Maybe Bill Gates was right after all.

Several speakers at Forrester Research Inc.'s New Realities in Online Financial Service conference in New York this week said banks' Internet progress has been slow despite repeated warnings that if they do not move faster in making good use of the World Wide Web, they may go extinct.

"Do you know how dinosaurs died?" asked Jaime Punishill, a senior analyst at Forrester Research of Cambridge, Mass.

To survive, banks must reinvent themselves as electronic businesses, Mr. Punishill said. Instead of passively waiting for customers to walk into their branches, they should begin building a customer base with a strong foundation of the young and Internet-savvy.

This means not just having a Web site but also creating "resilient structures" that can accommodate "interdependent players linked in real time," said Mr. Punishill, whose observations were echoed by many speakers at the conference.

Research by Forrester has found that when choosing Internet banking services, people look into the competing companies, usually on the Web at sites such as

The customer then picks the bank that gives him the best deal on what he wants, instead of seeking out a package deal - from checking to mortgage to credit card - at a branch.

As financial services migrate online, "the basis of trust will not be the relationship the customer has with his bank but the bank's performance," Mr. Punishill said.

Banks must "share and exploit" all data that show how they are doing - even if they perform badly, he said. Hiding information is useless, he said.

"Winners will be highly interdependent and specialized," Mr. Punishill said. Successful banks will offer a diverse menu of services and turn their core businesses into independent divisions - but without losing their brand strength.

The star speaker at the Forrester conference was John S. Reed, former co-chief executive officer of Citigroup Inc., who said that banks should merge with technology companies rather than with other banks to move from "in line" to "online."Mr. Reed said 20% of customers change their bank every year because they are unsatisfied with service.

To keep these people, banks need to view their services in new ways and be wary of business-line consolidation. As an example, Mr. Reed pointed to the way he separated the credit card business from Citibank retail banking.

That let the company market cards directly to consumers instead of offering them primarily through branches. Similar customer-friendly separation is needed in Internet offerings, he said.

No bank will be able to exist on the Internet alone, Mr. Reed predicted, but the Internet will be where companies meet their clients' needs.

Ron Shevlin, a research director at Forrester, gave an overview of how online financial services might soon look: full of oddball pairings and cross-selling alliances.These were depicted on a chart showing the logos of Merrill Lynch, Playboy, J.P. Morgan, and Recreational Equipment Inc..

Customers of Playboy and the sporting goods company might be eager to get cobranded credit cards and other financial services products, Mr. Shevlin said.

"Firms must specialize to thrive in e-business networks," and the best way to do that is through partnerships, Mr. Shevlin said.

Mr. Shevlin cited Citibank as an example. The company already connects its customers to Travelers insurance and Salomon Smith Barney investment products, all of which are part of Citigroup.

Another thing it could do, he said, is to give customers the option of looking for loans through E-Trade Group Inc., a competitor. By helping its customers find the most suitable loan, Citi would build its brand and enter a new service segment.

"Customer segments will shape e-business networks," Mr. Shevlin said.

Michael E. Gazala, a group director at Forrester, stressed that people in their late teens and early 20s see the Internet not just as a place to shop but as a way of life."Raise the technology quotient of your brand," he told the audience. "Young consumers will intensify the online revolution, and they do expect a free lunch." They are also willing to do the research needed to find bargains, he said.

In addition to offering youth-oriented services, such as auto lending online, banks should "hire young people and learn from them," Mr. Gazala said.

In a survey last month that drew 7,000 responses, Forrester asked 16- to 22-year-olds which brands they would trust with their money. Fifty-seven percent said Visa, 55% Merrill Lynch, 29%, and 27% Yahoo.

Yahoo chairman and CEO Timothy Koogle, a speaker at the conference, was clearly pleased by this result. Yahoo will work more with financial services companies, but "we will not become a bank," he said.

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