As financial services competition speeds up on the Internet, breathless bankers may paradoxically find themselves back where they were when they started.

As in the real world, they are in many ways being outhustled by securities industry competitors.

Services that may have been conceived as water-testers or image- builders-like Charles Schwab & Co.'s e.Schwab or the upstart E-Trade Group - have gone mainstream. Dean Witter, Discover & Co., soon to merge with venerable Morgan Stanley & Co., acquired Internet broker Lombard.com in December.

Just last week, Lombard diversified by offering the QuickQuote insurance and annuity pricing service free to subscribers. And PaineWebber Inc. went on-line with PaineWebber Edge, as comprehensive a package of personal- account and market data as any financial company offers.

While it may be too soon to assess market-share implications, virtually every major firm now has something capable of giving banks a literal run for their money on the World Wide Web. Some mutual funds are clearly outdoing banks in their creation of virtual one-stop shops.

"We haven't yet seen everything that the nonbanks are capable of putting out there," said David Gumpert, a consultant who helps financial institutions with Web site designs and strategies.

Mr. Gumpert said some securities and mutual fund companies have even jumped ahead of Fidelity Investments, whose Fid-inv.com home page is widely regarded as the new medium's investment products standard-bearer.

"unlike banks, they can concentrate on the idea of value-added, rather than on how do they move people from old to new delivery channels," said Bill Burnham, a Booz-Allen & Hamilton consultant who has been systematically studying companies' Internet approaches. "Banks are still asking basic questions about where to start."

"Banks have been more patchwork, catch-as-catch-can," said Mr. Gumpert, president of NetMarquee Online Services Inc., Needham, Mass. "They haven't given it the priority it needs if they are going to be serious about marketing over the Internet."

"The brokerage and insurance industries came later to the Internet than banks, but they are moving much faster," said Catherine Corby, who headed alternative delivery system efforts at Barnett Banks Inc. until she recently joined Earnings Performance Group, a Short Hills, N.J., consulting firm.

"Of course, there is more to the Internet than what is on the screen," Ms. Corby added. "In the area of fulfillment, I'm not sure the nonbanks are yet as good as the banks."

To be sure, traditional banking offers its share of "cool sites." Those of Wells Fargo & Co., BankAmerica Corp., and First Union Corp. have gotten especially good reviews. And many eyes are trained on Security First Network Bank, which started two years ago as the "first Internet bank" and is marketing its technology and expertise to others.

These pacesetters consider themselves to have hit the big time when they allow deposits, transfers, and payments to take place as routinely as in the physical world. But even the 40 to 50 "transactional" banks-out of a total U.S. Web population still under 1,000-have work to do: Security First, for one, has not yet inaugurated its brokerage service.

Bankers want to be full-service financial sources, preferably selling their own fund and brokerage services alongside checking and savings. But some brokers and mutual funds are out ahead on the Web, offering to link clients to their entire financial portfolios, bank accounts and all.

While many bankers were concerned that Microsoft Corp. or Intuit Inc. might use their personal financial software to wrest control of customer relationships, the real competitive threat may have been emerging elsewhere.

"The mutual funds understand direct service, their customers are used to it, and they are in a position to extend their service to include seamless transfers with bank accounts," said Mr. Burnham, the Booz-Allen consultant.

He said "seamless" portfolio management would be made easy this year by OFX, the Open Financial Exchange standard supported by Microsoft, Intuit, Checkfree Corp., Security First, and just about every other vendor of interactive financial systems. With the technical playing field leveled, the real battle for on-line customer loyalty should begin in earnest.

"The success of mutual fund supermarkets shows that a lot of people want the freedom to choose," Mr. Burnham added. "Will they do it through one gatekeeper, or will they do it virtually through OFX?"

He pointed to Intuit's Quicken Financial Network as a "prototype for what many Web sites can evolve into." They can combine raw or customized news and market information with financial planning and advice, Mr. Burnham said, but "who gets the trade?"

Some mutual funds are prepping for battle with technological leaps that, if not producing immediate business gains, make some of the banking entries look ordinary at best.

Ryback Management Corp. announced a week ago that its Lindner Funds would be the first to enter into an alliance with an affiliate of D.E. Shaw & Co. The net effect is to bring highly sophisticated institutional trading technology within reach of tens of millions of people over the World Wide Web.

While alliances with the Shaw affiliate, FarSight Financial Services of Cambridge, Mass., are equally available to banks, industry observers said it was fitting that a mutual fund jumped in first.

Just two weeks earlier, the Stein Roe & Farnham fund family, part of Liberty Financial Cos. of Boston, became the first financial service provider of any kind to use the advanced personal-identification technique of digital certification in a consumer Internet service.

"Banks are not doing very well, especially versus the mutual funds," said Mr. Gumpert of NetMarquee. "The key to this method of marketing is change. A Web site has to change frequently, constantly adding new content- news, tools, etc."

Whereas banks are inclined to post static content-the customer newsletters or product billboards that critics deride as "brochureware"- mutual funds "are really going after this aggressively, focused on adding value and constantly upgrading," Mr. Gumpert said.

Nonbank pioneers like Schwab and Fidelity have conditioned financially inclined surfers of the Web to expect dynamic visuals, updated economic news and rate information, account viewing, and trading capability.

Iang Jeon, a Web-marketing innovator who launched the Fidelity site, moved on to Liberty Financial in hopes of taking some of his ideas to a new level. Steinroe.com, which debuted Jan. 28, was the first of several Internet adventures planned for Liberty's mutual fund and insurance subsidiaries.

Mr. Jeon, vice president for electronic commerce, attracted attention in the high-tech community for his use of digital certificates, which are far more secure for customer identification than passwords. But he had much more than authentication in mind. Liberty is emphasizing customization and personalization of portfolio management, and the certificates assure the privacy that is the foundation of the relationship.

Lindner Funds did not opt for customer certificates because they must be tied to a single personal computer; Lindner wants customers to have access from any location. It did go in for heavy-duty encryption of data communications.

FarSight, the technology partner, shies away from technology for technology's sake-"it has the potential to be unreliable and not ready for prime time," said Alexander D. Stein, FarSight's vice president of business development.

The D.E. Shaw affiliate is more concerned about moving its wholesale trading competencies into the consumer market, through allies that maintain their customer relationships and brand identities.

"The on-line medium can be used to deliver services better than in the traditional way," said Mr. Stein, "but it has to be compelling, and all financial services have to be integrated in the Web site." After three months of development, Lindner is delivering full investment capabilities plus a banking package courtesy of PNC Bank Corp.'s integrated financial services unit and bill-paying through Checkfree.

James Shelton, executive director of the Online Banking Association, Corte Madera, Calif., said the funds may have benefited by waiting for better Internet technology than banks had when they started. The association will sponsor a contest this spring among Web sites in the various financial categories that Mr. Shelton said would indicate how far the nonbanks have come.

"The mutual funds' advantage isn't the technology," he said. "The difference may be the transaction nature of banks; the funds are more like retailers."

"The banks have been focusing heavily on transactions and security," said Mr. Gumpert. "I can sympathize with that-but they are not just competing with banks. They are competing with insurance companies, mutual funds, and securities firms that are doing more things."

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