On-line banking is on the verge of a long-awaited growth spurt, says a leading market researcher in the field.

Nicholas Donatiello Jr., president and chief executive officer of the San Francisco-based research house Odyssey, said the firm's latest survey suggests that consumers who have flocked to other forms of electronic commerce are turning their attention to banking transactions.

"They are going to do it," Mr. Donatiello asserted in a presentation this week to the American Bankers Association's E-Customer Forum.

"The question is, will they do it with you or with somebody else?" Mr. Donatiello told an audience of 250, most of them representing banking companies. "The opportunity is enormous. The question is whether it is going to happen to you."

The optimism stems from levels of interest expressed by groups of consumers who tend to be affluent and technology-savvy. Mr. Donatiello said that if these people follow through on what they say, on-line banking could be in store for faster growth than electronic shopping over the next several months. That would be a first.

Odyssey, which draws many of its conclusions about interactive technologies from extensive polls of 5,000 or 6,000 consumers, has found that 5% of U.S. households have on-line banking accounts. That figure, equal to about five million households, is at the low end of available estimates. American Banker's consumer research with the Gallup Organization, among other surveys, places that total at seven million to eight million.

The banking numbers are well shy of measures of personal computer ownership, Internet use, and other on-line activity. Odyssey data from early this year showed half of households had PCs and 33% used on-line services.

Whereas 47% of the on-line households had made Internet purchases in the six months through January 1999, only 27% had done on-line banking. Those figures were up from 30% and 15%, respectively, a year earlier.

"Banks are lagging, and lagging badly," Mr. Donatiello said.

He pointed out that basic indicators such as PC and Internet penetration have been growing slowly and steadily, rather than showing the "hockey- stick" pattern often associated with market booms. "Slow, steady growth is powerful over time," he said.

On-line households have gradually increased to 33% from 7% in January 1995, Odyssey found. The average hours spent on-line tripled over that period. As of this past January, half of those people had clicked on Internet ads during the previous six months-both positive indicators for additional growth in banking and other areas, Mr. Donatiello said.

Reinforcing the trend, he added, is a hockey-stick graph of on-line purchases: 121 million in the six months through January, up from 53 million and 39 million in the two previous half-years.

A key to banking success, Mr. Donatiello said, is recognizing the characteristics of prospects for such services as balance checking, funds transfers, bill payments, and investments. Two upscale customer segments, which Odyssey calls "new enthusiasts" and "surfers," account for virtually the entire opportunity.

The proclivity to use on-line banking is noticeably less among less affluent or adventurous groups with such Odyssey labels as "hopefuls," "faithfuls," and "old-liners."

Of the on-line consumers surveyed most recently, 21% said they were very likely to begin on-line banking within six months, and 24% more said they might. That compared with responses of 8% and 29%, respectively, on a question about on-line shopping intentions.

Among the relatively small number of people already banking this way, 72% told Odyssey they were very satisfied, 7% were not, and 21% were neutral or not sure. The split among on-line purchasers was 85%, 3%, and 12%.

More "pathetic" from the banking standpoint, Mr. Donatiello said, was the fact that more people bought books from Amazon.com than performed PC banking transactions.

Mr. Donatiello's acerbity and sarcasm-at one point he asked his audience, "Where have you been?"-actually fit the mood at the San Francisco conference, which was co-sponsored by the ABA and Business Week magazine. Bankers and other speakers readily acknowledged that the industry has some catching up to do.

Joel Friedman, a top financial industry consultant at Andersen Consulting, based in San Francisco, said bankers have struggled with traditional notions of business cases because they have "no idea where revenue will come from, how many customers there are, or who they will be competing against."

But they are waking up to the threats posed by new and potential competitors, such as the Yahoo portal or retailers and other nonbanks developing on-line financial services.

"Not all (bank CEOs) get it, but they recognize it is not business as usual," Mr. Friedman said.

R. Robertson Hilton, executive vice president of global treasury management at KeyCorp in Cleveland, described how his company recently began to act faster than it had in the past to mobilize for e-commerce. He conceded that "we were not a leader." Now KeyCorp aims to "make a significant capital investment to be among the first movers."

Bank One Corp., under close scrutiny by competitors because of its especially aggressive approach to Web marketing and service delivery, expects to succeed because it has "the resources to seize all the options," said Bruce Luecke.

Mr. Luecke, president of the Chicago-based Bank One's interactive delivery services, said, "Most companies just need to choose a strategy and communicate it." Bank One wants to be the premier on-line financial services provider and is pursuing multiple customer segments in various ways. Some might be attracted to the Bank One brand, others to the new WingspanBank.com.

"Clearly define your strategies, apply the necessary resources, and focus on winning by helping your customers win," Mr. Luecke advised.

Mr. Donatiello said the possibilities are vast, as 95% of households lack an on-line banking account and there seems to be pent-up demand.

His pieces of advice included: "Focus on the likely targets. Stop charging for on-line services that save the banks money. ... How dumb do you think these people are? And guarantee security-take the responsibility on yourself. Amazon does it with books. A bank can't do it?"

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