First Union Corp. has become the first banking company to sign with Open Market Inc. to deliver home banking and related commercial services over the Internet.
First Union will rely on Open Market's software to create computerized "storefronts" for merchants. Buyers hooked into the Internet, an extensive network for personal computers, will be able to make secure, on-line purchases and obtain other information and services in this "virtual marketplace and community center."
The Charlotte, N.C.-based superregional bank plans to put as many as 20 of its 35,000 merchant customers into what it calls First Access Mall over the next three to four months. Bank officials expect this number to climb rapidly, with as many as 500 merchants on the virtual mall within a year or two.
Through a separate part of its arrangement with Open Market, First Union will be piloting a home banking service, giving customers on-line access to account information and transferring funds between accounts. After testing system security and other issues with 100 customers for six months, the bank will likely extend the offering to other computer users.
These initiatives follow First Union's announcement in January of an aggressive on-line service strategy under the name Cyberbanking, which it registered as a service mark. At that time, First Union posted more than 150 pages of information on the World Wide Web of the Internet, one of the largest such sites established by a bank.
First Union officials believe they can not only improve services and increase transaction fees, but also create closer ties with merchant customers as commerce begins to evolve on the Internet.
"Traditionally, banks have been at the center of their communities," said Tom Kitrick, the project manager of Internet services for First Union. "In this new technology, we see ourselves extending that paradigm with our merchants and other customers."
Shikar Ghosh, founder and chief executive officer of Open Market in Cambridge, Mass., echoed this sentiment, adding that electronic commerce and banking services will put "First Union in the middle of what its customers are doing."
Bank officials plan to strengthen this customer connection by allowing merchants to offer special deals, or sports teams to offer preferred tickets. The merchants themselves can continually revise and update the information in their own computerized storefronts, Mr. Kitrick said.
First Union is the first bank to sign on with Open Market, which has been in business only since last year.
Unlike competitors like CyberCash Inc. and Netscape Communications Corp. that are selling secure means of processing transactions using data encryption methods, Open Market wants to create an entire infrastructure that it calls "complete solutions for electronic commerce."
In early March, the technology company introduced several products including WebServer, Secure WebServer, and Commerce Connection. Mr. Ghosh said they "allow companies to do business over the World Wide Web on their own terms. They support electronic commerce in a way that transcends mere transactions by supporting ongoing customer relationships and the creation of brand identity."
Mr. Kitrick of First Union said the open architecture of Open Market leaves a wide berth for the bank to work with any number of software companies or Internet "browser" programs. He said First Union will probably be offering a home banking service by the end of this year, and will most likely sign an agreement with at least one browser provider before that.
In addition to its 35,000 merchants, First Union said any of its 10 million individual customers with access to the Internet can participate in the program it is calling CommunityCommerce.
"The alliance with Open Market will lay the groundwork for full-service home banking through the Internet," said Fred Winkler, president of the First Union Card Products Division. "The same technology that will enable us to provide access to securely process credit card transactions will be enhanced to provide access to account statements from the desktop, allow customers to transfer funds, purchase investment products, and apply for mortgage loans on-line over the Internet."
