NEWS ANALYSIS: Banks Aren't Giving Up on Screen Phones, But May Want to

Even as they grow enamored of the personal computer as the principal means of delivering their services, home banking strategists have not yet lost faith in screen telephones.

But the bankers have certainly scaled back their expectations. Where once they saw screen phones as banking products they could sell directly into customers' homes, bank marketers are increasingly willing to wait for other forces to bring the business to life.

"We don't want to be a phone company," Bruce Luecke, vice president of alternative delivery at Banc One Corp., said in a recent interview. "We just want to be a button on the phone."

It may, indeed, be the telephone companies that are in the best position to distribute the enhanced equipment and give bankers their buttons.

"The telcos are very hot" on screen phones, said Neal Chambliss, group vice president of Payment Systems Inc., the Tampa-based consulting firm. "They see the screen phone as a vehicle for getting more services into the home."

Though some small-scale screen phone tests have been dropped in the past year, Bank One in Columbus, Ohio, last month announced a formal rollout of screen phone services.

Unlike past pilots in which phones were typically given away or sold by banks, the devices are being offered to Bank One customers and others through retail outlets owned by GTE, the phone company participating in this project.

In addition to offering banking services, the phones will enable consumers to shop, and many other interactive services can be added later.

Bank One is part of the Visa Interactive home banking system. The phones are manufactured by U.S. Order, Herndon, Va., and sell for about $150, a lot less than a typical $2,000 PC setup. The devices are considerably more sophisticated than a plain telephone.

Picking up on the fact that consumers seem ready to accept remote banking - Payment Systems says about 1% of U.S. households have done banking by PC, but only a fraction of that number use screen phones - some screen phone proponents are designing their services to resemble those on PCs.

Citicorp and Philips Home Services, for example, are working with Oracle Corp. of Redwood Shores, Calif., to add an electronic mail function to screen phones made by Philips. U.S. Order is planning to add e-mail to its phones by early next year.

Scott Corzine, vice president of consumer products at U.S. Order, says telecommunications companies are stepping up efforts to make the platform more appealing.

"Banks have been doing a mating dance with RBOCs (regional Bell operating companies) for the past five years," Mr. Corzine said. "The RBOCs are natural to drive this now."

Mr. Corzine, vice chairman of the Interactive Services Association's screen phone council, a two-year-old group that is working to get a critical mass of screen phones into the market, believes banking services will be a "driving force" behind screen phone acceptance.

He said the industry has learned from the mistakes of the Minitel network in France - the first screen-based telephone appendage - "not to show up with a single-use device and cram it down people's throats."

But some observers have soured on screen phones.

"They missed an important window of opportunity," Michael L. Ritter, vice president of electronic banking at Meridian Bank, Reading, Pa., said at the Bank Administration Institute's recent home banking conference in Baltimore. "I think the screen phone is going to have a tough fight."

"The window continues to close," added Mark Hardie, a consultant with the Tower Group in Wellesley, Mass. "Consumers are moving toward PCs at a much more rapid rate than anticipated a couple of years ago."

The quandary, bankers say, is not whether the phones are useful but whether they have a place in a PC-oriented market. Even skeptics like Mr. Ritter say screen phones could find a role if smart cards become widely accepted, as expected. A smart card reader in a relatively simple phone could turn it into a home ATM, allowing value to be transmitted from bank computers into the card's chip.

Bank South chief information officer Bernard Baum said the rationale behind its screen phone project has changed since it began. And though the bank recently ended a yearlong test, he said he still sees the device as viable - with banks as information providers, not the driving force.

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