November 17, 2003

Over the past few years, Bank One's technology spending has moved from the back-office to the branch network. When Charles Scharf first joined the company as CFO in 2000, "we talked about the infrastructure work that was needed, especially for deposit systems and loan systems," says Scharf.

Then, in May 2002, he was named CEO of the retail group at Bank One Corporation (Chicago, $290 billion in assets). "There has been a tremendous reallocation of those technology development dollars to the banker's and the teller's desktop, in a way that actually helps drive the business."

That's evident in many ways. For instance, now it only takes 15 minutes to open up an account, according to Scharf. "To open up an account, it used to be a very 'back-office' experience," he says. "We now have new technology on that desktop."

Another prominent example is a profitability management application that Bank One has deployed across its 1,800 retail bank branches. The application, from Alphablox (Mountain View, Calif.), uses Hyperion Essbase, Microsoft SQL Analysis Server, and Microsoft Access to bring together sales tracking, brokerage, account analysis, real estate, human resources, and telecom data.


But it takes more than a new system to bring about real change. To make sure that the relationship bankers and branch managers were given the proper incentives, last year Bank One instituted a compensation system based on "production value credits," or PVCs. Every sale generates a certain number of PVCs, but not all products are equal. "We don't pay for people opening up a new checking account," says Scharf. "We do pay for someone opening up a new checking account and adding [convenience] products to it."

Indeed, about one-third of compensation is centered around checking accounts, with most of that tied to sales of products such as online bill payment, overdraft protection, direct deposit and credit cards. "We're basically paying for cross-sell, which is the value-add that a relationship banker has when a customer walks in the door and says, 'I want to open up a checking account.' "

According to Schraf, customer service has improved by having relationship bankers open new accounts, rather than leaving it to senior tellers. Indeed, when Bank One surveyed its customers that had left the bank, it found that "almost all the answers on attrition [were that] we didn't open the customer's account properly, we didn't put them in the right accounts," he says.

But not anymore. "We've got the right people seeing the customers when they walk through the door, we're putting them in the right accounts, and we have the right behaviors in place," he says.

The results: Production, as measured by PVCs, has doubled.

Contributing factors include a 35 percent increase in headcount (to 3,139 relationship bankers) along with a 70 percent rise in the average production per salesperson, says Scharf.

Also, Bank One has changed the staffing mix at the bank, by raising the average number of relationship bankers per branch from 1.3 in June 2002, to 1.7 in September 2003. "There's still a tremendous opportunity to raise the bar on that," says Scharf. Similarly, the number of investment sales reps and other sales specialists have also seen double-digit increases.

At the same time, technology has helped the bank to compensate by reducing the number of required support personnel. "When we started this process, we had about two support people per salesperson," says Scharf. "We're down to one-to-one."

Also, the teller headcount has been reduced by 1,000, concurrent with a move towards part-time staffing for peak hours. The bank had had "far too many people waiting for customers to walk through the door," says Scharf.

Scharf spoke at a conference sponsored by the BancAnalysts Association of Boston on November 7, 2003. Bank One CEO Jamie Dimon will speak at the BAI Retail Delivery conference on Wednesday, November 19, 2003, in New Orleans.

This article originally appeared in Bank Systems & Technology eNEWS, a weekly e-mail newsletter. To order a free subscription, click here.