On the subject of home banking, the executives of regional electronic banking networks are beginning to sound like a song from "West Side Story":
"There's a place for us, somewhere a place for us...."
Like the star-crossed lovers in the musical, the regional networks are experiencing growing pains. No longer satisfied with just switching automated teller machine transactions, the networks are busily exploring other lines of business.
Home banking looks especially interesting to them. Many network executives see a natural synergy between ATM transactions and those initiated in the home.
But their road to home banking has not exactly been smooth. Unlike Microsoft Corp. and Intuit Inc., which have millions of PC-literate customers who are seen as the perfect target market for home banking, the ATM networks are not directly attached to a ready-made customer base.
Add the potential problems with technology and perceived competitive issues, and it's clear that the networks are fighting an uphill battle.
But they remain optimistic.
"What networks do is facilitate the bringing together of a large number of financial institutions into a processing arrangement that allows them to achieve cost efficiencies," said John F. Beahn, chief marketing officer of Electronic Payment Services Inc., the Wilmington, Del.-based organization that runs the MAC network.
"For home banking to succeed, every payment is going to have to be authorized on-line," added Mr. Beahn. "Where networks will play a role is in the electronic authorization of the payments, because that's what we do best."
Not everyone sees such a central role for the networks in home banking.
"I think there's a good chance they (the networks) will be left on the sidelines," said Stephen P. White, managing director of the Atlanta office of Dove Associates Inc., a Boston-based consulting firm.
"The networks continue to drag their feet on home banking, which opens the door for other companies," said Robert P. Barone, chairman and chief executive of the Electronic Funds Transfer Association, Herndon, Va.
These other companies have lost no time filling the void. Indeed, almost all the major home banking announcements of the past six months have come from companies other than the bank-controlled ATM and point of sale networks.
Two of the most active have been Microsoft and Intuit, the software powerhouses that were close to merging earlier this year until a Justice Department antitrust investigation derailed the deal.
Since then, each of the organizations has entered into joint ventures with about 20 banks.
The transactions generated by these nascent alliances are not processed through any bank-network switch.
The success of Microsoft and Intuit in forming these alliances can be attributed to the huge numbers of current users of their personal finance software.
Intuit's best-selling product, Quicken, has more than seven million users, representing close to 80% of the market for banking and bill payment software.
Microsoft's Money software is reportedly installed in more than one million households.
"Networks do not bring any customers into the picture," said Mr. White. "Intuit and other niche players are better at playing the home banking game because they set the rules. Networks don't set the rules."
Although the networks can exercise control over the ATM market, through operating rules and guidelines for participating institutions, home banking operates differently. For example, consumers will buy their own PCs and are unlikely to submit to interference from the networks on how they use the machines.
Second, unlike shared networks of ATMs, which are viewed as bringing a "commodity level" of convenience to consumers, most banks still view home banking as a means of competitive differentiation.
Big banks, which have the resources to develop their own home banking products, are especially reluctant to enter into alliances with regional networks that can make the products and services available to all banks - regardless of size - in a particular area.
Why should a large bank support a home banking alliance with the networks when it can just as easily align with Microsoft directly? asked John B. Benton, president of Benton International, a Torrance, Calif.-based consulting firm.
"It won't," Mr. Benton said. "That's the networks' dilemma."
It is possible, added Mr. Benton, that as home banking becomes more prevalent and thus less of a competitive issue, that the banks will ask the regional networks to act as the distributors, to process and settle the transactions. The largest electronic banking networks, in fact, are counting on it.
Network executives, when pressed, admit that large banks are likely to continue to develop proprietary home banking strategies, even as these services become more prevalent.
"I cannot say there will not be some number of big banks who manage to achieve success for a proprietary product," said Richard G. Lyons Jr., executive vice president and chief operating officer of Internet Inc., the Reston, Va.-based company that operates the Most network.
"I think there's a lot of room for both proprietary, bank-branded home banking services and network-branded services," he added.
Even today, banks have other choices besides Microsoft and Intuit.
Electronic Data Systems Corp. offers home banking services to financial institutions through Interactive Transaction Partners, its joint venture with U S West and France Telecom.
NationsBank Corp. and BankAmerica Corp. recently acquired Meca Software Inc., provider of the "Managing Your Money" personal finance software.
The two banks plan to develop proprietary home banking programs based on the software, as well as market a home banking service to other financial institutions. They also are inviting other financial institutions to invest in Meca.
It is unlikely that any home banking transactions generated through these systems will be processed through the ATM networks.
And transactions emanating from the home banking programs of the two card associations, Visa International and MasterCard International, would be expected to go through their networks, not the regional switches.
That leaves just a couple of organizations that have agreed to work with the networks on home banking initiatives. One is Online Resources and Communications Corp., the McLean, Va.-based company that is best known for its phone-based financial services, and that launched a PC-based home banking and bill payment service earlier this month. It has joint ventures in place with many of the regional networks.
Another is SmartPay Processing Inc., a Bellevue, Neb.-based home banking and bill payment services company that has aligned with almost every major regional network in the country.
Network executives seem unconcerned about their small share of the home banking market. They say it is still very much in its early stages and that as it grows, banks will be drawn to the established regional switches as processing centers.
"As home banking emerges, the regional networks are here to provide electronic leadership and to help find our member banks a strategy for home banking," said Mr. Lyons of the Most network.
Later, Mr. Lyons promised, the networks will be playing a much larger role, including processing of transactions generated by banks' alliances with all sorts of providers.
"The network role is to standardize what all these different devices present to the financial institution interface," he said. "The network 'gateways' all the different customer technologies into the bank. And this is important - we will be providing security, acting as a firewall, and standing between the banks' systems and open systems" like Prodigy, Compuserve, or America Online.
"The banks," said Mr. Lyons, "will want the device-independence and they'll be able to get it through the regional switches."
"The trick is deciding at what time will you enter the market," added Chuck Lefevre, senior vice president of Southeast Switch Inc., the Maitland, Fla.-based company that runs the Honor network. Despite an interest in diversification, Honor has decided the time is not yet right to enter home banking.
The wait-and-see strategy has worked out in other fast-changing facets of high technology, and it may work for home banking. Even at the end of "West Side Story," the rival gangs started to cooperate, ending that otherwise tragic tale on a hopeful note.
