"Field of Dreams" approach to home banking - build the systems, and customers will come - on its head. PC-equipped households are already a sizable, sophisticated, and attractive market for banking and other interactive services, a fact underscored by the 1995 American Banker/Gallup consumer survey. It suggests that the banking providers will have to go after customers in the home, rather than expecting the customers to come to them. This notion is certainly not lost on the people who have spent years honing their home banking strategies and technologies. But the survey indicates that the PC infrastructure may have matured faster than even optimistic marketers had expected. Of households that use financial services - the "unbanked" are excluded from the survey - 44% said they have personal computers at home. That was statistically unchanged from last year's 43%, as was the finding that 26% have PCs with modems. In raw numbers, more than 30 million households are consolidating their PC technology and skills, and more than 20 million are primed to go on- line. The modem limitation is vanishing, as most new computers have them built in. Home PCs are prevalent not just among the younger set - more than half the respondents between 35 and 54 say they have them. Over the last year, the number of people who say they have done on-line PC banking transactions rose to 7% from 4%, a small but meaningful step. As in last year's survey, a majority of computer owners expressed some interest in on-line banking, and perhaps are waiting for their banks to call. The interest in PC banking was greatest in the coveted $75,000-and-over income segment, where a whopping 71% have PCs and 52% have them with modems. "What's happened over the past six months has heightened consumer awareness of using a PC to do banking transactions," said Janet Murry, senior vice president for alternative delivery at First Interstate Bancorp. "What's going to come next is a need for greater education." "If the banks sit back and do nothing, the customers could float out onto the Internet on their own," said William M. Randle, senior vice president of Huntington Bancshares, Columbus, Ohio. Ms. Murry and David Frankel, vice president for on-line banking at Prodigy Services Corp. and former Chemical Banking Corp. officer, both said the PC market would evolve much like automated teller machines. Mr. Frankel cautioned that, as with the early ATMs, consumers will require some coaxing and hand-holding to make the switch. And in this case, banks are dealing with a more complex set of technological and competitive pressures. "I hope the banks don't take three to four years to evolve, as they did when nonbanks started offering credit cards and when mutual funds started flowing out of the banks," Mr. Frankel said. Bringing in PC users, Mr. Frankel said, will require a greater attention to marketing details - including improved pricing and a simplification of the services. Working with a myriad of more consumer-savvy companies - notably software manufacturers - bankers hope the coming generation of in-home services will fare better than their past go-it-alone initiatives. More than a dozen banks have committed to hitching their accounts to popular financial programs like Intuit Inc.'s Quicken, Microsoft Corp.'s Money, or Meca Software Inc.'s Managing Your Money. David Weisman, an analyst with Forrester Research in Cambridge, Mass., said users have "warm fuzzies" about Money and Quicken, in contrast to the clumsier DOS-based software of the past. As these alliances and strategies unfold, another competitive issue is brewing: whether to use proprietary or branded on-line networks, or the vast "network of networks," the Internet. Banks have a history, and probably a high comfort level, with on-line services. Some of the earliest home banking efforts were launched in the 1980s over Prodigy, a joint venture of International Business Machines Corp. and Sears, Roebuck and Co. But over the last year, the Internet has caught fire and is taking on mass-market characteristics. In the American Banker/Gallup poll, 35% of the PC-owning households - translating to 15% of total households - said they have used the Internet. Less than a quarter of the PC owners said they subscribe to an on-line service such as Prodigy, CompuServe, America Online, or Microsoft Corp.'s recently launched Microsoft Network. That would extrapolate to about 10 million households - right on the estimate of interactive service subscribers by Information and Interactive Services Report of Washington. "The on-line networks are in a tough position," said Mr. Weisman of Forrester. "They're basically forerunners to the Web." One out of eight PC owners said they had used the Internet for a commercial purpose, such as to buy or sell goods or services or to request information. The Internet users are also a relatively younger and more affluent lot than the typical PC owner or on-line service user. Among 18- to 34-year- olds, 44% said they had used the Internet, trailing off to 38% of people 35 to 44 and 32% of those 45 to 54. Wells Fargo & Co. already allows consumers to check their account balances through a site on the Internet's World Wide Web. First Union Corp. recently announced plans to create a banking network with MCI Communications Corp. Security First Network Bank, a unit of Lexington, Ky.-based Cardinal Bancshares, recently opened as a full-service bank operating almost exclusively on the Internet. Intuit in October announced that it would offer Internet access through Quicken, laying the groundwork for future banking transactions. Forrester Research projects a steep growth in electronic commerce in the next five years. By 2000, Mr. Weisman said on-line transaction revenues will comprise $6.9 billion of $2.1 trillion in overall retail spending. By that time, Forrester further predicts, $46.2 billion of assets will be managed on-line - $29.9 billion in mutual funds and $16.3 billion in deposits. Mr. Frankel of Prodigy argues consumers will still want the less open- ended but more secure facilities that the on-line services can offer for banking and buying. "Just when the consumers are ready to accept PC banking, all the providers are leaping to the Internet," he said, warning that consumers may take longer to come around to financial services on the Internet. "The proprietary services are much less risky for everyone concerned," said Edward Neumann of the Washington-based consulting firm Furash & Co. "The banks' biggest fear is the perception that customers will get scared" by security shortcomings, Mr. Weisman said. However, Mr. Neumann pointed out, many consumers do not yet differentiate between the Internet and the closed networks, as most of the on-line services provide access to the Internet as well. He said banks must be wary of losing their identity and their customers to on-line services. "I think the on-line services are an even bigger threat to the banks" than some other actual or perceived competitors, said Mr. Randle of Huntington Bancshares. "They're branded." Ultimately, Mr. Weisman said, banks need to reaffirm to consumers that the on-line outlets are distribution channels, not products. By offering their electronic services for low or no fees, he asserted, banks may not earn much at first, but they will be able to retain customers, lower their overheads, and improve profits over time.

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