A credit union in Plano, Tex., Wednesday became the first financial institution to sell U.S. savings bonds on-line.
The 8,000 electronically enrolled members of Community Credit Union can order Series EE bonds by filling out order forms on their computer screens and designating an account to charge.
The credit union would then zap the data electronically to a processing center at the Federal Reserve Bank of Kansas City, and purchasers should receive their bonds in the mail within a week-two weeks faster than usual.
"It makes our organization look more technologically savvy," said Kimberly A. Phillips, executive vice president of the $511 million-asset credit union. Hoping to boost sales of the bonds, the Treasury Department is working with software companies-Community Credit Union's is Digital Insight Corp., Camarillo, Calif.-to sell as many depository institutions as possible on the electronic ordering system.
"We think this is going to be an enormously convenient feature for people who are using home banking, which is an increasingly popular service," said John D. Hawke Jr., Treasury's under secretary for domestic finance.
Because the purchasers enter their own data, the institutions should see their paperwork load reduced, Mr. Hawke said.
Banks also can take advantage of a government incentive: They get paid 85 cents for each order filed with the Fed processing centers electronically, as opposed to 50 cents per paper transaction.
Experts agreed that savings bonds are barely profitable for financial institutions, but they continue to sell them as a public service.
"There are easier ways to make a buck," said Robert G. Rowe, regulatory counsel for the Independent Bankers Association of America. Mutual funds and other investment products tend to attract the consumer assets that in generations past went into savings bonds.
Other institutions, particularly smaller ones, are considering selling bonds in cyberspace.
"It reduces the cost of issuing the bonds," said Bazile R. Lanneau Jr., executive vice president of Britton & Koontz First National Bank in Natchez, Miss., which plans some test sales. However, the banker worries that bond purchases may become so easy that they will siphon off deposits.
Chrystina M. Giorgio, assistant vice president of Sandy Spring National Bank in Olney, Md., wants to know whether there are hidden costs. "We know Treasury's value," she said. "What's in it for us?"
This is the Treasury Department's second action in four months to encourage savings bond sales, which fell to $6 billion in 1996 from $17.6 billion in 1993. In May the department began paying interest monthly at 90% of five-year Treasury interest rates, up from 85% every six months.
The department's next step will be to market savings bonds directly over the Internet, Mr. Hawke said. Although that would bypass financial institutions, most banks are not expected to object.
