`The Banking Industry's Best Kept Secret'

Texas native Carl E. Reichardt hammed it up in his usual good-ol'-boy style at the July 19 press conference announcing his retirement from Wells Fargo & Co. "Paul, he's quieter and smarter than I am," the chairman and chief executive officer drawled, grinning at the bland-looking, bespectacled man to his right, Paul Hazen, who will replace him on Jan. 1. "I intend to second-guess Paul every chance I get. Haw haw haw haw haw."

Then Reichardt turned to the serious-looking, blue-eyed man to his left, who could be equally important to the bank's future. "Where technology is concerned, I've got Billy Zuendt, here," Reichardt said, a thick finger indicating Hazen's replacement as president and chief operating officer. "He is one of the few presidents of a major bank that is current in technology."

SELF SERVICE. William F. Zuendt--only the boss calls him Billy--has worked at Wells for 21 years, leading the bank's technology operations since he joined in 1973 at the age of 27. Both Zuendt and Hazen operated in relative obscurity under the charismatic Reichardt. But given his promotion, Zuendt will now be closely watched. Thomas K. Brown, an analyst at Donaldson, Lufkin & Jenrette, calls Zuendt "the banking industry's best-kept secret."

Zuendt's role is to push Wells Fargo into the future. Banks everywhere are trying to move consumers away from high-overhead branches and toward self-service stations such as automated teller machines and touchtone telephones. Many are also frantically retooling their systems to market more effectively. Wells Fargo, which has long invested heavily in technology, must make its bet pay off in order to remain a major player in the new world of retail banking.

Zuendt, a bona fide technoid who reads Wired magazine, surfs on the Internet, and uses an Apple Newton, seems especially qualified for the task. A mathematician trained at Rensselaer Polytechnic Institute, he helped a machinery company avoid bankruptcy before moving on to Stanford's business school and then to Wells Fargo. In 1980, when then-Chairman Richard Cooley got sick of the bickering between retail marketing and operations, he put Zuendt in charge of retail as well as technology.

Zuendt says he isn't enthralled by technology for its own sake. "I hope we are never leading-edge on technology itself," he says. "I hope we are leading-edge in implementation." Certainly, Wells Fargo's religiously cost-conscious culture would have driven him out otherwise. Zuendt "is as cheap as he can be," Reichardt is proud to say. Under Zuendt, Wells Fargo became one of the first banks to offer 24-hour banking by phone. The bank also built an ATM network faster than almost any bank. Today, customers use Wells' highly advanced ATMs to pay utility bills, transfer money into mutual funds, and print bank statements. At Wells Fargo, 77% of customers use an ATM at least once a month; the industry average is 46%.

TRICKY TERRAIN. Largely because of its success with ATMs, now numbering 1,844, Wells Fargo has kept branches down to 624, just three more than in 1986. Even so, core deposits have grown 33%, and net income has rocketed 124%, to $612 million--although the number of tellers and other branch employees has dropped by 1,200 since 1993 alone. Says Zuendt: "A teller is a manual ATM." DLJ's Brown says Wells Fargo's technology outpaces rival BankAmerica Corp.'s in areas such as credit cards, where Wells Fargo offers applicants introductory rates based on credit history and other measures.

Zuendt is now trying to move Wells Fargo into trickier territory. Banks everywhere are adding computing power to their databases to better target customers--projects that demand more sophistication than installing ATMs. Wells Fargo is going one step further, testing a new Unix-based client-server system for its tellers, fancier but potentially more powerful than a network of simple PCs. The system will flash tellers recommendations on products and services to mention to each customer, based on the customer's business with the bank.

Reichardt has made clear--and Hazen agrees--that Wells Fargo won't pay the high prices demanded today for bank branches, a distribution system he calls a "dinosaur." That disdain increases the pressure on Zuendt to grow profits using technology to reach new customers--all while not alienating older, wealthier depositors who wouldn't touch a PC if their lives depended on it. Zuendt has his work cut out for him.


Highly advanced cash machines provide access to IRA, CD, and Wells mutual-fund accounts. Customers can also use ATMs to pay utility and store bills and print out full bank statements.


Computers assess overdrawn customers' balances and payment histories to determine likelihood of recovery. Result: in 1993, Wells paid twice as many overdrawn checks and cut losses 10%.


Wells uses computers to break small-business accounts into narrow subsegments and price loans based on creditworthiness. Wells has lent close to $2 billion to small businesses since 1989.


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