Almost 600 people paid a quick visit this week to a future in which most consumers carry smart cards, do most of their banking and shopping on the Internet, and rest assured that their financial institutions have taken all necessary steps to ensure payment security and personal privacy.

By now the bankers among the 600 have returned to a reality in which most chief executive officers don't know much about personal computers, pay more attention to commercial loan spreads and credit card profitability than to information technology, and still need convincing to pour a lot of investment capital into creating the aforementioned future.

The vision of the possible appeared at American Banker's second annual conference on financial services in cyberspace. After three days of almost boundless enthusiasm for electronic cash and virtual banking, these concepts didn't sound futuristic at all.

Stirring up a revival-meeting atmosphere, Mondex USA chairman Dudley Nigg referred to Internet banking as "the Holy Grail." But no longer does he consider it beyond bankers' grasp.

Giving the opening speech Monday, the Wells Fargo Bank executive vice president decried the industry's past sin of "giving away the branch channel for free and charging for on-line service ... How ludicrous!"

After Wells saw the light and dropped its fees for PC users, on-line customers jumped from 20,000 in early 1995 to 270,000 today - 110,000 of them via the Internet. Mr. Nigg expects two million Internet customers in five years.

It provides an unusual opening, he said, to "satisfy customer needs (while) we lower our costs ... That's the kind of economics that chairmen in our industry love to hear about, and is rare in banking. Rare is the channel where costs can be driven down."

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Mr. Nigg, speaking the same day MasterCard announced its acquisition of 51% of Mondex International, a smart card program he fervently supports, lived up to his keynote billing with the conference's most quotable quote: "If we don't get aboard this train early, we will miss it."

He said technology is advancing so quickly and decisively that bankers no longer have the luxury of waiting for lower prices or more definitive outcomes before making a move.

"If we regard this as purely hype, we will forfeit this opportunity to others who are waiting in the wings," Mr. Nigg said. "We have traditionally been slow to step up. In the past, second-movers had an opportunity to meet the train. Today, people are waiting for us to act. If we don't do so, somebody else will step in and take our place."

"Don't do nothing, waiting to see if Internet commerce is real," said Verifone Inc. vice president Roger Bertman, picking up the theme two days later when discussing bank-merchant relationships. "It is absolutely clear you will miss an opportunity and risk losing pieces of your merchant portfolios."

The Internet and personal financial management software like Intuit Inc.'s Quicken are "wedges driving financial services into the home," said Adam Schoenfeld, vice president of publishing at Jupiter Communications in New York.

Though many attempts at electronic financial services were "poorly conceived and executed," he said, banks are serving two million customers by PC, and more than three times that number express interest in the medium, according to a recent Jupiter-Find/SVP study.

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Veterans of earlier, unsuccessful attempts at revolutionizing banking behavior like to bat around ideas on why the 1990s are different.

One obvious reason is the breakneck spread of personal computers into consumers' homes. Huntington Bancshares senior vice president William Randle, a conference co-chairman, cited an October survey that said 19 million U.S. households now use home computers for some aspect of financial management.

He also showed a commercial that touted the home banking capabilities of Packard Bell's products. "When manufacturers of computers start advertising banking as an application, times are moving fast," he concluded.

There were other ideas as well. Gaurang Desai, a vice president at Montgomery Securities, said vendors and bankers are growing more comfortable with one another and are working together more productively. Henry Lichstein, a vice president and technology strategist at Citibank, said banks are learning how to market on-line services so they are attractive to consumers.

Pointing out that Citibank has offered home banking for a decade, he said the program began "in earnest" last year when the bank stopped charging for it.

In 1996, Mr. Lichstein said, "the big change was the Internet."

And David Frankel, banking business manager at the Prodigy on-line service, recalled that when his company introduced on-line banking in 1988, it fell flat.

Prodigy has spent the last eight months reconstructing its service for the Internet. "People are moving to the Internet directly at almost alarming speed," Mr. Frankel said. "We have recognized the future of the Internet and the ultimate demise of proprietary on-line services."

Several speakers predicted that the introduction this year of television sets with Web browsers will jump-start home banking for the mass of consumers.

In the Jupiter Communications survey, 25% of households with personal computers said they "would prefer to get their electronic financial services through the television," said Mr. Schoenfeld.

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Mr. Lichstein defined the task at hand - "the process of anticipating change and aligning oneself to it" - as "finding the strategic groove."

Something is in a strategic groove, he said, when "if we do not step up to the challenge, someone else will." By that definition, Mr. Nigg was describing strategic grooves for the Internet and smart cards, particularly Mondex, which can operate as both a real-world cash substitute and a virtual-world payment transmission device.

Mr. Lichstein put smart cards and consumer electronic banking in that very context. "The strategic groove in home banking," he said, "is in full swing."

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Critical or dissenting voices were pretty much drowned out. Charlotte Wingfield, a KPMG Peat Marwick partner, said she got a respectful reception to what she called the only presentation covering the biggest mode of banking distribution - the branch.

Citing a consumer survey KPMG commissioned from Yankelovich Partners, Ms. Wingfield concluded that "the branch's demise is greatly exaggerated." Her data indicated that even frequent PC users put "banking in person" ahead of software-based services on their list of preferences.

Agreeing with Ms. Wingfield, a member of the audience who works for a technology company grumbled about the pro-virtual majority. "They make it sound like everybody has to be on the Internet by next Tuesday, or they're toast. That just isn't the case."

Even a bank executive from the Northeast who is well versed in the Internet and intranets said, "I think it's all hype."

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In one session that devolved into a small-scale cat fight among software vendors, a Microsoft Corp. executive was trying to take the high road: Other purveyors of personal financial management software divulged the number of users they had doing on-line banking, but he wasn't going to play the numbers game.

A representative of Intuit said 400,000 people were banking on-line through Quicken and BankNow. The chief executive of Meca Software said he had 200,000 active users.

When Microsoft's turn came, Richard Bray, a product manager, kept insisting that 10% of Microsoft Money users were doing on-line banking. When pressed for specific numbers, he would go no further.

Unluckily for Mr. Bray, he was also scheduled to speak again later in the day about the Microsoft Network for the Internet. It was in that speech that he casually said: "Two and a half million people use Microsoft Money."

And 10% of 2.5 million would be ...

William N. Melton, founder and president of Cybercash Inc., was torn within himself. He took a break from the American Banker conference to fly to the giant Comdex computer trade show in Las Vegas and returned with what he termed a "manic-depressive problem."

When he first arrived in Scottsdale, he became "manic" when he learned that the bankers there had apparently gotten religion on the subject of the Internet.

"We've been trying to talk to bankers for a long time, and said, 'The Internet is really here,"' he said. "I didn't think they were really getting it."

After jetting off to Comdex, though, he became "depressed" that while the 250,000 people attending the show were "all doing nothing but thinking about the Internet," they didn't seem to be moving quickly enough toward on-line commerce.

"We've been working on SET (the Secure Electronic Transactions protocol) for one to one and a half years, and hopefully within six months we'll have interoperability tests," Mr. Melton said with some disdain.

After returning to Arizona, Mr. Melton swung back to manic mode. Hearing details about MasterCard's buy into Mondex persuaded him that "maybe it's going to happen."

Mr. Melton was emphatic about what was needed to help make "it" happen: he called on banks to "unilaterally issue digital certificates" to get customers accustomed to on-line commerce and comfortable with evolving privacy and security measures.

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Mr. Melton and Mr. Bertman, general manager of the Internet commerce division at Verifone (another company Mr. Melton founded), acknowledged some other impediments or potential obstacles.

"By 2000, the privacy issue will have really hit," Mr. Melton predicted. He said the negative consequences of such an explosive political issue could be mitigated by banks' convincing the public they have addressed it. But he warned of "a huge public debate."

Mr. Bertman said the industry must help consumers and merchants make sense of a dizzying array of payment methods and options. Verifone and Cybercash, among others, have proposed "virtual wallets" as a solution.

"Technologists tend to oversimplify the payments world," he said, "but there are some very complex issues" that financial institutions are best placed to resolve.

Mr. Bertman added that while most discussions have focused on the on- line consumer, bank-merchant relationships are at least as critical and have been "underestimated and under-understood."

"There is a question of how many banks do you need on the Internet," Mr. Melton said. "This is not a polite question, but it's going to become very competitive - more so than in the physical world where you are protected by the walls of geography."

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Mr. Melton was ready to declare victory on the security issue, saying, "It's essentially done."

Given the availability of data encryption techniques and specifications like SET, which is being developed by MasterCard and Visa, he said: "Tell your customers, 'Don't worry. We'll take care of it'."

Mr. Bertman said the SET development process will take well into next year, but the card industry should move ahead with Internet payments."

Sholom Rosen, a vice president at Citibank who has invented a computer- to-computer electronic money system, raised a red flag.

He said electronic currencies like those being promoted for the Internet - Citibank's is not among them - raise security issues different from those in conventional commerce, and they are not fully addressed by "strong encryption and protocols."

For example, Mr. Rosen said, counterfeit losses are conventionally borne by the party who is discovered passing fake currency. In on-line commerce, the issuer of money - likely a bank - is the victim, with consequences for solvency and systemic risk that Mr. Rosen said haven't been thought through.

Mr. Rosen stated in an interview that Mr. Melton and others are in an "entrepreneurial mode" and understandably eager to embrace exciting new things.

"Comdex is fine, but banks are in the business of having to manage risks," Mr. Rosen said.

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