Bank profits, as they exist today, are under siege from the effects of technology. The maturing of digital signature technology, smart cards and the Internet are automating at-home customer interfaces to wither bank profits at the hands of an Internet-wide competition for bank customers. Now is the time for financial institutions to leverage their existing assets to penetrate emerging Internet markets.
Several key factors in the at-home transacting equation have quietly passed critical milestones in the past few months, such as "signing- capable" smart cards that can digitally sign transactions using public key techniques. Some might think smart cards are a "been there, done that" technology-but few smart card designs have successfully navigated the gauntlet of stringent conditions that come with the "signing-capable" label. This critical piece of the at-home transacting puzzle is just recently available from vendors.
The dispersal to the public of requisite Internet-capable platforms has been broadened from just PCs to include low-cost Web TVs and network computers-all designed to support smart card readers. New PC keyboard designs integrate smart card readers to support the insertion of a PIN from the keyboard directly onto the smart card, wisely bypassing any processor that could snatch the PIN. Significantly reduced costs for platforms that are both Internet and smart card-capable will expedite the utility of at- home transacting.
Commercially available Web browsers have also just passed a crucial milestone: compatibility with "signing-capable" smart cards and their associated readers. The first such browser-integrated smart card product became available last fall, costs about $150, and supports secure e-mail.
Quality Internet access from the home, another critical factor of at- home transacting, is on the road to ubiquity. Low-speed dial-up is still prevalent, but high-speed cable modems, ISDN, and other techniques are sharply boosting Internet performance for users.
The vision of at-home transacting conflicts with several other concepts for future transacting. Some think smart card solutions are just too costly and regard card numbers or passwords as adequate for Internet use. Others imagine protected memory cards for stored value are somehow relevant to the Internet. Some, like SET developers, use digital-signing techniques on too narrow a target (credit only) and are thereby deemed by others as being too expensive. Unfortunately, these visions fail to anticipate the power of an on-line society with digital signature technology. In the future, users will plug smart cards into PCs at home or work, ATMs, point-of-sale terminals, phones, even parking meters, and the network will literally synchronize cardholders with their data to enable transactions.
Banks need to turn their strengths into advantages. Bank-issued "signing-capable" smart cards could be used in a broad array of markets to both recover card costs and capture new revenue streams. For example, bank- issued smart cards can be used to authenticate and encrypt all types of personal communications.
The banking industry uniquely possesses all the skills to process signing-capable smart cards. In many cases, the requisite skills are directly transferable from its massive credit card processing infrastructure. Handling of card applications, fraud, embossing, issuance, call centers, and consumer and merchant relations are competencies that reside in the financial industry's arsenal.
Nonbanks are already cashing in on these bank-developed infrastructure resources to create new Internet-based revenue streams. Some companies deem themselves as "trusted third parties" for Internet commerce. But today's nonbank certifiers of public keys for Internet are heavily dependent on bank-populated credit databases for verifying identity since they do not have the bank's point-of-presence with the public to perform the needed identifications themselves.
The banks' most critical asset is trust. Who will consumers "trust" to affirm the financial status of an Internet merchant or to authorize transactions-some technology company or a bank? Time is running out; bankers must attack quickly using their best weapon, consumer trust, before technology companies win the battle and the war.
