On-Line Banking: Cyberbank Gets Physical - But Don't Say 'Branch'

Don't call it a branch. Executives at Security First Network Bank prefer the term "city office."

Semantics aside, some who have seen the Internet-based bank's first physical facility in Atlanta hail it as a prototype of the branch of the future. No teller lines, no stacks of deposit slips. Just a small staff of lending and technology experts, dressed "business casual," who help customers surf the World Wide Web and invite them to drink free cappuccino.

There is an automated teller machine outside for people who want cash. Inside are a variety of newfangled computers and a mini-museum showing such high-tech gadgetry as a browser telephone.

"This is what banking is going to be about-this is a look into the future," said Anne Morgan Moore, president of Synergistics Research Corp. in Atlanta, who attended the facility's grand opening on Jan. 30.

"You're going to have face-to-face primarily for investments or something new or different," she said. "After that, customers will more or less do their routine banking remotely."

Last summer, when Security First executives revealed their plans to open a small number of offices, some critics snickered at the apparent backpedaling from the Internet-only concept.

"The reality is that no new technology gets adopted cold turkey," said Eric W. Hartz, president of Security First, which is based in Atlanta. "You have to go from what people are used to to something new in a hybrid fashion."

Security First Network Bank opened for business in October 1995, with a skeleton crew working out of a suburban office park.

In its first year, the bank gained a small but loyal cadre of "early adopter" depositors favorably disposed to doing business on the Internet.

The bank, which owns software and security affiliates, went public last May. In November came its first similarly structured competitor-Atlanta Internet Bank, a subsidiary of Carolina First Corp. of Greenville, S.C.

Also last year, Security First moved its headquarters to the trendy Buckhead section of Atlanta, and renamed its network and financial services subsidiaries-formerly SecureWare and Five Paces Software-as Security First Technologies.

Account openings continue to progress slowly, but Security First executives emphasize that their "guinea pig" operation is largely a showcase for the Internet banking software being peddled by its financial services arm.

On Wednesday, the company stated that 24 financial institutions had signed up for that software. Security First also released earnings results showing a net loss of $11.1 million, or $1.36 per share, for the fourth quarter. The company attributed the loss to the expense of developing Internet banking.

While profits may be distant, the bank has ambitious plans for growth and product introductions.

"Even though we have not been marketing this bank at all in the last six to nine months, we're still opening about 50 accounts a day, we're receiving between 75,000 and 90,000 hits a day" on the Web site, said James S. Mahan 3d, chief executive officer of Security First Network Bank.

It now claims 9,000 customers, a trickle of whom-maybe 10 per day-have opened accounts at the new city office, which occupies part of a former Wachovia Bank branch.

Mr. Hartz described the new office as "a perfect hybrid between the virtual world and the real world."

"We are bringing technology-the Internet reach of banking-to a community that may be questioning whether they want to put their money into something virtual," Mr. Hartz said.

The goal of the office is to expand the bank's base of private banking customers. More cosmically, it is aimed at demonstrating how brick and mortar can be a useful, though not a necessary, component of banking.

"The point is, you don't need a big branch," Mr. Hartz said. "We have a place that is one-fourth the size of the old branch, yet it has all the requirements and needs. It's more of a sales office because it's not full of tellers. It's full of people who have lending authority."

Mr. Mahan said the bank does not plan to open more offices until it has rolled out an Internet brokerage product, probably around midyear. The product is now being tested, and the bank conducted its first live trade this month.

"I want to seamlessly be able to offer you the ability to do a trade and move money from your money market account to your brokerage account," Mr. Mahan said.

"Before we actually attempt to blow this thing out either from a Web banking standpoint or from a physical location standpoint, we're going to wait until we have that product."

The availability of brokerage will help Security First's "city office" function more as an investment center. The office includes three sit-down kiosks for Web-surfing, several large-screen computers, and even a vault inherited from the erstwhile Wachovia operation.

Though the office has been open informally for several months, it had a "grand opening" Jan. 30. Children from the Boys and Girls Club of Atlanta came in for an Internet training session, and then the office conducted its first official transaction: an electronic donation to the charity.

In the evening, there was a reception for about 200 Atlanta luminaries, and the cappuccino was flowing.

Rep. Bob Barr, a Republican who represents the district and sits on the House Banking Committee, spoke at the ribbon-cutting. He said he was particularly impressed with the bank's privacy and security measures, equating them to those used by U.S. intelligence and defense agencies.

"Internet banking is a reality that has established itself for the long term," Rep. Barr said. "SFNB has innovatively created a secure way for millions who use the Internet to handle their banking needs."

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