Citi, Chase Beefing Up Home Banking

After letting their micro-computer-based home banking services languish for years, two New York banks are planning to improve their software to attract more business.

Citibank and Chase Manhattan Bank are quietly putting some additional development money into their home banking systems that let consumers check balances, pay bills, transfer funds between accounts, and perform other financial tasks.

While Citibank has continued to actively market its service, called Direct Access, Chase Manhattan was close to mothballing its Spectrum homebanking program. For example, customers who recently asked about Spectrum at a Chase branch were probably told that the service was no longer offered.

That's going to change, according to executives in the electronic services unit of the bank.

Software Update

After meeting with customers and analyzing the pros and cons of keeping the service, Chase has not only decided to continue offering Spectrum, but will produce a new release of the software for the first time in four years. The bank plans to relaunch it with a publicity campaign in the branches next year.

Citicorp's Direct Access system also has four-year-old software that was developed for terminals with much less intelligence than that of today's micro computers. With some computers, the system can freeze up while a customer is online.

A bank spokesman said that Citicorp plans to upgrade the software eventually.

"It's not going to take years, but it's not going to be weeks either," said the spokesman. "There was never the penetration among customers because of the [required micro] computer, and because of that, the systems were never really complete. The philosophy we're pursuing is to completely integrate the front-end devices to the back-office systems."

Correcting the Problems

Chase currently does not make money on its service, according to knowledgeable sources, and Spectrum has not been popular with customers. But Chase believes it can correct both these problems by upgrading the service and eventually shifting to new devices, such as an advanced telephone with a small screen.

"Chase is very much committed to Spectrum," said Barbara Velte, vice president of electronic services. "We are looking at additional features, and we're also exploring other devices."

Sources said Chase is also planning to enhance its telephone banking service by adding a screen that will allow customers to display and print out transaction information.

Customers Might Walk Away

Competition, the emergence of more advanced home banking services, and pressure to cut costs forced Chase to act. Citicorp is testing an enhanced telephone with a few hundred home-banking customers in New York City. Later this year, Hungtington Bancshares Inc. plans to offer a home banking service that uses an advanced telephone from AT&T.

More important, sources said, Chase decided that even though the service is not profitable, the bank has more to lose by dropping it. The customers that do use the service really like it, and if it were not available, they might switch banks.

So while Chase might be able to cut back-office costs by eliminating the service, it might lose valuable customers. Customers who use home banking typically have high balances and multiple accounts, and use bank services more than other customers. Chase service now has about 10,000 customers, according to industry estimates.

"Even if it's not wildly profitable, it doesn't mean you should exit the business," said a Chase executive close to the project. "Customers like it, so we should offer it."

Service Scaled Back

Chase has continued to support the service for existing customers. But the bank had anticipated more customers would sign up for Spectrum. The service was scaled back a few years ago and is not marketed to customers in the branches. "Customers didn't really want it," said an employee at one branch.

Chase considered dropping the service several months ago. Sources say that when the bank was planning its 1991 budget last fall, it was looking at programs to cut, and Spectrum was a candidate. Instead of cutting it, Chase held focus groups with customers and analyzed the home banking market, as well as how much the bank should invest in the service if it decided to keep it.

"We have not added features, but we've really improved the access and the overall service quality level," said Barbara Velte, vice president of electronic services at Chase.

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