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Thrift Thrives on Low Tech

By Connie Winkler
July 21, 2003 12:00 PM ET

Computerworld - It's one of the West's fastest-growing savings and loans, with 119 branches in eight states and $7.4 billion in assets. Yet it owns no automated teller machines. It has no online banking. No voice mail. No "press 3" automated phone system. Typewriters still sit on desks at headquarters, and there are only five Internet-connected PCs.

So, how does this business survive?

Superbly, says Washington Federal Savings and Loan Association in Seattle, which last year reported record earnings of $144 million, a 27% increase over fiscal 2001. At a time when critics are questioning the value of IT, Washington Federal seems to be proving those contrarians right: Less is more.

Washington Federal keeps its technology spending down to 1% of its annual operating expenses and has a 1980s-style IT department of seven.

"We say, 'Don't spend a dollar when a dime will do,'" says Roy M. Whitehead, president and CEO.

Whitehead boasts that Washington Federal has the best efficiency ratio in the thrift industry: 18%, compared with the industry average of 45%. That means that while other thrifts spend 45 cents to produce $1 of net revenue, Washington Federal spends 18 cents (including the 1 cent for IT) to earn a buck.

"We measure any investment—whether in people, in brick and mortar, or technology—relative to the impact it will have on our efficiency ratio," says Whitehead.

'High-Touch' Service

One reason Washington Federal can spend so little on IT is that it has a simple, low-tech collection of services: passbook savings, certificates of deposit, money market accounts, interest-bearing checking accounts and fixed-rate home mortgages.

"We use technology when it allows us to deliver a higher level of customer service more profitably," Whitehead says. "However, our customer base is one that is older and probably longing for 'high-touch' levels of service that they can't get at other institutions, which seem focused on delivering product at the lowest per-unit transaction cost."

So Washington Federal employees answer their own phones. And if they don't use typewriters, they use the WordPad applet that comes free with Microsoft Windows 98. The company's Web site provides customer and investor information, with a single e-mail contact for inquiries.

"The whole concept of not having a high-tech environment isn't particularly new, but it seems [Washington Federal has] raised it to an art form," says Jerry Silva, an analyst at Needham, Mass.-based TowerGroup.

So, what does Washington Federal's IT chief think of this low-tech operation? "You really have to let go of anything that's 'cool' or 'gee whiz' or 'would this be great,' " says Terry O. Permenter, manager of information systems. "And you have to say, 'What really makes sense for the bottom line?' Sometimes that's frustrating, because that 'cool, gee-whiz' stuff is pretty fun. The discipline of our business model is pretty powerful." Permenter started working at the thrift as a programmer 21 years ago. "I am very proud of Washington Federal," he says. "We are so off-the-chart that people have a hard time believing it."

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