Big banks are beefing up their retail Internet banking and e-commerce services in order to hammer their stake in the digital frontier.

But at what cost?

Executives attending a banking conference in Miami Beach, Fla., in December said their institutions are having a tough time stretching already lean information technology staffs to tackle hot projects such as Internet banking and customer relationship management initiatives without impacting support for their day-to-day operations. The topic was discussed at the Bank Administration Institute’s Retail Delivery ’99 conference.

“It’s definitely something that we’ve been struggling with. How do you grow e-commerce without emasculating [support] for these other core businesses?” said Josh Grotstein, a division executive at Citigroup Inc. in New York.

Although many banks’ technology departments find themselves shorthanded, there’s no evidence that core banking activities such as checking accounts or credit-card operations have run into any glitches outside of the occasional merger-related gaffe, said Bill Bradway, an analyst at Meridien Research Inc. in Newton, Mass.

But bankers worry that it may be only a matter of time before something gives.

For example, Newfoundland and Labrador Credit Union in St. John’s is running into “serious” resource constraints trying to support 11 locations spread out over the province, said credit union president Mike A. Boland.

Meanwhile, the credit union is trying to pursue an aggressive Internet banking strategy because deregulation of the Canadian banking industry has led virtual banks to enter its turf and offer customers more attractive rates, Boland added.

The support problems, Boland said, “are hampering our ability to innovate.”

The solution seems to depend on each bank’s corporate culture.

“Banks that have always provided strong customer support — like First Tennessee — will continue to do so and provide good Internet support,” said Paul Murphy, head of Murphy & Co., a St. Louis-based bank consultant.

Some banks, such as The Chase Manhattan Corp., are finding that creating a separate dot-com entity as Chase did last summer with helps to “protect important [IT] resources” within the core bank to run day-to-day operations, said Ronald A. Braco, who heads up in New York.

The 100 or so people who make up primarily focus on business-to-consumer and business-to-business on-line opportunities, while the bank’s primary IT staff supports its core operations, said Braco. Still, both Braco and Chase president and CEO William B. Harrison said the parent bank is currently Web-enabling all of its business lines.

“We’re only in the first or second inning of a nine-inning game,” said Harrison of digital commerce. Perhaps, but bank technologists might be looking for relief help pretty soon.

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