Big Bank Mergers Could Mean Long-Term Boost to E-Banking
By Karen Epper Hoffman
Many consumers are up in arms about the merger mania sweeping the banking industry. They worry that the proposed deals will limit their options, worsen services, and increase fees.
For online banking customers, however, these fears take on a new twist: Will progress on less profitable and less popular electronic services be held back, or even shunted to the side, in the face of huge consolidations?
"There's no question in my mind that these mergers disrupt everything," said David Taylor, the executive vice president of the Bank Administration Institute, which runs the annual Retail Delivery Show, a major banking industry trade show.
"The larger these mergers are, the more time they take--there's a tremendous amount of time devoted to comparing different systems and retraining people," he added. "And there's a huge focus on customer retention, just trying to hold on to the customers you have, and meeting quarterly earnings expectations."
Aside from the delays that a systems consolidation can cause, there is also the potential issue that two merging partners will not see eye to eye on interactive initiatives. For example, if a bank moving aggressively in its Internet strategy is acquired by a more conservative institution, does the new bank pull back, forge ahead, or somehow compromise?
"If two banks have taken different perspectives, they have to reconcile their views," said Seamus McMahon, the executive vice president of First Manhattan Consulting Group, a bank consulting firm. "I think that dialogue has produced different answers [in different mergers], but ultimately these mergers will only accelerate a drive for standards in the industry."
McMahon said he expects the mega-mergers proposed recently (Citibank-Travelers, NationsBank-BankAmeri- ca, First Chicago-BankOne)
to result in consistent leadership because the partners are essentially equals, and not in the position where one is taking over the other and cleaning house.
The proposed merger of BankAmerica and NationsBank unites two banks
that have already shared their views on alternative delivery. Together, the pair jointly acquired Meca Software, maker of Managing Your Money, in 1995, and later they helped spearhead the creation of Integrion, a consortium of 17 banks, IBM, and Visa that's focused on developing services and standards in electronic banking.
Michael DeVico, executive vice president of BankAmerica's interactive banking division, discounted the idea that the proposed merger might detract from online service. "The obvious evidence within both companies suggests that this is an important distribution channel for both of us," DeVico said, adding that both banks had separately gained "more relevant experience" in recent smaller mergers.
However, McMahon of First Manhattan pointed out that although
NationsBank is moving forward to "roll out a Web-based version of its Meca software," some banks it has acquired recently--like Barnett Banks of Florida--do not have access to NationsBank's basic online services.
Paul Harrison, CEO of Meca Software, said that banks have improved their turnaround time in merger consolidations--pulling off in months what sometimes took years. But many are still coming to grips with e-banking, he noted.
Taylor of the Bank Administration Institute said the mergers will help banks compete online in about two years with the brokerages that have been nibbling away at banking assets for more than a decade. "Bankers are not into this mode of constantly enhancing or quick turnaround," he said. "But after that, they're going to have the size, the marketing power, and the account base to really compete."
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