Rapid increases in uses of the Internet in American homes, the drumbeat of new product announcements from high-tech companies, and ever-larger investments in information technology have many bank executives asking, "Is all this real? Will the emerging digital world actually change the nature of my business? Am I looking at the Model T or the hula hoop?"

A recent discussion with a longtime banking colleague put this into proper perspective. He noted that back in 1968 he participated in a number of task forces that were planning for the elimination of the paper check-by 1980!

Not only is the check still with us today, but the technology that was then emerging and called EFT-electronic funds transfer-did absolutely nothing to reduce the importance of the check as a payment instrument. It is easy to understand my friend's skepticism.

Those perennial questions still nag: Will it happen? If so, when? Where will it affect me? What is my best current response?

I believe that enough pieces of the "digital world" puzzle are beginning to emerge for us to start to answer some of these questions.

The mass availability of high-powered information and communications devices, which has been referred to as the e-world, will truly change the way we all live and do business. I am also convinced that we are dealing with a phenomenon that is every bit as significant as the widespread use of the automobile, the telephone, or air travel.

Whether it's entertainment activities and hobbies, or the managing of our businesses, every facet of our lives will be affected in some way.

For example, data already show that the number of hours of TV watching has decreased dramatically in households regularly using the Internet. This is affecting the way networks deliver their programming.

CBS worked hard to integrate television coverage of the NCAA basketball tournament with a corresponding Web site that offered in-depth stories, statistics, player profiles, game summaries, and the chance to compare the performance of one's favorite teams with those of other Netizens.

Why is this not just another fad? The answer lies in demographics. In his book "Growing Up Digital," Don Tapscott pointed out that over 60 million children were born in the U.S. from 1970 to 1987. They have lived most or all of their lives with computers as commonplace as refrigerators.

They do not look upon this as a "new technology." They consider it part of everyday life. I can't help but notice how often children in this age group regularly "go on the Net" for information and communication.

This will apply especially when making major purchase decisions (cars, appliances, electronics). As this group ripples into the economy and work force, it will expect and demand a digital world around them and will organize their buying habits accordingly.

Products and services created as part of the e-world will, at some point in the not too distant future, begin to move market share. It may not happen as visibly as an Amazon.com might drive booksellers out of business. But organizations that are not responsive to the use of e-world by the emerging generation of consumers will quickly find themselves less competitive.

In the financial services arena these developments are important for two reasons.

First, the digitization of financial services is a huge leap toward the commoditization of these products. The Net is absolutely democratic-any provider can offer its wares, and buyers can examine many almost simultaneously.

The impact can be seen in the incredible pace of shrinkage of on-line brokerage commissions. If the customer perceives no differentiation in product, price wins. Financial firms must begin searching for ways to use the e-world to build meaningful value propositions, or they run the risk of an intense price war.

Second, and probably even more strategically pivotal, is that e-world technologies introduce a new platform. Unlike the automated teller machine, which is an easily replicable extension of cash withdrawal services, digital technologies strike at the heart of the banking relationship precisely because they represent a new platform. They will become the basis on which a relationship operates, much as the branch has been for many years.

The first phase of this transformation is under way among organizations that use phone centers as a primary relationship vehicle. USAA and Geico come immediately to mind. As new technologies such as smart cards and Net services are added to the mix, consumers will increasingly choose a financial services provider on the basis of the platform. This already is occurring in some cases and will rapidly accelerate as the N-Gen (Tapscott's term) matures.

There is another dimension to this scene that must also be noted. Some would say that the initial results of such efforts have not been encouraging.

Many smart card pilots have had mixed results, at best. Loyalty programs, a purported "killer app," have not usually been enabled by an emerging technology.

But the fundamental movement toward an e-world is still on track. These programs have not yet enjoyed much mass appeal because they have not been designed from the end-user's vantage point-something that is very typical in the early stages of introducing new technology. As consumer expectations continue to expand, and as organizations become smarter about using the technology to improve the customer's overall experience with the company, success stories will rapidly proliferate.

Tremendous opportunities exist for those willing to be creative and make an investment. For example, the vast majority of transactions remain cash- based. The potential number of loyalty transactions dwarfs the current level of credit card activity. Because the possibilities in these areas require innovative approaches and technology, they are open to a wide spectrum of players, not only traditional providers.

To take advantage of the opportunities it is necessary to understand the dynamics of user behavior with specific respect to the services to be offered. Marketing efforts must play a central role in the success of these programs if they are to respond to changed consumer behavior, and not replace well-understood services or offer mere incremental improvements. This marketing must be carefully tailored to the segment, product, and technology. This element has been grossly underfunded in most programs conceived to date, and often there is a mismatch of the technology and the program.

In this regard, financial organizations must look to their vendors for more than systems and services that function as advertised. It is also necessary to expect support in terms of the design and implementation of e- world services that fit the customer segment that is targeted, and to assure that it is implemented so that the customer's experience really does improve.

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