Bank of Boston Corp. entered the home banking fray on Thursday, saying it would offer retail customers a juiced-up telephone made by Northern Telecom Inc.
The announcement makes Bank of Boston one of a handful of banks offering customers the ability to execute a wide range of transactions by pressing keys on a special phone.
Bank of Boston obtained exclusive banking-industry rights to market the Northern Telecom device in New England.
It will compete against similar offerings, including one jointly marketed by Huntington Bancshares Inc., Columbus, Ohio, and American Telephone and Telegraph Co., a major rival of Canadian-owned Northern Telecom in the communications equipment market.
Full-Scale Launch a Year Off
Edward O'Neal, Bank of Boston's group executive for New England banking, said the bank would begin testing its service in a few months with a few hundred customers.
A full-scale launch is slated for late 1993.
Mr. O'Neal predicted that the
home banking service would eventually be used by thousands of New England consumers and would help Bank of Boston increase market share.
"I think there is real competitive advantage in providing customers with this kind of access," Mr. O'Neal said.
He added the Bank of Boston hoped to make a profit from service fees, though fee schedules have not been set.
The track record of home banking has been mixed since the advent of more primitive services using standard telephones in the 1970s.
Those programs met with initial success, especially among thrift institutions that used them to gain entry into transaction-account services, but their popularity fizzled by the mid-1980s.
PC Approach Was Tried
By that time, bankers and other providers latched onto the home computer as a supervisor vehicle for banking transactions, account inquiries, and bill payments.
But these products attracted a small following, primarily among computer enthusiasts, and many were deemed failures.
One example was the Pronto service of Chemical Bank in New York. Mr. O'Neal, a vice chairman at Chemical before he joined Bank of Boston in August, said he made the decision to pull the plug on Pronto because its revenues did not justify the costs.
An American Bankers Association survey indicated that in 1990, 26% of large banks and 5% of small banks offered home banking products in 1990. But 85% of those in the business lost money or broke even.
"It's been extremely difficult for banks to convince customers that [home banking is] something they need, want, or should be willing to pay money for," said Greg Schmergel, banking consultant at Ernst & Young's Center for Information Technology and Strategy in Boston.
But he said enormous operational savings could result if customers could be convinced to bank from home. For example, he said, if the 15 billion checks that consumers write at home each year were handled electronically, annual industrywide operating costs could be reduced by $750 million.
The current approach by Bank of Boston and others seeks a middle ground between basic telephones and more-sophisticated personal-computer technology. The telephone-like device is enhanced with a small computer display.
Citicorp began a test of what it calls Enhanced Telephone in 1990. Initially manufactured by Citicorp and now by the Dutch electronics giant Philips NV, the product remains in a test mode, used by only a few hundred customers in the New York area.
MNC Financial Inc.'s Maryland National Bank of Baltimore and American Security Bank of Washington, launched a service in 1991, using the ScreenPhone system of Online Resources and Communications Corp., McLean, Va.
Next year, Huntington plans to launch its AT&T SmartPhone service while also marketing the technology to other financial institutions.
Mr. O'Neal contended that Northern Telecom's product would be technically superior to similar telephones now on the market.
The biggest difference, he said, is that the Northern Telecom device will provide voice prompts in addition to the screen displays, making the product easier to use.
Mr. O'Neal added that the Northern Telecom phone would be based on an emerging standard that would more easily support other services, such as travel bookings and home shopping, than do the competing telephones. But makers of rival phones said they, too, would support the standard.