twist to its on-line banking strategy: "micro-branches."

In addition to launching a rebranded and redesigned Web site, the $1.1 billion-asset Massachusetts thrift unveiled plans this week to open five installations reminiscent of the film-developing kiosks in shopping center parking lots.

The thrift's centers, which will average 600 square feet, will provide drive-up teller services during normal business hours. After hours, customers will also have the option of entering a secure reception room, where they could do Internet banking and talk to customer service representatives over video connections.

The kiosks illustrate a decision by Salem Five Cents to concentrate on its own region. There had been speculation that it would seek a nationwide profile with its Internet offering.

"We're not walking away from the possibility of picking up customers across the country," said Michael R. Fitzgerald, president of the thrift's unit, "but we're focusing on greater Boston and New England."

It also reflects realism about the limited appeal of Internet-only banks, said Bill Doyle, research director of on-line financial services at Forrester Research in Cambridge, Mass. "Truly virtual banks will appeal to a small core of hardy self-sufficient folks," Mr. Doyle said, "but most folks want to know that they can use any one of the channels."

In one recent acknowledgement of the difficulty of establishing a separate nationwide Internet-only bank, North Fork Bancorp on New York's Long Island scrapped plans to do so. North Fork said it would maintain its focus on its regional market and integrate its Web offering with its other services.

Christopher Musto, director of financial services at Gomez Advisors Inc., a Lincoln, Mass., firm that ranks on-line companies, said Salem Five's decision to focus on its home market is wise. "If you're a community bank, do you want to go into turf that's not home turf, where you don't have established marketing relationships and go head to head with the big players?" he asked. "Maybe the better play is to capitalize on your own strengths within your traditional region."

Customers of Salem Five's will be able to use the thrift's nine branches in addition to the micro branches, which will be branded with the name.

Salem will build the first micro branch, which will cost $300,000 to $350,000, in downtown Boston, and will put the others in a line north toward Salem.

Salem Five plans to spend $1 million to advertise over the next six months, mostly in New England mass media, Mr. Fitzgerald said.

"It has become hard for us to create brand awareness outside our geographic footprint," he said. "After all, we're only a billion-dollar community bank."

Mr. Fitzgerald said it was easier to gain attention with little or no advertising five years ago, when fewer banks offered Internet services. But now it is more difficult to cut through the "digital clutter," he said.

Though the thrift will continue to target customers in its region, it saw a need to develop a new brand name for the Web, he said. Consumer research showed that the Salem Five brand -- which dates back to the 1850s, when 5 cent deposits were significant -- didn't work on the Internet.

"It made us look so caught up in history," Mr. Fitzgerald said.

Despite that handicap and its small size, Salem Five has received a lot of attention since its Internet debut in 1995. Gomez Advisors calls it "a little bank with attitude." The Web site was rated No. 4 in Gomez's spring 1999 scorecard of overall service quality.

Mr. Doyle at Forrester said the merger of Fleet Financial Group and BankBoston Corp. leaves room for smaller banks in the region to flourish. "If Salem Five can offer a very efficient and well-designed home banking system, it can attract some people to whom the idea of having a branch not too far away will appeal."

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