ZIFFPAGE TITLEBarnettBy Mel Duvall | Posted 2004-11-01 Email Print
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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.: Big Bump in the Road">
Barnett: Big Bump in the Road
But getting to a single system isn't easy. Complications in integrating the operations of Barnett Banks made that $15.5 billion purchase in 1997 a washout, even by the reckoning of Bank of America, then operating in Florida as NationsBank.
Regulators forced the bank to sell 127 branches so that it did not exceed 30% of statewide deposits, a requirement of the Bank Holding Company Act of 1956 that places limits on a bank's ability to control a market. In addition, NationsBank decided to shutter another 200 of about 1,000 branches to cut costs.
Customers were peeved and in no mood for further changes. What they got, though, was a wholesale systems calamity.
"It was a disasteran absolute disaster," says a former NationsBank technology executive who was transferred to Florida to work on the Model Bank conversion. He still consults for the bank and requested anonymity. "They closed banks and converted to the Model Bank all at the same time. Customers left in droves."
The executive says Barnett already had a modern banking platform that was as good asand in some instances better thanNationsBank's system. Barnett in the early 1990s had created its own Retail Market Management System (RMMS), its equivalent of Model Bank.
With RMMS, Barnett tellers could already view a customer's complete relationship on screen, from checking and savings accounts through to investments.
"A customer could, for example, say [to a teller], 'I'd like to make a deposit, but first tell me what my credit card balance is,' " the executive says. "When [NationsBank] went into Barnett, they didn't have that capability. They've since been able to add it, but they didn't have it then."
NationsBank eliminated such features in favor of its own, less capable Model Bank platform.
NationsBank chose the Columbus Day weekend in 1998 for the switchover, banking on an extra day to work out bugs. But when the system was turned on, the extra workload overwhelmed it. Personal account balances, normally current by 8 a.m., fell two hours behind. Some Barnett branches couldn't sign onto the system at all. Others were blocked by frequent outages. One culprit: Taking the branches off Barnett's satellite-based communications to Bank of America's land-line network.
The result was long lines at the branches. And to make matters worse, when customers finally reached a teller, they learned about a wide range of new fees, such as $1 charges for deposit slips, $3 charges for withdrawals after account balances fell below $1,000 (Barnett charged $2), and automatic holds on checks. Or were facing a teller who was not yet familiar with the new systems.
The bank paid for its missteps. Even though its deposits grew to $54 billion in 2003 from $49 billion in 1997, if it could have maintained its 29% share of the fast-growing Florida market, its deposits would have exceeded $78 billion.