critics warn that attracting deposits this way could heighten consumer sensitivity to rates.

PNC Bank Corp. last month introduced Auction Zone on its Web site, joining USABanc-shares.com in conducting regular auctions to attract customers and set rates on certificates of deposit. Fleet Boston Corp. is testing a similar service.

The banks seem to want to capitalize on the excitement generated by Internet auction ventures led by eBay Inc., which had 5.6 million registered buyers at the end of the second quarter, up 556% from a year earlier. Sales via eBay were $622 million, up 346% from a year earlier.

In the consumer loan market, LendingTree Inc. of Charlotte, N.C., has a network of 80 lenders that bid on consumer and mortgage loan applications submitted through its Web site. It processes $65 million a day in applications for mortgage, home equity, automobile, personal, and credit card loans.

NetEarnings Inc. of Burlingame, Calif., and PrimeStreet Corp. of Menlo Park, Calif., have built similar loan services for the small-business market.

On-line auctions are not just a way to jump-start Web activity, advocates say, but are inevitable.

"It is hard to imagine a world where customers would not be able to buy real-time financial services products," said Robert B. Hedges Jr., managing director of retail banking services at Fleet Boston, in a speech at a recent American Banker conference. Though Fleet declined to discuss its auction pilot, Mr. Hedges predicted that on-line auctions would soon be "not fringe activities, but mainstream."

Kenneth L. Tepper, president and chief executive officer at USABancshares.com in Philadelphia, said, "If banks are going to compete in this new world in terms of owning financial services on the Internet, then we have got to become competitive like other Internet companies."

Since May, $20 million-asset USABancshares.com has operated a Web site called CDenergy where customers bid daily for federally insured certificates of deposit. Bidding starts at an annual rate yield of 10%. Using a reverse bidding process, consumers typically drive the yield down close to market rates.

USABancshares.com's first auction attracted 2,500 participants to bid on a 12-month CD that sold at a final rate of 5.724%. That is higher than the average national rate posted by Bank Rate Monitor of about 5.28%, but lower than the 6.2% that Telebanc Financial Corp.'s Telebank pays on a one-year CD.

"The story here is about out-of-the-box, creative delivery channels," Mr. Tepper said. "You need to get rid of your banker's hat and say, 'Look, we will not win as bankers.' There are 2,000 on-line banking sites out there, and they all look identical."

Mr. Tepper plans to auction other products, including mortgages and home equity lines of credit.

PNC also plans to step up its auction activity. It held a five-day, on-line auction in September, selling 50 12-month CDs for $5,000 each. The average annual yield was 6.10%.

"It gets our customers excited, we get people to our Web site, and a number of people get good deals," said PNC senior vice president Martin Evancoe. "I would be surprised if not everybody looked at it."

PrimeStreet, which has received $10 million of funding from Royal Bank of Canada, is creating a service to enable 50 banks to view small-business loan applications. PrimeStreet would get them credit-scored, then banks would submit bids spelling out their terms, which borrowers would review before making a decision. The service would be free to customers, and banks would pay for every closed loan.

"We are trying to shift the balance of power," said Shelley Harrison, co-founder of PrimeStreet. "Borrowers right now are very much at the mercy of banks, and we want to make sure they feel as though they are able to see a number of qualified bids that they can evaluate, and in terms they understand."

Despite the enthusiasm, some bankers who prefer not to be viewed as pure price competitors or commodity marketers are wary of on-line auctions.

Bert Ely, an Alexandria, Va.-based bank consultant, said auctions would put pressure on all banks to offer better rates, and said this is "not in bankers' best interests." In addition, auctions "do not build a franchise. Banks will do as much as possible to sell service, convenience, and a value proposition rather than just a straight price proposition."

Banks that run auctions are likely to attract rate-shoppers who would leave for even a marginally better rate of return, he added.

Mitchell Caplan, president and chief executive officer of Telebank, concurred that auctions do not promote relationships.

"We do not need to create an auction," Mr. Caplan said. Telebank is aiming to offer service and convenience, he said. "Over the long term, that is how you build value with the customer."

But Mr. Evancoe of PNC said auctions could be an important first step toward getting customers. Then it would be PNC's job to demonstrate its other strengths and develop stronger relationships.

"Any retailer who can get people into his store is happy," Mr. Evancoe said. Auctions "get people into our store."

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