Competition Update: Banks Using Wireless Technology

CU360
October 3, 2007 | COMMENTS

ERF Enterprise Network Services announced recently it had signed new customers for its ambitious plan to use wireless technology to construct a nationwide network for the banking industry called US-BankNet. "We're going to create the financial network of the future," John Burns, chairman and chief executive of ERF Enterprise, told American Banker . "Everybody's going to need high-speed broadband within five years to keep up."

First Federal Bank of Louisiana, in Lake Charles, is setting up an internal network through ERF by using the vendor's BranchNet product to connect 14 branches. James Fazende, the bank's chief operating officer, said he expects ERF's wireless network to deliver 20 megabytes of bandwidth—effectively the equivalent of 14 high-capacity T-1 lines between branches—at the cost of one T-1 line.

Growing demand for data transmission—for digital check images and to address concerns about disaster-recovery capabilities—drove First Federal to seek more capacity. "We felt an urgent need to get more bandwidth one way or another," he said. "Going with a conventional wired network, unlike what we have now, was just cost-prohibitive."

First Federal was the first company to sign up for ERF's planned national network. The first portion of that network went live in Louisiana last month. In a news release, ERF said the five other banks using BranchNet include two others in Louisiana that might also sign up for US-BankNet. The system transmits data using microwave signals, which can travel up to 35 miles. Companies can use several transmitters strung across the countryside to deliver data over longer distances to eventually create the proposed national network.

When talking about wireless networks, bankers and regulators are quick to raise questions about data security. ERF's networks use hardware and software to encrypt data, and the encryption devices in each branch are monitored continually from outside to guard against tampering, according to Burns.

ERF is focusing on the Gulf Coast , both to provide services in an area that's prone to hurricanes and other disasters, and also to build out its envisioned interbank network. The company's network withstood a trial by fire when hurricane Rita struck the Louisiana coast in September 2005.

Iberville Bank of Plaquemine , Louisiana , began using BranchNet in October, connecting 13 branches across six parishes and an operations center in West Baton Rouge, covering an area spanning 60 miles north to south and 25 miles east to west, according to ERF. Last week it became the second financial company to agree to use US-BankNet.

The bank wanted to reduce costs by processing checks as images but was turned off by the bandwidth expense of a conventional high-speed set-up. After setting up the ERF network, Iberville moved immediately to branch capture of check images, which went live in December 2006. It plans to add merchant capture by August 2007.

Iberville plans to use voice-over Internet protocol to replace branch phone systems with a central call center and to adopt videoconferencing to reduce travel for employees.