thirty-one and 42% of bank respondents indicate imaging item and loan-processing functions by 1997.

"These technologies will play a critical role in shaping the future banking," said Wayne Christensen, chairman, ABA's Information Technology Management Group. "The challenge that faces us as bankers is how we can relate technology and service to the needs of our customers." Banks respondents identified a list of top processes to reengineering: credit, trading/investment, accounting/check payment reporting, customer service, accounts payable, planning/budgeting, consumer marketing, securities processing.

Bank Reengineering Check List

While most CEOs and CFOs of U.S. banks reported that the number of options available to them in reengineering processes is confusing, several offered advice to simplify the initiative:

o Drive reengineering initiatives according to business needs, using technology as the enabler;

o Focus reengineering dollars on processes that contribute to the bottom line to enhance revenues and decrease costs; and

o Provide the sponsorship, training and support necessary for the project to be a success.

"Through reengineering initiatives, banks are beginning to integrate the different processes involved in servicing customers to not only improve and personalize service, but to track profitability and minimize costs," said Rossettie.

Ernst & Young LLP 

Ernst & Young LLP is a leading professional services organization with 100 U.S. locations. The firm's Financial Services Industries Consulting Practice provides an integrated service approach unique to each client's business environment. The practice's primary services focus on process improvement and innovation, and information technology design and implementation that will support the specific needs and priorities of today's financial services organization.

American Bankers Association 

The American Bankers Association (ABA) is the only national trade and professional association serving the entire banking community, from small community banks to large bank holding companies. ABA members represent approximately 90% of the industry's total assets. About 94% of ABA members are community banks with assets of less than $500 million.

CONTACT: Kendra Collins

212/704-8286

kcollins(at)edelman.com

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Dee Anna McPherson

212/704-8133

damcpherson(at)edelman.com