Long before industry observers argued whether wireless financial services would outpace online or whether Web-based banking services would be more popular than PC dial-up, an earlier debate raged in the pioneering days of home banking.
Would consumers be more likely to check balances and pay bills through their personal computers or their television sets?
Perhaps it sounds odd to imagine that bankers at some of the country's largest and most prestigious retail financial institutions viewed the TV set as a preferable medium to the PC. But in the early to mid-1980s, with fairly low PC penetration and little utility on the equipment, it really isn't surprising that leaders such as Northeastern powerhouse Chase Manhattan Bank saw greater potential in the ubiquitous TV as a medium for their earliest home banking pilots.
What may be more surprising is that now, with PC Internet-based services becoming a requirement at most large and midsize financial firms, the television again is being viewed as a channel for banks to reach consumers. But interactive television finally is becoming a reality in the United States, and it already has entered millions of homes in Europe. And the new capabilities of this enhanced, two-way medium bring renewed opportunities for service providers in the financial industry to reach customers.
"This is not just about putting the Web on television," says Isabella Fonseca, an analyst with Celent Communications, a financial services market research firm. "If banks plan to remain competitive, they'll have to eventually move into this channel."
Interactive television services are just starting to blossom in the United States, and so far, no banks have publicly announced their intent to provide services by iTV. But if the medium grows as quickly as some observers expect, it may be hard for bankers to avoid this new venue. Internet researcher Jupiter Media Metrix predicts that interactive television will grow 83% to reach 46 million U.S. homes by 2005-many times faster than the 9% online growth it forecast for the same period. But after years of development and piloting with only a fairly tepid response, why the surge now?
"The day interactive television became a reality was when (America Online Chief Executive Officer) Steve Case and (Time-Warner CEO) Gerald Levin said their companies would be one," says Phillip Swann, author of TV Dot Com, which discusses the future of interactive television. "And they said AOLTV would be a focus for them.
While Swann admits that several satellite and cable providers as well as technology powerhouses like Microsoft (which owns WebTV) already have staked positions in the iTV field, he believes the union of America Online and Time-Warner created a competitive force that has spurred the other players forward. Other onlookers see a more gradual progression, saying iTV has simply evolved to the point where services soon will be as readily available here as they are in France and the United Kingdom.
Fonseca of Celent, who currently is researching the interactive television banking space in Europe, says that demand for such services in France and the United Kingdom has been growing fairly steadily since they were initially offered a couple of years ago. France's Credit Agricole, the first European bank to initiate such service in 1998 by partnering with satellite operator TPS, had garnered 50,000 customers by the end of 2000, according to Fonseca. She expects that number to climb to 160,000 by the end of this year.
The Credit Agricole iTV service is available to TPS subscribers who also are customers of the bank. Customers get a special set-top box and remote control, and they are charged a basic monthly rate by TPS for the overall interactive TV service, with no additional fee from the bank. They can check balances, order checkbooks, make transfers and also receive targeted advertising from their bank through the service.
Fonseca believes that banking services on iTV will become increasingly important, especially in Europe. But she says such services will grow more slowly here since the United States is behind in interactive television deployment and already has such a high penetration of PC-based banking users.
"Banking by interactive television will not grow as quickly over here," Fonseca says. "The way we see it, it's an additional channel through which you're reaching your customers."
Demand for iTV-based banking services will be greatest in the United Kingdom, says Fonseca, where the platform providers have been the most active. Forrester Research reports that seven U.K.-based retail banks already offer services via interactive television, and more banks like online bank Egg are planning to launch similar services.
Most of these "sites" offer basic information about the bank's products, although a few feature more advanced functions. Abbey National, for example, has electronic callback, and Woolwich provides loan quotes. Only a few pioneers, like HSBC, let consumers view their accounts, make payments or conduct funds transfers by iTV.
OpenTV, a leading interactive television and media solutions company, has distributed 14 million set-top boxes in 50 countries, mostly in Europe. The company now has a deal with satellite provider EchoStar to begin deployment in the United States, says Sharon Brown, chief marketing officer for Open TV. The effort will begin with an upcoming project in Half Moon Bay, CA, near San Francisco. Brown expects adoption to begin snowballing and predicts that by year-end, OpenTV will be in 5 million U.S. homes and 40 million households worldwide.
Brown believes that banking access will become a popular application for interactive television as availability grows. In France, where interactive television services including banking have been offered for more than two years, she says that 30% of consumers with an iTV service use it to do banking. Why?
"It's so much simpler than the Internet," says Brown, underscoring television's ease of use and its accessibility.
As much as it has vaulted in the past decade, PC penetration still hovers at less than two-thirds of U.S. households, and a significant slowdown is evident by most accounts. Meanwhile, virtually every household has at least one television set-many have one in each room- not to mention the low level of expertise required to operate the so- called "boob tube."
"Most American families already feel their lives are too complicated and they don't have enough time," Brown adds. "You don't have to boot up. There's a large screen. It's so turnkey and easy. Everyone has one and knows how to use one."
Ryan Petty, one of the co-founders of Myrio, which provides hardware, software, content aggregation and system integration to telecommunications companies to help them offer iTV services, says banking is one of the target content areas. Myrio has four U.S. deployments under way with four separate telephone companies, typically in smaller or rural markets, such as Livingston, TX, the only trial area publicly announced so far.
Although Myrio is working on a deal with one company that creates financial content, Petty admits that iTV-based banking services will likely take off gradually, and it probably won't happen this year to any great extent.
"The surfing experience on the television is not as great as on a PC," says Petty, adding that media and entertainment services like video-on-demand are expected to gain popularity with consumers much more quickly.
In its study Opportunities in Interactive TV Applications and Services, Boston-based research firm TechTrends sees electronic banking and investing as a promising t-commerce application, citing that 34% of consumers have expressed an interest. But bankers need to be aware of the potential payback; the report also says fewer than 6% of consumers are willing to pay more than $3 per month for this type of service.
While expectations run high, some iTV experts believe that banking by interactive television is not going to happen anytime soon. For starters, critics say, television is not necessarily a good match for financial services, especially since banks already have their hands full developing and managing more crucial channels like Internet, telephone and wireless access.
"Banking is sort of at a cross-purpose; it doesn't necessarily fit TV," says Swann. "It's more of a serious, work-related task that people are likely to associate with their PC."
In the short term, Swann believes that interactive television presents the opportunity for financial service providers and content developers to create "niche channels"-ones that focus on personal finance or other consumer finance issues rather than bill pay or account access.
In a recent brief, Forrester Research outlines how costly interactive television-based banking services can be for banks in the United Kingdom. Although the majority of adults in the U.K. will have access to interactive television by 2007, Forrester says most of them will also have PC-based Internet access, "leaving few iDTV-only bankers."
Since carriers are charging big fees for establishing and running such services for banks, supporting the interactive television channel for relatively few customers could be a costly venture for banks.
"Steep technology costs, high revenue-contribution fees and carriers' ongoing fixed costs make iDTV an expensive proposition for banks," Charlotte Hamilton, an analyst with Forrester, says in the brief. "Only the largest banks will be able to afford to offer iDTV services to their customers, encouraging self-service transactions on the platform."
Karen Epper Hoffman is a business writer based in Ulster Park, NY.