Brokers with Mellon Bank Corp. will soon be able to process mutual fund transactions over the Internet for institutional customers.
The new service, expected to start early next year, would mark the first time a bank has used the Internet to offer mutual fund transaction services, according to a leading bank technology consultant.
While many other banks offer basic banking services over the Internet, such as checking accounts, processing mutual fund transactions in cyberspace is "a ground-breaking movement," said Robert Frasca, chief executive at Galt Technologies Inc., a Pittsburgh consultancy.
Mellon's new service is part of an experiment to determine whether the Internet is a worthy distribution channel for a broad range of bank products and services, said Martin Lippert, manager of the banking company's information and research department.
"This is simply the initial venture into using the Internet as a delivery channel for providing financial services," said Mr. Lippert.
Those brokers who subscribe to the Internet and work with institutional clients will be able to purchase and redeem shares of the portfolios of Dreyfus Corp. Mellon owns Dreyfus, the nation's seventh-largest mutual fund company with $75 billion in assets under management.
The service is being offered to brokers who work for Mellon's broker- dealer subsidiary, Dreyfus Services Corp.
The advantage of using the Internet for brokers is that they don't have to pay each time they make a transaction, said Mr. Lippert. They merely pay their monthly charge for the Internet.
Currently, brokers make transactions via their computers, which use modems to transport the information across telephone lines. That means they get billed by the telephone company for each transaction, he said.
Brokers will be able to perform other transactions, including monitoring client account balances. Brokers can also retrieve fund share prices and yields every day.
Mellon's experiment comes as part of an alliance between long-distance provider MCI and Information Resource Engineer Inc., Washington.
Information Resource manufacturers communications systems that protect the privacy of data transmissions. MCI and Information Resource have formed an alliance themselves to offer financial services via the Internet.
