If bankers are feeling pressured to get themselves on the Internet, the responsibility - or blame - may rest with a recent rash of conferences and seminars.
Perhaps more than any other industry that might stake out a position on the information superhighway, banking has been bombarded with promotional and educational messages of ever-increasing urgency.
While the hype factor is evident and remarked upon, bankers seem to be taking the messages seriously and acting on them. Internet hype may be evolving toward self-fulfilling prophecy.
At least 100 commercial banks and competing financial service providers are believed to have established addresses on the World Wide Web, the part of the global Internet system most likely to accommodate what the seers call electronic commerce. And a growing number of those web sites - like that of the credit card issuer Capital One Financial Corp., and a 150-page complex from First Union Corp. - are geared for true delivery of customer services, not just experimentation or advertising.
"We are at the right stage of the life cycle of the Internet for everyone to take a look at it and try to figure out how to use it as a delivery mechanism for products and services," Robert Gold, chief executive officer of Transaction Information Systems, told one recent conference in New York.
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Like many of the pundits making such pronouncements, Mr. Gold has a vested interest. His New York-based company helps businesses establish web sites. (This newspaper and its parent company are among his clients.)
But Mr. Gold's and similar messages are striking the intended chord, judging by the more than 100 people who attended the daylong seminar he led on March 31 at the Swiss Bank Corp. conference center in New York, sponsored by the International Bank Study Center.
It seems to have become more than a cottage industry.
The very same week, AIC Conferences of New York held a session called Virtual Banking, with a strong Internet component, at the Marriott Marquis Hotel. A week ago, Banxquote, which is expanding its Internet stock quote service to include interactive banking, held a "full-day conference and multimedia event" at the Salomon Brothers Executive Center in New York.
On the near-term calendar are Online Communications '95, another in a series of Jupiter Communications Corp. conferences, April 18-19 in Chicago; AIC's Electronic Commerce on the Internet, April 24-25 in Arlington, Va.; and Electronic Banking '95, sponsored by the Institute for International Research, May 11-12 in Washington.
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A software consultant who has worked for many of the nation's biggest banks, Mr. Gold of Transaction Information Systems asked, "Is the Internet an opportunity or a threat?"
His answer: "Both . . . It depends on what you do with the Internet and other on-line services."
Like many consultants and strategic planners serving various parts of the industry, Mr. Gold advised bankers to "think a little differently" about their mix of brick-and-mortar and electronic delivery systems, and about how on-line services must fit in with the human element that is essential to banking.
"The average customer of a bank buys 2.5 products, and banks are trying to drive that up to five or six," Mr. Gold said. "New vehicles can help banks cross-sell and facilitate relationship banking, which could be the real value of the Internet."
Mr. Gold and other Internet-business promoters, like many in the more broadly defined home banking field, tout the technology as a way for banks to retain the "primary interface to the customer" that competitors from Merrill Lynch to Microsoft might be coveting.
Mr. Gold also stresses the ease of making at least elementary use of the Internet to test the waters, if nothing else. He is more than willing to help sort out the proliferation of available web server alternatives (see chart).
Even the most established bank technology vendors take the same attitude.
"We advise our customers to get on the Internet," said Tom Lindsay, financial systems division director of AT&T Global Information Solutions, Dayton, Ohio. "Nobody is sure how this will all turn out, but getting established on the net is not very expensive, and it can be a window on the future."
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At this early stage of commerce on the Internet, it is still possible to get the basics out of a conference. At the International Bank Study Center meeting, Sun Microsystems Computer Corp. engineer Hal L. Stern delivered the primer - appropriately, since Sun computers are used for the bulk of Internet activity and applications development.
Mr. Stern pointed out that the Internet is indeed huge, accessible by perhaps 30 million to 40 million individuals worldwide, but at bottom it is merely "a collection of addresses." The business challenge is to make sense of the vastness of the network, navigate its nooks and crannies, and profit from what Mr. Stern sees as its potential for a commercial revolution.
He said, "The paradigm changes from 'what the merchant has' to 'what the consumer wants.' What happens to banks that don't use the Internet? Will big institutions gain advantages over small ones?"
For example, he said, customers using the Internet may have equal access to banks and to firms like Fidelity Investments or Merrill Lynch. Money might move around rapidly in search of higher returns. And with transaction costs likely to come down, it becomes easier to serve smaller accounts - but also perhaps more complicated to intervene and resolve the errors and other problems to which these systems might be more prone than existing approaches.
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Another question about the Internet - actually, more of a cloud - is security. Everyone agrees it is insufficient for commercial exchanges of sensitive transaction information, and there is a flurry of activity to fill the breach.
Mr. Stern laid out the alternatives, ranging from passwords that change with each transaction to data encryption - the scrambling and eventual unscrambling of transmitted data - at varying levels of sophistication.
The choice, he said, comes down to a risk management calculation: "the tradeoff between what the data is worth to you versus what someone else would go through to get it."
The potential for Internet fraud, a subset of the burgeoning field of computer crime, disturbs Robert F. Friel, coordinator of the Secret Service's Electronic Crimes Special Agent Program.
"The anonymity is phenomenal," he said. "A criminal sitting in his bedroom can do the equivalent of knock you down and take your money, but not get caught. He can do damage to health records, 911 emergency systems, air-traffic control systems, as well as the financial system."
Mr. Friel put in a plug for an encryption system based on the proposed Clipper chip - controversial in computer science circles because government agencies would have a "back door" way to compromise the security for investigative purposes.
"If you can't trust the government (to safeguard the otherwise airtight encryption keys), who can you trust?" Mr. Friel said.
There was no further discussion in the banker crowd.
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In designing the system it launched last year for Internet commerce, First Virtual Holdings Inc. voted against encryption entirely. While orders are entered "in the clear," sensitive transaction data flow over an Electronic Data Systems Corp. private network and bank clearing systems.
"People tend to overestimate the effectiveness of encryption," said Nathaniel S. Borenstein, chief scientist at San Diego-based First Virtual. Also hanging over encryption are potential export and patent-law problems, a lack of standardization, and technical complexities.
Mr. Borenstein pointed out that one company, Netscape Communications, advertises "end-to-end security" for its commerce server, but said this does not necessarily extend to a bank that may get involved between buyer and seller.
"Every merchant becomes a target for hackers," he said. "The system is only as safe as its most unsafe merchant, which means it is not safe at all."
The First Virtual formula, for easy and accessible Internet-style information exchanges at a low transaction price to sellers of 29 cents plus 2% of sales, is beginning to work. First Virtual has disclosed few statistics - some, such as the number of browsers, are impossible to ascertain - but one indication is that 60 to 70 sellers have used the company's Infohaus option to set up storefronts, and Apple Computer Inc. is selling the software, Mr. Borenstein said.
He said the system survives an average of two break-in attempts a day. None have succeeded.
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Among bankers, Citibank vice president Dan Schutzer has become the most prominent regular - usually as a speaker - at Internet commerce conferences. Mr. Schutzer is president of the Financial Services Technology Consortium, a high-tech forum Citicorp organized two years ago that has attracted most of the nation's biggest banks and prominent technology providers.
An engineer by training, Mr. Schutzer has faith in the technology's ability not only to "revolutionize how we work and play," but to create "whole new big opportunities and ways of doing things that we can't appreciate yet."
"It's not just the Internet, it's on-line services in any way," Mr. Schutzer said last month, defining the emerging "information infrastructure." But he is also realistic amid the hype.
"What makes it truly exciting is the social phenomenon, just as the shopping mall was a social phenomenon that changed the way we do things," he said. "With all those customers out there, it would be nice if we can handle electronic commerce.
"It won't be long before you'll want to offer information of a sensitive nature, such as balances, and you'll want to be comfortable no one is listening. . . . Financial services can be an enabler. If we can make it available, electronic commerce will blossom. If we can't, it won't."
The authentication, authorization, and privacy of transactions remain missing links. Mr. Schutzer said he is confident that with "lots of software and cryptography solutions proposed and standards evolving, it looks like (security problems) will be solved." But some sense has to be made of the "cluttered landscape" of electronic commerce systems and providers, of which First Virtual, Digicash, Cybercash, Netscape, AT&T, MCI, and Mondex are but a few.
"There is probably room for all, but it is a little distressing that they don't work well together," Mr. Schutzer said. "We are striving for some sort of interoperability and an understanding of the degrees of (relative) risk."
