ZIFFPAGE TITLECoastal Disturbances

By Mel Duvall  |  Posted 2004-11-01 Print this article Print

Bank of America spent $47 billion to acquire FleetBoston to get a stout presence in New England and New York. The bank will spend tens of millions to convert its 1,500 branches onto its Model Bank platform, so it can provide the same services nationwide.

Coastal Disturbances
If the bank's past experience is any guide, this latest regional conversion of the Fleet branches won't be easy.

Six years after NationsBank swapped $67 billion of stock with BankAmerica Corp. to create today's Bank of America, its West Coast customers still can't conduct business easily when on the East Coast.

The fact that the company has yet to convert California customers to the Model Bank platform means:

  • Two sets of products are supported. Today, California customers have Prima, Standard and other checking account products, while customers in the rest of the country have Advantage, Regular, and other accounts. Who cares about the names and details? A company whose higher ambitions include providing a common set of products across the country.

  • Accounts are updated in batches each night. California customers who deposit funds in a bank outside the state may have to wait, depending on the hour of the transaction, a day or more to see their balances updated, which means they are unable to withdraw funds from that latest deposit.

  • Deposits can't be made at ATMs. The bank's machines are tied into different deposit transaction processing platforms. As a result, California depositors must make a trip to a teller. And New Yorkers going to San Francisco experience the same problem.

    Bank of America's chief executive officer, Kenneth D. Lewis, says the company is determined not to have a repeat of its California experience in New York and New England.

    "We are moving rapidly through this transition and offering customers more reasons to do business with us every day," Lewis told a meeting of business leaders at the Boston Executives' Club last month. "All in all, this has been the fastest, smoothest, most positive transition that I've seen in my career."

    But the bank has made glowing predictions in the past, only to fail to finish the conversions, as in California, or bungle them so badly that customers fled to competitors, as was the case after it acquired Florida's Barnett Banks seven years ago. By the time Bank of America converted Barnett to its Model Bank platform, its share of the Sunshine State market had fallen to 20% in 2003 from 29% in 1997.

    Bank of America can't afford similar missteps with the Fleet conversion. Its success depends on its ability to attract, capture and exploit the retail customer.

    Branches drive 56% of the company's $38.5 billion in annual revenue. And the bank's strategy is to blanket the country with as many outposts as financially makes sense, particularly in fast-growing consumer markets such as Texas and California. The more branches, the more opportunities to boost revenue by selling products such as college savings plans, insurance or check cards.

    In pursuit of its retail strategy, Bank of America snapped up more than 50 local and regional banks over the past two decades. Its reach now stretches from the Pacific to the Atlantic oceans, from the Gulf of Mexico to Maine. The only major hole is its absence from Chicago and the upper Midwestern states, such as Ohio and Michigan. Bank of America, which now serves 33 million consumers and some 2.5 million businesses, doubtless wants to fill that gap and thus become a truly nationwide bank.

    But if its aim is high, its shots must be on target as well. That means the Fleet bank conversion must go smoothly, or else its aspirations in the Midwest will likely have to be postponed. The Model Bank platform is Bank of America's means of securing customer loyalty and getting more of their dollars into more of its products and accounts.

    "It's really come to represent our retail banking strategy," says retail banking president Liam McGee.

    Model Bank is the result of 13 years and close to $1 billion of custom development. At its heart, Model Bank is a common set of applications, running on mainframe computers, for checking and savings accounts, credit cards, mortgages and other banking products that can be used across the branch network.

    In Model Bank, a customer is identified by a single account number. A customer can deposit funds, have immediate access to money and cash checks in any branch that can recognize that number. It would thus be easy for a customer to buy products and services in, say, North Carolina on a trip, and deal further with them once back home in Florida.

    But as of right now, Bank of America runs three systems: its Model Bank platform, its California system and the Fleet system.

    Chief financial officer Marc Oken, who is in charge of the Fleet integration, says the conversion is on schedule. But its California and Florida experiences are signs that achieving higher standards of customer satisfaction will be a lot more difficult than blasting out electronic slogans above Times Square.

    "There are no quick solutions or easy answers to an integration of this size and scope," says Andrew Wasser, an information systems adjunct professor at Carnegie Mellon University. "Anything is [technologically] possible, but the question is, are you willing to pay the price and are you willing to run the risk of upsetting customers in the process?''

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    Contributing Editor
    Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.


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