In the on-again, off-again business of home banking, executives are excited by prospects that the latest uptick in consumer and industry interest in the field may translate into sustainable activity.

But executives of nonbank service organizations are much less sanguine about the potential business advantages of entering the home banking arena now.

"There's a lot to be learned about what works best for consumers. There have been so many experiments in banking that just haven't panned out," observed Katherine Borsecnik, vice president of America Online. Headquartered in Vienna, Va., America Online is a leading provider of on- line information services to the home personal computer market.

Although Ms. Borsecnik said America Online is interested in partnering with banks to support transaction-based services, she suggested the company isn't yet convinced that on-line banking is a logical next step for expanding its service offerings.

"Our customers will have on-line experiences with brokerage companies and mutual funds before they do with banks," she said.

And America Online is not alone in this assessment of the market for PC banking. Of the three major companies serving the on-line information needs of today's PC households - America Online, Compuserve, and Prodigy - only Prodigy today features banking on its menu of service offerings.

Compuserve did offer home banking, about 10 years ago, in cooperation with four banks. "But there just wasn't enough interest in the product to continue," said Scott Gerber, marketing manager at the Columbus, Ohio-based company.

Like Ms. Borsecnik, Mr. Gerber sees more promise in nonbank financial services, such as brokerage, which Compuserve now offers its subscribers. "Brokerage does very well for us," he said.

Not that Compuserve has ruled out banking services. It has plans on the drawing board for bank alliances to provide transaction services, said Mr. Gerber.

At this point, however, those plans do not seem to hold top priority. For one thing, said Mr. Gerber, the revenue potential from this line of service is meager.

"The banks have to understand that they are not going to make a lot of money from an on-line relationship," he insisted. "It's really got to be low-cost or no-cost to get people on line. So banks are really going to have to share the cost burden associated with this."

For their part, bankers say they are not quite sure anyone can see with clarity just how the particulars of pricing will work out. Banks, suggested Martha Campbell, senior vice president for interactive banking at Bank of America, San Francisco, need to find what they can reasonably charge consumers for on-line access to banking services, just as the on-line service providers need to determine what they can charge banks for routing transactions.

"This is an emerging business," said Ms. Campbell. "There isn't an established pricing paradigm for anybody. Everybody is struggling with that."

Clearly, market size is an important consideration - and one which has not gone unnoticed by companies such as America Online and Compuserve.

By most estimates, 30% to 35% of all households have a PC, and about one-third of these computers are equipped with modems. Yet only about 1% of households today subscribe to home banking. Any bank that offers home banking is likely to say that fewer than 1% of its customers are home banking subscribers.

"We have customers on line, and they love it. But there certainly aren't enough of them," said Joe Pendleton, senior vice president for delivery systems development at Meridian Bank, Reading, Pa. Indeed, he conceded, fewer than 0.5% of Meridian's retail customers today have access to bank services via Prodigy, the on-line service Meridian partnered with more than three years ago.

Meridian is one of 18 financial institutions that offer home banking via Prodigy, according to David Baird, manager of business finance at Prodigy Information Services, a joint venture of International Business Machines Corp. and Sears, Roebuck and Co.

Mr. Baird refers to the institutions that offer banking via his White Plains, N.Y.-based company as regionally prominent. This summer, he said, however, two nationally prominent banks will be added to the roster.

Mr. Pendleton and other bankers would like to see open access to services via the Internet as a prod to interest in on-line banking. The Internet is a loose confederation of computer networks that provides access to more than 30 million PC users worldwide.

The potential for promoting home banking in this manner, said Mr. Pendleton, is significant. Rather than encouraging service providers like America Online or Compuserve to develop proprietary banking services, home banking advocates could use the Internet to direct customers of these service providers to Prodigy and its banking service partners.

"If I could get to anybody out there on any of the on-line services, I'd have a much bigger audience," said Mr. Pendleton.

Currently, he estimated, 60,000 Prodigy users live in Meridian's market, which encompasses southeastern Pennsylvania and portions of New Jersey and Delaware. Adding the Internet to the equation, Mr. Pendleton believes, would increase potential customers fivefold.

And these are lucrative prospects. Consumers who use on-line information services and who are interested in on-line banking are among a bank's most attractive prospects.

Payment Systems Inc., Tampa, said the 4% to 5% of consumers who have told its researchers they would be interested in subscribing to a home banking service are, on average, 40 years old with annual household incomes of at least $50,000.

More than 40% of this group have college degrees, noted Neal Chambliss, PSI group vice president. In terms of employment, 43% are in managerial or professional jobs, and 18% work in sales support or technical posts.

As for their banking habits, Mr. Chambliss said, home banking prospects maintain greater than average balances, offering a potential net interest value to banks of 41%.

Demographics quoted by Compuserve executives are even more impressive: The average household income of a Compuserve user is $89,000, and 94% of users are college-educated. "We have a very appealing audience," said Compuserve's Mr. Gerber.

While neither Compuserve nor America Online seems ready yet to offer home banking, it is also unclear whether the aspiration of bankers like Meridian's Mr. Pendleton to gain access to those companies' users via the Internet can be accommodated.

"We talk about that a lot," said Prodigy's Mr. Baird. "But it's easier from the information side of the business to do that." When it comes to providing a gateway between on-line service providers and access to banking services, he suggested, thorny issues of security and functionality can cloud such a plan's operational feasibility.

For companies like Prodigy, America Online, and Compuserve, information is the key business success. And only when banks fully understand this, and the role they can play in supplying information on line, will the potential of on-line banking be fully realized, asserted Richard Crone, senior manager for the financial services consulting practice at KPMG Peat Marwick, Los Angeles.

"The banks own a gold mine of data," said Mr. Crone. "If they are willing to leverage third parties and strategically manage the relationships, the banking community can take full advantage of the gold mine of data they have."

"The value these (on-line service providers) offer is that they group together into one place a substantial number of diverse services that make it attractive to consumers," said John Howe, chief technology officer at Transaction Systems Architects Inc., Omaha, parent company of Applied Communications Inc. "The people who get addicted want to do everything they can on these services."

And that, suggested Mr. Howe, includes banking. Already, he noted, nine million Americans are running personal finance software on their PCs; banking is a logical extension for these people.

The problem with personal finance software is that, historically, consumers who use both those software packages and home banking/bill-paying services have had to reenter pertinent information from one program to another - a potential deal breaker for many time-strapped consumers.

That's one reason BankAmerica Corp. teamed up with NationsBank Corp. to buy Meca Software Inc., the Fairfield, Conn., firm that markets Managing Your Money, a PC-based consumer finance package. According to Bank of America's Ms. Campbell, she expects to begin marketing a branded version of the software by yearend that ties in directly to the bank's home banking product.

For companies like America Online, that might make bank alliances more promising. "What brings the biggest value to customers ultimately is the ability to have all the information they need to make decisions in one place," said Ms. Borsecnik.

But price is also a factor. And for on-line banking to live up to expectations, bankers must be willing to pay for access to the on-line service providers' customers, according to executives of these firms.

"There's certainly a lot of value we can offer by bringing our customers to the banks' front doors," said Ms. Borsecnik. "If we're going to bring millions of customers through their doors, some part of the economic value chain is going to have to be realized by us."

Though neither Ms. Borsecnik nor her competitors would discuss pricing details, Mr. Howe of Transaction Systems Architects in Omaha said he doubts any pricing scheme offered by the on-line service providers would financially harm banks.

Many bankers fear that on-line service providers want to be banks, said Mr. Howe. But nothing could be further from the truth. "They merely want to earn pennies on the messages passing through their gates," he said.

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