Whatever else it does, on-line banking is not likely to break the branch.

Even as financial institutions go on-line, experts say, branches of some type are likely to remain a key component in bank retail strategies for many years.

Bankers are finding they cannot change faster than customer habits and expectations allow.

"The industry taught people to associate banking with visiting marble halls that were almost like cathedrals," said Martin Taylor, chief executive of Barclays Bank of London, in a recent edition of the Economist. "Now we're telling them it's all right to pray at home. But we have to understand that money, our product, has a lot of sociological incrustrations, which we can't remove simply by changing the way we view our business."

Branches would figure prominently in sales and service strategies even if banks could instantly make customers want to do business another way.

Even Security First Network Bank, billed as the first FDIC-insured Internet bank, is getting into the branching act. Next month it plans to open up in a made-over Wachovia branch on the ground floor of its own Atlanta office building. (Early next year it plans to open at least two more "city offices" - it studiously avoids calling them branches - in Cambridge, Mass., and Palo Alto, Calif.)

At 2,000 square feet, the one in Atlanta will be smaller than an ordinary bank facility. Old marble columns will be camouflaged. There will be a cappuccino machine, plus three computers for surfing the Internet.

Customers will be able to make deposits and withdrawals, as at an ordinary branch. Sales representatives will be present to show how to call into the bank's World Wide Web site, to build people's confidence in the system, and to help them open accounts.

"We want to be the Nike Town of banking," said Eric W. Hartz, president of the Atlanta city office. Some people want the comfort of knowing they can go to a real bank office "even if they use it very infrequently," he said.

In common with virtually all banks, Security First hopes to steer customers toward less costly methods of doing routine transactions.

A 1994 study by Oliver, Wyman & Co. of New York found that an average transaction with branch salespeople cost banks $1.80, versus $1.40 with a teller. The transaction cost falls to $1 if conducted over the phone with a customer service representative, 40 cents at an automated teller machine, and 15 cents over the phone with an automated voice-response system.

Unit costs of Internet-based transactions, while not in that study, are widely assumed to be next to nothing.

How do customers like banking over the Net without a brick-and- mortar branch?

Security First customer William Voorhees of Bloomington, Ind., complained that customer service representatives could not resolve routine problems over the phone.

But James C. Sewell of Key West, Fla., said he likes being able to view his cashed Security First checks on-line. Because he does not live near a bank office, he must make nonpayroll deposits through the mail. He said seeing his account balance electronically gives him a sense of control.

Stephen Brock Rozen opened a Security First Internet checking account in Los Angeles before leaving to study in Israel. The account gives him an ATM card and lets him pay his U.S. bills; he arranges for his parents or others to deposit money into his U.S.-based account.

Mr. Rozen said even though he would like to be able to make deposits in a local branch, "the fact that I can send E-checks and that I have real checks makes this account very useful."

Deposits are "the big question" in on-line banking, said Mimi Rossetti, a research director at Payment Systems Inc. in Tampa. "Deposits are the one function that there doesn't seem to be a routine alternative to, and I don't think anyone knows the answer."

First Union Corp. is addressing another deposit issue: the fact that many people dislike making deposits at ATMs.

The North Carolina giant recently redesigned nine Asheville branches and eight in Raleigh-Durham to look more like retail centers.

Patrons headed for a teller line are greeted by a host who politely asks the purpose of the visit. If it is to make a deposit, the host suggests using an ATM, offers to show how, and can even issue a card on the spot.

"It is a recognition that customers have changed, and we need to change with them," said Sandra C. Deem, a First Union spokeswoman.

Cutting costs is only one objective. First Union does not want not to reduce staff and space requirements, but wants to free tellers for selling.

In California, Wells Fargo & Co. and BankAmerica Corp. are pushing minibranches, among other newfangled delivery alternatives.

In the past several years alone, Bank of America - which has about 1,000 full-service branches - has opened 360 "banking centers" in Lucky supermarkets. The number will soon rise to 400.

"Now when you open a traditional freestanding branch or a branch in a retail space like a supermarket, it tends to be smaller and a far more efficient use of space," said Bank of America spokesman Harvey M. Radin.

But with branches at the heart of banks' retail operations, displacing them may be easier said than done.

"Most bankers grew up in a bank-centered environment," said Peter Freire, managing director of the Council on Financial Competition, a unit of the Advisory Board Co. in Washington. "Competitive advantage was always defined by the physical world."

"But most banks are concentrating the activities of more and more assets in fewer and fewer sites," he said.

Many experts say banks of the future will probably use branches the way brokers do, concentrating sales efforts there but relying on other channels for day-to-day service needs.

"Our cost structure is different because we are not looking to build large offices with vaulted ceilings," said Tom Taggert, a spokesman for Charles Schwab & Co. The discount brokerage leader has 240 branches, each typically with 2,000 to 2,400 square feet.

"Branches are an extremely important element to serving the mass market with financial services," said Mr. Taggert, who noted that 75% of the U.S. population lives within 10 miles of a Schwab branch. "The vast majority of new assets and new customers come through branches. When people are turning over their life savings, they want to be able to talk to a person face-to-face."

Like the new First Union bank centers, Schwab's generally have a host who asks customers what they want. If a request cannot be handled by a computer or over a phone, employees - three, on average - are on hand to assist.

Once customers are "acquired," Schwab officials attempt to meet their financial needs outside the branches.

"All the customer calls are taken out of the branches and handled by huge service centers," Mr. Taggert said. The customers are "supported by a large infrastructure of PC and telephone automated services, so the branches are much more dedicated to business development and to the guidance of people who come in to the offices."

Fidelity Investments, the mutual fund and brokerage giant, has 82 branches averaging 4,500 square feet and 10 to 12 employees.

"We train our customers on the different points of access," said Peter Benzi, Fidelity national sales manager. As at Schwab, most customer contact is through the mail, over the phone, or increasingly the World Wide Web.

Many banks are likely to find themselves doing the same. As the branch-centric generations die off, their successors may find branches convenient mainly for sipping cappuccino and surfing the Net.

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