Canadian banks are attacking the United States-virtually.

Sharing a belief that U.S. institutions have not made the most of on- line banking opportunities, three of the largest Toronto-based banks are exporting their computer-based strategies, each in its own way.

Some experts in the home banking market say U.S. bankers have everything to fear.

The magnitude of the invasion became clear last week when Royal Bank of Canada announced an agreement to purchase Security First Network Bank of Atlanta, the highly touted "first Internet bank."

Toronto-Dominion Bank is putting down an electronic stake through Waterhouse National Bank, an affiliate of its brokerage subsidiary, Waterhouse Investor Services.

Bank of Montreal is working to duplicate the success of its on-line brand, Mbanx, through its Chicago-based subsidiary Harris Bankcorp.

The Canadian banks, said one observer, can capitalize on their fresh perspective and on the fact that they lack some of the internal baggage that slows U.S. banks down.

"Major regional banks and full-commission brokerages have channel conflicts that prevent them from fully exploiting the Internet," said James M. Marks, vice president and electronic commerce analyst with CS First Boston in New York.

In other words, a branch-heavy financial institution may be reluctant to commit fully to a new medium that might "cannibalize" its existing way of doing business.

"That leaves the door wide open for new entrants to build a nationwide retail financial service franchise in a fraction of the time and at a fraction of the cost," said Mr. Marks.

Royal Bank appeared to want to do just that with its $20 million deal to purchase Security First Network Bank-a third vehicle for its U.S. campaign, following its ownership stakes in the Integrion home banking consortium and Meca Software LLC.

Security First comes with technology licensing rights from Security First Technologies, known as S1, which Royal can use as a springboard for establishing a retail presence without branches.

"Security First Network Bank fits perfectly with our strategy of selectively expanding international operations," said John E. Cleghorn, chairman and chief executive officer of $182 billion-asset Royal Bank, Canada's largest.

"This addresses the gap we had in the U.S.," said Martin J. Lippert, the bank's executive vice president and chief information officer. He crossed the border the other way last year from Mellon Bank of Pittsburgh.

With on-line services including the ability to open accounts in U.S. currency, Royal wants to meet the needs of business customers as well as "snowbirds" traveling south from Canada and back.

"We see a great potential to leverage Security First's technology with our existing application," said Mr. Lippert, noting that the "fat server" technology employed by Security First permits a consolidation of customer account information not currently available through Royal's Web site.

The "S1 suite," he said, "is a strong platform for us to launch new Internet-based products and services."

Officials at $54 million-asset Security First viewed Royal's decision as a vindication of their philosophy of maintaining customer information separate from bank mainframe computers.

"The pieces are in place for them to just step on the gas, the gas being marketing dollars," said Bill Burnham, senior research analyst at Piper Jaffray Inc. and the author of a forthcoming book on electronic commerce.

As an example of American banks' tentativeness in promoting banking via personal computer, Mr. Burnham estimated that the $25 million spent by Web broker Ameritrade Holding Corp. in the fourth quarter of 1997 exceeded all banks' Web marketing efforts last year.

"U.S. banks are in for a rude awaking," Mr. Burnham said. He called the Canadian banks' move a "stealth invasion" that "will start to shake up the cozy and sedate world of on-line banking."

To be sure, not all U.S. banks are napping. Canadian bankers point to incursions northward by Wells Fargo & Co. in small-business lending, MBNA Corp. in credit cards, and others.

"We can either sit back or proactively do things," said Colin Henderson, a Canadian manager of Bank of Montreal's Mbanx.

"Once First Union digests CoreStates, what are the logical places for them to go?" he said. "They can move across the U.S. or go up to Canada."

Canadian banks are acting in various ways. Royal Bank has signed a merger agreement with Bank of Montreal-which could, interestingly, put their two aggressive home banking programs together under one roof. The $133 billion-asset Bank of Montreal has also pursued what it calls a Nafta strategy, taking advantage of the liberalizations afforded by the North American Free Trade Act.

Bank of Montreal chose the name Mbanx because it can work as easily in French and Spanish as in English. The bank aims to bring its virtual offering to Mexico, where it owns 16% of the country's largest banking company.

The licensing agreement Royal Bank is entering into with Security First includes rights to the software in Mexico and the option to use it elsewhere.

Toronto-Dominion Bank, meanwhile, wants to appeal to Canadian expatriates with the electronic banking features of its new Waterhouse National Bank. But Toronto-Dominion executives also contend that the Waterhouse discount brokerage it purchased in 1996 has what it takes to lure U.S. citizens away from their existing banks.

David Livingston, senior vice president of Toronto-Dominion, said he sees "little demand for banking services per se, but there is a demand for discount brokerage accompanied by electronic banking services."

Officials at Waterhouse Bank plan to launch a combined Internet banking and brokerage service over the Internet in July. The bank has custom-built software but will rely on Fiserv Inc. for data processing and Electronic Data Systems Corp. for bill payments.

The service is designed for customers who "package" their financial affairs in discrete "shoe boxes," said Carrie Rattle, senior vice president of product development for Waterhouse National Bank.

"Customers like to separate their money so that they know, for example, that their child's education account is safe," she said. "They like to keep their investments separate."

With an aggressive marketing campaign, Waterhouse, the third-largest on- line broker, hopes to match or better competitors' pricing by offering 1.56% interest on basic checking accounts and 2.87% on high-balance checking.

Charles Piermarini, senior vice president of Mbanx operations in the United States, said Bank of Montreal's North American expansion efforts are part of a long-term drive stemming from the acquisition of Harris Bank in 1984.

"Banks in Canada have looked south for a number of years because the U.S. market has much more potential for growth," said Mr. Piermarini. "Now you are seeing those efforts come to fruition"-and branches are not in the forefront of Canadian bankers' minds.

"There aren't many Canadian banks that would want to amass a large physical infrastructure in the U.S., just as there isn't a U.S. bank that would be interested in doing the same thing in Canada," said Maurice St. Jean, senior manager of alternative network development for Royal Bank of Canada.

"Canadian banks benefit from their closeness, their comparable culture, and common language," said Mr. Marks of CS First Boston. "You wouldn't expect a comfortable oligopoly of five or six banks to be aggressive technologically. But they seem particularly determined to exploit their heritage."

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