Internet banking is no longer viewed as just an option, judging from comments at the Bank Administration Institute's direct banking conference.

It has become "a game of survival," Caroline Sullivan, vice president of Allied Irish Bank in New York.

"We knew that before we came" to the San Diego conference late last month. "But it was stressed here even more, from the large banks to the small banks."

Huntington Bancshares of Columbus, Ohio, also takes its on-line strategy dead seriously, said senior vice president Chester Thompson. The three reasons behind its direct, or branchless, banking approach are to keep delivery costs low, stay in step with the competition, and stay in business.

Illustrating the expansiveness of Internet ambitions, Wachovia Corp. vice president Jeanne Howard said her bank originally set out to retain, and cross-sell to, customers using personal computers.

Now Wachovia explicitly goes after new customers for its direct channel. "Our vision is to provide everything in the branch and more," she said.

Apollo (Pa.) Trust Co., with 8,500 depositors, has a vision that goes beyond the branch, and even banking. Apollo earns fees as a local Internet service provider. According to Raymond Muth, executive vice president, 750 people use the bank's PC product and 600 pay $15 a month for general Internet access.

Survival does not seem an issue for America Online, the No. 1 interactive service network, which has connections with 12 million households that use AOL for eight million Web hits a day, said AOL senior account manager Darryl Shrock.

Mr. Shrock is convinced that if a bank builds a service on the Internet- or, for that matter, through the AOL BankNow program-customers will come.

"You need to be where people are looking for on-line banking," he said. "These people want to send in applications now and should be able to do so."

Excite Inc., provider of a leading Web search engine that earns money from advertising sales, sponsorships, and transaction revenue sharing, sees itself as "a channel for commerce," said James Desrosier, executive vice president of Excite.

Mr. Desrosier, previously chief marketing officer at Infoseek and before that senior vice president of global brand marketing at MasterCard International, added, "There will be billions of dollars from commerce on- line faster than you can think."

A part of the Internet banking equation that does not have to worry about survival is the customer, which is one reason for bankers' growing interest.

Jacques Driscoll, senior vice president of National Bank of Commerce, Memphis, said its average Internet banking customer is aged 25 to 55, a homeowner, a professional or manager, earns more than $55,000 a year, keeps a deposit of $12,000, and is typically 77% more profitable than the average retail banking customer.

National Bank of Commerce has been catering to such customers since October 1997, when it launched its Internet banking service with software from Security First Technologies and Hewlett-Packard Co. Today, 4% of its retail households are Internet-enabled and 11% of the Internet banking customers are paying an average of 7.2 bills a month, each averaging $231.

Over the next few months, 70% will apply for credit over the Internet and 30% will use it to open new accounts.

"The more educated, active consumer wants anytime-anywhere banking," said Mark LaPenta, group manager of Summit Bancorp affiliate Summit Services Corp. in Ridgefield Park, N.J. "We feel customer retention is our No. 1 reason for doing electronic spending. We're adamant that our Web site only works if it's a personal experience."

Payment Systems Inc., Tampa, reports that visits to bank branches are declining as PC usage, telephone banking, and automated teller machine transactions are increasing.

Branches, however, still function as transaction centers. About 12% of tellers' time is spent selling products, 18% resolving problems, 18% doing administration, and 65% carrying out transactions. Most customers still go to branches to make deposits or obtain cash.

On-line, the PSI research shows, the primary activities are to track checks that have cleared. The key barriers to increased usage, said Neal Chambliss, group vice president, are lack of security and privacy.

Banks are in a position to assuage any fears. PSI data indicated 63% of on-line households trust their bank or credit union as a source of information about the security of transactions. MasterCard and Visa scored 53% on that question, Netscape and Microsoft only 22%.

"We believe seamless access to accounts will emerge and proliferate in financial services-among banks and nonbanks," Mr. Chambliss said.

Kathryn Jackson, principal of Response Design Corp., Ocean City, N.J., predicted the number of call centers and calls coming into them will grow by 30% a year.

David Grant of PNC Bank Corp., Pittsburgh, went so far as to label the call center "the nerve of the bank."

"The word 'call' will disappear in favor of a word like 'contact.'" said Andersen Consulting partner Chuck McDonough.

This calls for advanced technology. "An integrated architecture is what you need," said Michael Sanchez, chairman of Sanchez Computer Associates, Malvern, Pa.

The challenge is not so much the integration of the customer information file into the call center, said Mr. McDonough, but in having a customer data base that is up to the job in the first place.

"Very few people do," said the Charlotte, N.C.-based consultant. "They don't have the concept, let alone the technology."

An integrated approach ensures customers get consistent service across all channels. KeyBank of Cleveland, for example is aiming to run the same applications on desktops in both its call centers and branches.

"At some point you are going to have to integrate phone contacts with e- mail contacts," said Paul O'Malley, vice president. That gives bank representatives a completely updated look at customers' dealings.

Besides paying attention to technology, banks need to spend money and time on their call center staffs, according to Ms. Jackson of Response Design. Call center turnover rates average 36%, she said, and it costs some $1,200 to hire and install a replacement worker.

Gary Meshell, the former Price Waterhouse consultant now with Benton International in New York, warned bankers to watch out for MSFDC, the joint bill payment and presentment venture of Microsoft Corp. and First Data Corp.

"My belief is that banks need to be the aggregators, not MSFDC or the telcos," Mr. Meshell said.

He said an MSFDC alternative, the bank-dominated Integrion consortium, "will become the shining star or else sizzle out in the next few months. My message to Integrion is to get your act together because the banking industry needs you."

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