1st Tennessee Trying Screen Phones Again

Two years after making a false start in home banking, First Tennessee National Corp. announced plans Thursday for a screen phone program.

The Memphis-based banking company, which has $10.9 billion of assets, said it will offer a home banking and shopping service via screen-based telephones supplied by U.S. Order Inc., starting in mid-September. Sprint Corp.'s local telecommunications division will handle the distribution and the maintenance of the phones.

First Tennessee customers will be able to pay bills, check account balances, transfer funds, and make purchases from catalogues using these souped-up telephones.

The bank and the long-distance company are working out specifics on pricing, said Susan Terry, vice president of marketing at First Tennessee. She expects the screen phone to retail for less than $250.

This announcement comes almost two years to the day after First Tennessee came forth with plans to embark on a rather ambitious screen phone venture with BellSouth Telecommunications Inc., a unit of Atlanta- based BellSouth Corp.

The bank planned to give away 500 advanced phones - supplied by three different vendors, including U.S. Order - in the Nashville area in the spring and summer of 1994. This pilot was expected to be the precursor of a broad-based screen phone initiative.

But Ms. Terry said the bank backed out before the test began, citing technical and security problems with the phones. "It never really came together," she said.

Then, as now, First Tennessee preferred the U.S. Order phone to those of the other vendors, Northern Telecom Ltd. and National Semiconductor Corp., Ms. Terry said. But the U.S. Order screen phone at that time lacked the desired security functions and standard communications compatibility.

First Tennessee is the first bank to announce it will market the U.S. Order screen phone, called PhonePlus.

John Backus, president and chief executive officer of U.S. Order, said a handful of other banks will announce similar screen phone offerings this fall.

First National Bank of Maryland and Banc One Corp. are expected to be among the participating banks. BellSouth, Nynex Corp., and Bell Atlantic Corp. will be among the telephone operating companies working with the banks to sell the phones and the enhanced services.

U.S. Order, a Herndon, Va., company owned by Worldcorp, has been developing its screen-enhanced telephone technology and negotiating to market it through banks for more than two years.

Progress was slowed last year when the company sold its home banking and bill payment businesses to Visa International, Mr. Backus said.

U.S. Order now works exclusively with Visa, selling its phones to banks involved in its home banking program.

First Tennessee, for example, is one of the 60-odd banks that has signed on to Visa Interactive, the remote banking arm that grew out of the U.S. Order transaction. Ms. Terry said First Tennessee will offer Visa's PC banking product to customers later this year.

Since May, about 15 banks have been testing the U.S. Order screen phone in limited groups of five to 50 employees, Mr. Backus said.

The banking industry has been grappling with the issue of whether screen phones, as opposed to personal computers and perhaps also interactive television, will be the preferred means of delivering remote services to customers. Screen phone prices - most still considerably higher than basic telephones - have been a stumbling block.

Gary Arlen, president of Arlen Consulting Group in Bethesda, Md., said banks are attracted to the relatively low risk in screen phones. Telephone companies, eager to enhance their services, are increasingly willing to bear the cost of distributing the phones, he said.

Still, he added, "people are tiptoeing into this area."

While the price points have been dropping, companies like U.S. Order have been rallying to bring in other services, like catalogue shopping.

Mr. Backus said Phone Plus would also contain a digital phone-book feature that could hold up to 150 names, numbers, and addresses. Later this year, the company will introduce an application that will allow consumers to send electronic mail through the Internet from the phone, and a paging feature.

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