Until recently, I agreed with those who believe that there will always be a need for community banks, and I have been an enthusiastic investor in and supporter of such banks.

It now seems obvious to me, however, that information superhighway banks will have emerged by 2004 in a form fully evolved enough to render obsolete the franchises of small and medium-size banks.

This will not be the first time that technology has had a radical impact on the structure of the banking industry.

For example, in 1926, there were over 29,000 commercial banks in America; by 1935, the number was down to just over 14,000.

The dramatic reduction began as technology, then in the form of the automobile, eliminated the need for many small-town banks as depositories for local citizens' funds.

Consumers became able to drive a few miles to do their banking in the larger, better-equipped bank that was typically located in the county seat (the role of the automobile was overtaken and obscured by the Depression, which actually came on the top of the bank consolidation movement already in motion).

The information superhighway will have an effect on the structure of the banking industry even more fundamental than that of the automobile. Although difficult to forecast precisely, the metamorphosis to a system for information superhighway banking seems certain to include at least two distinct stages.

First, an intermediate step of PC-based banking is already on its way to fruition within two or three years. The current thrusts by Microsoft, Intuit, and others are the vanguard of information superhighway banking.

Not surprisingly, the press and bankers are focusing on the near future, visible in PC-based banking, because of its concreteness.

The emergence of PC-based banking is being and may continue to be perceived generally as interesting but not revolutionary in its early stages. Its appearance is setting off no alarm bells for bank stock investors at this juncture, when bank stocks, especially those of small and medium-size banks, carry the highest valuations in my 25 years of watching them.

But here's my admonition: At some point, after PC-based banking has matured and had its largely foreseeable, evolutionary impact, more thought will be given to what the next transformation will look like. It is at that point, perhaps, that panic about the value of old-fashioned banking franchises might set in.

Despite today's insouciance, it is inevitable that a second metamorphic stage, with gigantic, network-type entities, will overwhelm all the rest of the traditional, deposit-taking segment of banking.

As soon as a consumer can sit down in front of his television (CRT interface) and talk to his bank to transact business, then other retail banking delivery systems will disappear.

For example, one can imagine a banking transaction in 2004 beginning in a consumer's home: "CRT on. I want to do my banking. How much money do I have in my checking account? How much is my electricity bill? O.K., pay my electricity bill - and print out a payment memorandum for my records. Now I want to watch the news."

A new species of bank, the information superhighway bank, will thus take over banking.

The path of the emergence of superhighway banks will probably at first rely on and then incorporate parts of old-fashioned banking. It is easy to envision such banks working through existing banks, and then deciding to acquire some of them to forge their own banking franchises.

What occurs to me, however, is that once there are five superhighway banks in place with about $500 billion in assets apiece, maybe even before 2004, they may lose their appetites for acquiring banks and switch to direct development of their own by-then formidable franchises."At that time, the leftover existing banks may simply be obsolete and destined to atrophy as the final transformation to superhighway banking takes hold.

What does this mean? It means that small and medium-size banks that have in mind remaining independent forever (say, based on the competitive advantages of personal service) may be engaging in wishful thinking. Such banks run the risk of an overnight evaporation of any premium to book value of their franchises.

My opinion, therefore, is that small and medium-size banks should be open to selling early rather than late. Late might be too late. Mr. Johnson is president of Heron Hill Corp., a bank consulting and investing company based in Santa Fe, N.M. He is a director of two community banks.

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