Banks Pour Money Into Branch Connectivity And Automation - InformationWeek

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Banks Pour Money Into Branch Connectivity And Automation

Large financial institutions invest in applications and technology to connect many branch operations to the Web.

In this era of austerity, banks are spending freely to bring branch offices up to speed with other distribution channels, tethering everything from teller workstations to information kiosks to the Internet.

IT spending on branches by banks with deposits above $1 billion is projected to rise from $1.1 billion this year to $1.5 billion by 2007, according to a report by research firm Financial Insights. Three-quarters of the spending will be concentrated among the top 29 U.S. banks, those with deposits of $25 billion or more and a minimum of 500 branches. Institutions with deposits of $1 billion or less, mostly community banks and credit unions, tend to outsource branch IT operations and hence aren't included in the Financial Insights totals.

IBM and Cisco Systems Inc. are jointly working with about 20 banks on branch-automation projects in an initiative called Branch Transformation Networking that the companies launched last year. Combining Cisco networking and IBM infrastructure and middleware, the vendors envision branches with Web-enabled ATMs and kiosks, portals, videoconferencing, and IP-based services linking branches and call centers, such as computer-telephony integration, interactive voice response, and intelligent call routing. "Historically, banks have created separate infrastructures for each channel," says Bryan Lee, global solutions manager for retail banking at IBM. "The goal now is to create a common infrastructure."

The transformation involves ripping out wiring in many cases. A lot of banks, Lee says, are still communicating over 19.2-Kbps lines using IBM's Systems Network Architecture. These lines have to be replaced with wiring and other devices capable of transporting IP-based traffic.

The IBM-Cisco arrangement frees banks to choose from an array of application software providers. Last week, for example, IBM inked a deal with Harland Financial Solutions Inc., letting Harland run its Sparak core banking system on IBM hardware such as the pSeries server and its accompanying AIX operating system. By necessity, most institutions are opting for a phased rather than a wholesale approach to branch-technology replacement.

The annual IT cost per branch ranges from $124,000 to $180,000, depending on branch and institution size; the larger the branch and institution, the higher the cost. Once the multichannel infrastructure connecting branch, ATM, contact center, and the Web is achieved, banks will be able to make more efficient IT decisions, allocating costs by channel instead of by individual branches.

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