Security First Network Bank, the first Internet-based bank, opened its virtual doors on Wednesday.

The bank, a unit of Cardinal Bancshares in Lexington, Ky., is designed to operate with no physical branches. Customers gain access to their accounts through personal computers and get cash through automated teller machines.

Customers can make deposits, pay bills, view images of canceled checks, and reconcile accounts at any time of the day or night. The transactions, including those at ATMs, carry no fees.

Experts said the bank will be closely watched for clues about consumer acceptance of pure on-line banking and for proof that transactions can be secured.

The bank's grand opening follows months of development and testing of the security that will guard transactions as they travel over the Internet.

Since Security First plans to market the software that protects on-line transactions, other institutions are expected soon to follow in its footsteps.

Security First officials said about a dozen banks, ranging in size from $110 million to $80 billion in assets, have lined up to purchase the software, which passed muster with third-party testers at the Georgia Tech Research Institute.

Security First has "a split personality," said David Weisman, an analyst for Forrestor Research in Cambridge, Mass. "They want to be the first bank on the Internet, and they also want to sell their software to other banks."

The on-line bank is the brainchild of two brothers-in-law: James S. "Chip" Mahan 3d, Cardinal's chairman and chief executive officer, and Michael McChesney, chief executive of an Atlanta-based security software firm, Secureware.

Though it is small - the Pineville, Ky.-based bank holds about $41 million in assets and has 25 employees - there are indications that the former "pig-path bank in the middle of nowhere," as Mr. Mahan once called it, could grow very quickly.

In its first 12 hours of operation, it recorded over 40,000 "hits" on its Internet home page, which indicates, if nothing else, a high level of curiosity about Security First.

Though success is hardly assured, several large banks have invested in the bank. Wachovia Corp. and Huntington Bancshares each sank $2 million into the on-line project in May. Area Bancshares, a $1.2 billion bank in Owensboro, Ky., also invested $1 million.

William M. Randle, a senior vice president at Columbus, Ohio-based Huntington, said the bank hopes to set up its own Internet-based banking unit by the first quarter of next year, using Security First's technology.

Cardinal is seeking approval from the Fed to spin off Security First entirely by the end of November, according to Michael Karlin, the president and chief operating officer for Security First. After it is spun off, Security First intends to acquire Secureware.

Mr. Karlin seems unconcerned about providing larger banks with software that could enable them to compete with Security First for customers. "I still think we've got a significant head start," he said. "You can't make a baby with nine women in one month."

Mr. Karlin pointed out that Security First, which operates only one branch office, has much lower overhead than the vast majority of potential competitors. This gives the bank an advantage in pricing and in its ability to focus on the on-line market.

But Mr. Weisman of Forrestor Research predicted that most consumers will wait for big banks to offer on-line banking services. He added that Security First is likely to focus on selling its security software - a business from which it can reap greater returns.

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