Study Says Banks Are Primed For Stampede to Get On-Line

At least 500 North American banks will offer advanced home banking services over the Internet banking by 2000, according to a study by the consulting firm of Booz-Allen & Hamilton.

The study, released last week, also asserted that the Internet will become the dominant electronic retail delivery channel in the not-so- distant future.

The firm identified 285 banks, thrifts, and credit unions with sites on the World Wide Web and surveyed them about costs, marketing, and technical strategies. Of the 56 that responded, 34 were retail banks.

Working from the survey results and projections that suggest rapid multiplication of Web sites and the dwindling number of banks - the firm concluded that 1,500 financial institutions will maintain some type of presence on the Web three years from now, with one-third of those offering advanced features such as bill payment and transfers between a customer's accounts.

"It's a done deal that banks are going to offer Internet banking - it's a matter of ironing out the kinks," said Bill Burnham, a Booz-Allen associate who led the survey.

Two-thirds of survey respondents said they spent less than $25,000 to establish their Web site, and 84% said they spend less than $25,000 a year to maintain it.

By comparison, Mr. Burnham said, a traditional branch costs $1.5 million to $2 million to set up and $350,000 to $500,000 a year to maintain.

"Banks are ideally suited to this medium," Mr. Burnham said.

David Jung, a vice president at the consulting firm of Killen & Associates, called Booz-Allen's projections conservative, and predicted that 3,000 to 4,000 banks would be on-line by the year 2000. "There will be hundreds and even thousands of small banks over the next few years that will put on some level of on-line banking or bill paying," Mr. Jung said.

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