On-line investing moved up a notch with the recently announced merger deal of E-Trade Group and Telebanc Financial Corp.

The ball is now in the court of the brick-and-mortar banks and the full- service investment firms.

The future seems to be a combination of banking and investing delivered on-line. The issue is whether such services delivered on-line will appeal to high-touch, higher-net-worth customers.

Some may discount the combination of E-Trade and Telebanc because of the profile of the potential customer base.

Telebanc, without the brick-and-mortar personal touch of the average bank, has accumulated 70,000 customers. These conceivably are the type to whom quick on-line delivery of investment services will appeal.

Whether E-Trade's million customers will open deposit accounts remains to be seen, but the likelihood that on-line banking and bill payment services will appeal to on-line discount brokerage customers is good.

Clearly, this combination presents synergy in the customer base. And it seems likely to avoid the huge technological problems presented by the brick-and-mortar banks, whose systems may be antiquated and unsuitable for information delivery on-line.

E-Trade and Telebanc are new, technology driven, and presumably positioned to merge on-line systems without huge expenditures. The combined entity would apparently deliver mutual funds, equities, certificates of deposit, fixed-income, and bill payment services on-line.

The question is whether the E-Trade/Telebanc on-line vision will attract the higher-net-worth customers of traditional brick-and-mortar banks or full-service investment customers.

Meanwhile, one full-service investment firm is making an interesting on- line move.

Merrill Lynch announced last week that in December it will launch its own foray into direct on-line brokerage at Schwab's per-trade price, $29.95.

Currently, Merrill's full-service product line is delivered on-line to high-touch customers, those with larger account size minimums. By December, it appears, Merrill will be trying to deliver the "touch" on-line.

Are Merrill's high-touch, higher-net-worth customers the Schwab customers in disguise? Apparently Merrill thinks so.

If successful, Merrill's actions may alter and extend the on-line customer profile to include the high-touch, higher-net-worth customer. That promises to pose a serious challenge for the banks.

High-touch has been the province of the brick-and-mortar banks, whose argument has been that higher-net-worth customers require it-especially those who need personal services.

If high-touch can be delivered on-line, what happens to the justification for very expensive mergers such as Amsouth Bancorp and First American Corp.? More bricks and more mortar - but what customer profile?

First Union Corp. is one brick-and-mortar organization that seems to be wrestling with the on-line high-touch customer profile.

The company is spending substantial sums to enhance electronic commerce and implement electronic initiatives to centralize administrative costs. Its chairman has stopped talking about brick-and-mortar bank mergers. And it has emphasized its high-touch asset management product line.

On the other hand, its shareholders - at least recently - don't seem to be impressed.

What does all this mean? Will on-line be extended successfully to high- touch, higher-net-worth customers? Who will win the war for the hearts and minds of such a customer?

The stakes are high, and the players seem to be getting increasingly active.

One lesson of all this activity seems to be that to be competitive, on- line access to the customer base is now required. Ms. Striegel is a vice president at SEI Investments in Oaks, Pa.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.