What banks would like to be a battle of brands is turning out to be a battle of rates as the multitude of small- and mid-sized financial institutions focus on bolstering their on-line presence to serve increasingly Internet-savvy customers. The phenomenon is turning stable bank relationships into Internet commodities. "It's tough because it does something (to banks) that on-line retailers have been afraid of for a long time becoming commoditized by a tool," says Scott Smith, director of the digital commerce group at Jupiter Communications in New York.

Mortgage rates may be the most glaring example of products commoditized by the Internet. Though customers previously "shopped rate" through newspaper listings, on-line mortgage aggregators make it even easier. One aggregator, Mortgage Market Information Services, boasts 2,000 completed on-line mortgage applications in April 1997. Applications were divided among approximately 300 financial institutions that pay $25 a month to have their Web pages linked to the site. At the site, customers can search by state, lender or category of mortgage.

But few large institutions willingly participate in on-line aggregator ventures because banks want brand equity; they don't want to be another bottle on the shelf. "Obviously we don't want to be competing just on rate," says Karen Shapiro, vp and on-line channel manager for Bank of America's interactive banking division.

At BankBoston, the strategy is to add value for existing customers so that they come to BankBoston first. "The relationship is the central driver," says Mike Balin, director of on-line banking.

As the market becomes more commoditized and search tools more advanced, branding may be even further degraded on-line. Says Booz, Allen & Hamilton vp Navtej S. Nandra, "You're going to see product specialists becoming a bigger force and losing some of that brand appeal."--sausner tfn.com

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