Most banks have stayed away from the hottest area of on-line financial services, according to Gomez Advisors' latest assessment of the Internet brokerage market.
Despite the boom in on-line stock trading, only about 20 banks have Web- based retail brokerage capabilities, the Concord, Mass., research firm said.
Analysts and consultants said those that fail to meet the demand for such services could wind up losing customers and deposits to the 80-plus nonbanks that provide them.
"The on-line discount brokerage companies are running while banks are still crawling," said George A. Bicher, an analyst with BT Alex. Brown Inc.
Mr. Bicher said banks are aware of the customer-attracting power of trading services, but many are preoccupied with on-line security initiatives.
Even banks that do offer on-line trading have not integrated it well with banking services. Gomez Advisors found that only a handful give customers access to brokerage and checking accounts through a single entry point.
Creating a one-stop shop would help banks compete more effectively with nonbanks that now offer checking-like accounts and credit cards.
For institutions uncomfortable jumping into on-line trading with both feet, some analysts recommend testing the waters with brokerage services delivered through more traditional channels, such as the telephone.
"Most of the larger banks have work to do because they are not capturing the on-line consumers," said Thomas F. Theurkauf, senior vice president of Keefe, Bruyette & Woods Inc. "The growth in traditional banking services has been modest, with retail deposits not growing-perhaps due to customer preference of the stock market versus certificates of deposit."
Christopher Musto, senior analyst at Gomez Advisors, said banks' problems with on-line trading have their roots in the way banks provide brokerage services through other channels. "Bank discount brokerages are not leaders and have been indistinguishable in the off-line world. The same is true on-line."
Mr. Musto said banks face several hurdles. For one, bank brokerages do not tend to have economies of scale working in their favor. Also, the technology necessary for delivering brokerage services places a heavy emphasis on real-time processing, which is relatively new to retail banking.
He added that banks are not usually the first places consumers think of when looking for access to the markets. But banks have some things working in their favor, notably their customers' trust.
"Banks should be well positioned to develop a combined financial services package via the Internet," said Octavio Marenzi, research director with Meridien Research in Needham, Mass. "The technology is there. It is just a matter of getting the various businesses aligned with the technology."
Fleet Financial Group is one bank offering customers electronic brokerage services. David A. Fingerman, vice president in the on-line financial services area, said Fleet customers currently must jump between the bank's main Web site and that of its Quick & Reilly subsidiary to get both banking and trading services on-line.
"We are working on an integrated approach that allows to them do both in same place," Mr. Fingerman said.