By Evan SparksVernon Hill made it more convenient for his customers to get to the bank, and more pleasant while they were there. But bankers across the industry were spending the late 1970s trying to figure out how to roll out the ultimate in bank convenience—banking from one’s own home. Today we take mobile banking for granted, but four decades ago “anytime banking” was a distant dream.
Banks across the country were working on it. The biggest names in the industry—Chemical Bank, First Chicago, Bank One, Citibank—were racing to roll out home banking. Perhaps surprisingly, the first to do it was a community bank in Knoxville, Tenn. And the leader of the rollout was a 35-year-old technologist named Thomas Sudman.
Sudman was an engineer who had spent the first decade of his career at IBM focusing on parallel processing before he joined the United American Service Corporation, which served several small United American banks in Tennessee cities (statewide branching not being permitted until 1990).
There were two key elements to home banking, Sudman realized: the access portal and the account status. The second challenge was less readily solved. At the time, transactions were processed in batches at the end of the day. Funds availability was not certain at any given point before the batch, since any number of transactions could have been initiated. To enable home banking—in which the consumer could initiate transactions on his own or just get an accurate read on his account balance—would require real-time settlement. “It was a renegade way of thinking,” Sudman reflects. “Technology is always capable of doing more than culture is ready to accept.”
Having pushed United American and its systems to move toward real-time processing, Sudman turned to the simpler challenge: access. The portal would be a home computer. They were not widespread but were moving from the realm of the hobbyist to the first consumer mass market. Sudman arranged with Radio Shack to manufacture a custom security modem for its TRS-80 computer; United American customers who bought the hardware would be able to access their account information securely.
Home banking began rolling out to United American customers in December 1980. In its first year, customers could pay bills, check balances and account history and even apply for a loan. Included in the charge of $25-30 per month was access to games, budget and tax calculators and 11 daily newspapers. Thousands of Knoxvillians enrolled in the service.
Sudman’s ambition was to take United American’s platform national, licensing it to other banks. The launch attracted huge media attention; Sudman gave hundreds of speeches around the country and did a white-knuckle live demonstration on Good Morning America with Joan Lunden. And Sudman’s system may well have been the future of banking, but for the man at the helm of the bank.
Jake Butcher was at the head of a Tennessee banking empire, a prominent Democratic state politico and a relentless civic promoter. (He singlehandedly brought the unlikely 1982 World’s Fair to Knoxville.) “He was not a great banker, but he hired good people,” Sudman recalls, proud of the team that rolled out home banking. But Butcher let the bank run out of control and it failed in 1983 on massive loan losses—the fourth largest failure up to that point. The acquiring bank couldn’t figure out what to do with the innovations Sudman had led, and Sudman and his team moved on.
United American may not have had the “killer app” for anytime banking, but it was first to the game—proving that even in high-stakes technology races, creative young community bankers can beat the big guys.