customer confidence. Many consumers are reluctant to trust their financial information to the Internet. They question whether their personal income and financial information will fall into the wrong hands.

Traditionally, a large segment of the population viewed the bank as an institution that held private information in the strictest confidence. Banks on the Web are going to have to be careful that they are perceived in the same way.

Many believe that the fear factor will be overcome gradually as standards emerge and users begin to trust the fact that privacy and data integrity are being preserved. This will be accomplished when lenders deliver secure and trusted Web sites. A key to this is the ability to prove the true identities and credentials of all communicating parties, and technology is available to do this.

Lenders will employ these tools and then sell authentication to users by explaining it over their Web sites, and displaying trust symbols from their authentication provider.

There is also the issue of valid signatures and differences in lending regulations between states. Currently, legislation is being studied that would create uniform requirements for digital signatures and protection of consumer privacy. The laws would guarantee that transactions entered into on-line would be honored in every state, regardless of variations in states' regulations.

Amid the rush of financial service providers to the Internet, on-line lending creates a new reality: a virtual branch in every home that has a computer with on-line capabilities. Consider the advantages. One retailer recently reported that 35% of its on-line business is generated between 10:00 p.m. and 7:00 a.m. This is an obvious indication that some people prefer off hours.

Conversely, there is an advantage in the amount of information that can be fed over your site. For example, you may not have knowledgeable personnel at every bank location that can deal with highly specialized loan types. A sophisticated Web site can automatically direct an application for a particular loan type to the proper department or specialist.

Another advantage is that once the process begins electronically, the consumer and the bank are in constant e-contact. All of the information pertinent to the entire process is available to every endpoint. The bank staff comes into play only after the application has been received, which reduces staff demands and errors in data entry because all information is entered by the customer.

The phenomenon of buying, trading, and getting information over the Internet is peaking. Consumers are looking for better service, faster responses, and new levels of convenience. They can explore possibilities and alternative terms in the privacy of their homes or offices. It makes sense that the consumer will want to extend the process to filling out a loan application, with all procedures capable of being completed without an on-site visit, and approval or denial by e-mail with the required disclosures. Everything except perhaps the closing can be electronic, offering consumers every reason to use the power of the Internet for their banking purposes.

But Web banking is not exempt from regulations. The accuracy of calculations will have to be perfect. Everyone, including competitors and regulators, will be able to visit the site. The minute an application is initiated, all of the Regulation Z Truth-in-Lending disclosures are required.

Aside from taking care of compliance details, a marketing person or a Web site specialist who has knowledge about screen designs and presentation should be involved. So should a programmer who has the ability to tie all of these elements together.

A word of caution: Do not simply duplicate present paper flows. Take the opportunity to design an interactive framework that does not buckle under the weight of the existing legacy systems. Rely on application components and middleware to connect the two.

Components are pre-written code that enables one to build new applications quickly and with great reliability, because all testing has already been completed. For example, a component is available that makes all of the calculations and disclosures necessary to satisfy regulations. It has the ability to output them in a form that can be used to build amortization schedules and prepare documents and reports. Middleware pulls it all together, mediating between an application program and a network helping to manage the interaction between disparate applications across heterogeneous computer platforms. It allows you to have a modern, efficient system without redesigning or scrapping your existing systems.

Any bank not on-line now should be looking in that direction in the very near future. Researchers predict that by 2002, 62 million U.S. households will be on-line. One-third of them will be doing electronic banking, gathering information on financial services, and applying for credit cards, mortgages, and insurance products. Small and medium-size banks can benefit quickly from going on-line because they don't have as many obstacles and red tape to overcome as do the larger banks.

There will always be a segment of the consumer base that will not elect to use the Internet. But Generation X and Baby Boomer adults are already relying heavily on the Internet. The convenience, easy access, and immediate results of Internet lending have heightened the attraction. If financial institutions create sites that are easy to navigate and integrate accurate mathematical components, an Internet presence can increase business immeasurably. Ignore the Web and you are likely lose customers to banks that foresaw the Internet banking explosion.

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