The Internet has threatened to engulf and overwhelm the old-style dial- up methods of home banking, but private networks are not being written off quite yet.

Even as an increasing number of new entrants into the business are bypassing packaged software links to customers and putting their services directly on the World Wide Web, many bankers say they will continue to support their direct-dial customers as long as they want the service.

The Internet momentum is unmistakable. One of the most aggressive home banking providers, Wells Fargo Bank of San Francisco, has a majority of its more than 400,000 personal computer customers banking via the Web, and it plans to convert the rest.

Nationwide, a fast-growing 20% to 30% of the estimated 2.3 million Americans who bank from home are doing it via the Internet, according to a recent study by Needham, Mass.-based Meridien Research Inc.

Internet strategies appeal to community banks that often lack the resources of their larger brethren and view the Internet as an economical remote delivery channel.

But among those still devoting resources to proprietary software offerings are the two biggest banking companies, Chase Manhattan Corp. and Citicorp. Both have released upgrades within the last year.

Though direct-dial PC banking is more costly to maintain than Internet- based technology, these banks are willing to spend the money to retain a group of loyal, long-standing customers who tend to be more profitable than average.

People who are concerned about security prefer not to exchange financial information over the open Internet. Or they may not even be linked to the Net.

"A segment of customers are more comfortable using private network services," said Jim Springer, vice president of Chase's remote access delivery group.

Chase, which plans this year to upgrade its informational Web site into a transactional one, released a Microsoft Windows-based Chase Online Banking software program last April. The direct-dial program allows customers to check account balances, transfer funds, and pay bills.

More than 150,000 people have signed up since the relaunch, Mr. Springer said. The bank has 250,000 total enrollees using its network service and personal finance software such as Intuit Inc.'s Quicken.

Forgoing the proprietary network approach, KeyCorp has decided to focus on augmenting its informational Web site, said Al Gula, chief executive officer of Key Services Corp., the Cleveland company's information technology and support unit.

Key chose to discontinue the development of its on-line banking software after "seeing the headaches it would create," he said. Mr. Gula has big plans for the Web site, including linking it to the bank's data base to facilitate sales opportunities.

Most banks and customers are moving toward Web-based banking, said Octavio Marenzi, Meridien's research director.

"It is easier to implement," he said. "It costs a bit less and is easier for customers because they can access it from anywhere."

Direct-dial services can require banks to become software distributors- creating, maintaining and upgrading the products- Mr. Marenzi continued. They tend to rely on Intuit and its support for Quicken, or Microsoft Corp. and its support for Money, to keep those customers happy and on-line.

One big on-line aspirant that did not at first offer software-based home banking was Huntington Bancshares, Columbus, Ohio. The $26.7 billion-asset institution was among the first to offer fully transactional Internet banking, which it introduced in June 1996. Later this year, Huntington will start serving Quicken and Money as a result of its October acquisition of First Michigan Bank Corp., which provided those connections.

Huntington chose to concentrate on its Web site because it could get the service to market sooner than it could with a software product, said Chester L. Thompson, senior vice president and general manager of electronic commerce. Also, the institution saw building an Internet site as a lot easier than developing software.

"Proprietary software is dead," Mr. Thompson said. "I can't imagine anyone investing in a proprietary system in this day and age."

Huntington does not disclose its number of on-line customers but said it saw a 25% to 30% jump in usage after a revamping in October. Though he did not discuss relative operating costs, Mr. Thompson did say that to support the personal finance software Huntington will have to add six to eight people to its 13-member help desk.

Banking companies like KeyCorp and Huntington are fairly new to the on- line banking scene, which is one reason they veer away from proprietary software. The Internet was not an option in 1984 when Citibank launched its Direct Access PC service. It became so big and important to the Citicorp unit's retail strategy-with more than 300,000 enrollees-that the New York bank does not want to give it up.

"It was pretty clear from polling our customers that the vast majority would prefer to do their banking via private networks," said David Smith, the bank's access management director. "It will take customers a while to feel comfortable" with Web-based banking.

Reaching out in the new way, Citicorp launched a Web site while upgrading its proprietary software in October. The two methods are identical and fully transactional, Mr. Smith said.

While most private network customers now enjoy the same functionality as Web clients, they eventually will fall behind as banks pour more money into Internet development.

Chase will encourage its private network customers to migrate to the Internet. Citicorp expects new Web site features to draw customers there.

"Over time, people will gravitate to the Internet," Mr. Smith said.

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