Speed was of the essence last week at the E-Customer Forum, a first-of- its-kind American Bankers Association meeting about what makes Internet commerce different from what financial industry executives are used to.

The stated theme of the conference, an intense two-day affair in a San Francisco hotel space that barely fit the 250 people in attendance, was "The New World of the Customer in Control."

But many of the speakers-thought leaders and electronic commerce innovators from inside and outside the banking industry-kept coming back to the need for speed.

Mark Kvamme, chairman of the Web marketing and consulting firm USWeb/CKS, urged his audience to conceptualize and carry out their strategies in 90-day chunks, the better to match the pace set by cyber- innovators such as Yahoo and eBay.

"It's all about speed-time to market," Mr. Kvamme said. "You do not have time. Time is your enemy."

He reduced this competitive reality to a formula: Profits are equal to Efficiency times Differentiation divided by Time. In other words, the shorter the time, the more likely the return.

Security First Network Bank, the first Internet bank and now a subsidiary of Royal Bank of Canada, took that message to heart. It aims to maintain a "rapid deployment culture," said David Noble, the Royal Bank senior vice president who is president and chief executive officer of Atlanta-based Security First.

Mr. Noble also acknowledged that "many banks are not there yet," but others at the E-Customer Forum seemed to want to prove-or hope-otherwise. However fast the pace might have been back at their offices, speakers in San Francisco seemed to be racing to get speed into their speeches.


Bruce Luecke of Bank One Corp., whose luncheon speech was eagerly anticipated because of his company's bold Internet moves and marketing aggressiveness, pondered the idea of acceleration.

The Chicago-based company's president of interactive services drew parallels, as he did in an American Banker commentary July 21, between Internet business developments and the race to the moon in the 1960s. The winning strategies in both cases had to be clearly defined and backed by "superior resources," Mr. Luecke said.

For Bank One, that means multiple Web sites, marketing and cobranding initiatives, and even brands-one of them is the newly introduced WingspanBank.com-to capture a broad spectrum of the consumer market.

"One Web site does not a business make," said Mr. Luecke, without apologies to the smaller institutions that do not have "superior resources" at their disposal.

In the 1960s, he recalled, the decade-long journey to Neil Armstrong's first step on the moon was measured as "one-third of a generation." Today, he said, a generation is thought of as "three to four years. At Bank One, that forces us to move pretty fast," as in the six weeks it took to put a home equity loan service on the Internet.

Bank One has not disclosed how many hundreds of millions of dollars it put into the rapid deployment of WingspanBank.com. Mr. Luecke conceded it is in "an investment phase right now," losing money. But the parent is applying to Web-related research, development, and marketing a portion of the billions it might otherwise spend on acquisitions.


Just as the U.S. space racers had a clear opponent in the Soviet Union, bankers worry about a host of nonbank threats within a click's distance. "We have Internet anxiety ... fear of extinction," Mr. Luecke said.

"Anybody with a brand can get into banking," said Mr. Noble, citing Ford, Nordstrom, Wal-Mart, and Yahoo as examples.

The consensus choice for most-feared nonbank competitor is Charles Schwab & Co., judging by how often its name gets mentioned by public presenters like these. No financial company has better combined the traditional and Internet modes of service delivery, they say, nor profited so handsomely in the process.

The E-Customer Forum-co-sponsored by Business Week and previewing a larger "Future Payments" event in September that is replacing the old ABA National Bank Card Conference-welcomed Schwab executive Martha Deevy on a panel discussion.

Ms. Deevy, senior vice president of electronic brokerage marketing, gave away no corporate secrets but exuded a confidence that could not go unnoticed.

The customized Web service called MySchwab, she reported, has signed up three times the number of customers expected since its May launching. "The key to it is that people want news, information, and their account and portfolio information their way," she said.

A systems vendor, meanwhile, provided a glimpse into one of Schwab's big backroom issues.

"It was an enormous challenge for Schwab to manage a five-million- customer data base," said Joe Gibson, vice president and national financial services practice director of Inventa Corp. in Redwood Shores, Calif. "They needed to partition the data base-break it up to provide blazing-fast access."


Thomas J. Greco, president of ABAecom, the trade association's e- commerce security spinoff, invoked speed to plug its services.

"Bankers need to start developing strategies that leverage off their trust and brand," he said, arguing that banks are ideally placed to issue digital credentials for certifying buyers' and sellers' on-line identities.

The banks "need to act faster, better, and more cost-effectively than these new intermediaries" that threaten to move in on their markets, Mr. Greco said.

R. Robertson Hilton, a KeyCorp executive vice president and head of its global treasury management group, said the Cleveland banking company has struggled to overcome organizational impediments but is now certifiably fast.

He offered as a case study KeyBank's development of CECCs-corporate electronic commerce communities-for aggregating on-line wholesale transactions and aspiring to "destination portal" status. A second- generation treasury management Web site is scheduled for a September release, 10 months after the first generation. And the first CECC is due by yearend.

His advice: "Think big, start small, and move fast."


The ABA invited speakers like Mr. Kvamme and Jeff Taylor, vice president of product development for the red-hot Internet auctioneer eBay Inc., to expand bankers' minds about e-commerce.

Mr. Taylor's telling of the eBay story left many audience members envious of its five million registered users and, on an average day, 50 million page-views and $6 million of merchandise sales.

But Ms. Deevy and co-panelist Sharon Osberg, senior vice president and head of on-line financial services at Wells Fargo Bank in San Francisco, conceded nothing to eBay as a "business model."

Financial institutions by definition have "already adopted a lot of what they do," Ms. Osberg said. "Auctions are bid/ask," she said, as are the many financial and securities transactions with which banks are familiar.

"I agree that the financial industry has done a lot of what eBay does," Ms. Deevy said. "They are successful because their business is about accessibility," just as Schwab's on-line success will be measured by "making services accessible to the individual investor."

One trend represented by eBay, which might change the thinking of financial industry strategists, is the rise of sizable on-line communities, said Larry Martinez, a financial industry e-commerce executive at Oracle Corp. He said his customers in retail financial services are looking for ways to build and work with such communities.

"The Internet, to me, is about a customer orientation and providing a good customer experience," Ms. Osberg said. Later she added, "We have no immediate plan to enter the auction business-but anything is possible."


There was plenty of talk and debate about portals, the sites such as Yahoo and Excite that attract attention from millions more Web surfers than even such a successful mass enterprise as eBay.

Mr. Kvamme of USWeb/CKS, for one, said the role of "financial aggregator or financial portal" should be "the Holy Grail in banking on the Net.

"I as a consumer will want a place to go to get all the information about my financial self," he said.

If banks don't reach for that goal, they could be threatened competitively, warned Gary Craft, managing director of the on-line investment bank E-Offering. "If Yahoo controls your customer, you are a passive receptacle," he said.

Mr. Craft advocates a strong bill presentment and payment position for banks, lest the likes of "Yahoo, Intuit, and Microsoft get control of the eyeballs."

Ms. Osberg agreed that bill presentment will be a key battleground and said Exchange, a joint venture in that market recently formed by Wells, Chase Manhattan Corp., and First Union Corp., "in some respects looks and feels like eBay."

"Bill presentment is, from the consumers' point of view, a critical piece of this," she said. "We want them to come to us, which gives us an opportunity to do more things, meaning expand our relationships."


John Hagel 3d-principal of McKinsey & Co., co-author of the book "Net Worth," and the E-Customer Forum's keynote speaker-said the nature of electronic commerce and the new competitors that sprout up prompt a fundamental question: "What business are we in?"

He said many large companies are "unnatural bundles" of businesses in the areas of customer relationships, product innovation and commercialization, and infrastructure management. "Each has different economies, skill sets, and cultures," he said, then asked: "Can you be world-class across all three?"

The solution, he said, is to unbundle, focus on a chosen core, and rely on outsiders for other functions. He predicted that the customer relationship category-including Yahoo and Schwab-and the infrastructure field-typified by Electronic Data Systems Corp. and FedEx Corp.-will tend to be highly concentrated, with room for just a few giants.

Might this limit banks' portal aspirations?

"Let's be real, this stuff is really, really hard," said Lucinda Duncalfe, chief executive officer of Conshohocken, Pa.-based Destiny Software.

She said it has become trendy for financial services people to say they can become portals, as opposed to product providers. But "I put my money on Microsoft or Intuit .... I'm not sure financial services institutions will be positioned for this."


An offer of solace to bankers came from an unexpected source: Frank Zammataro of Merrill Lynch & Co.

As first vice president and senior director of strategic technologies, Mr. Zammataro has been involved in the Internet as long as any business executive-since 1994. When Microsoft Corp. and Intuit Inc. announced a merger agreement that year, galvanizing bankers and their competitors into action even though the merger was called off, "I was the Internet group" at Merrill Lynch, he said.

"Now 600 to 700 people throughout the firm are focusing on the Internet," he added.

The New York brokerage has taken lumps for not embracing the Net as quickly or successfully as Schwab and others, though as Mr. Zammataro pointed out, it has hardly been idle. Merrill opened its first public Internet site in May 1995, currently has 450,000 people enrolled for its on-line program, and is preparing for $29.95 trades and a direct challenge to the Internet leaders this year.

"Now we are on the same side of the equation as banks-thinking the 900- pound gorilla may be somewhere else" in the form of disintermediation threats, Mr. Zammataro said. But "the 900-pound gorilla may also be inside your firm, (in the form of) organizational apathy."


All that strategic urgency did not entirely drown out the philosophical point of the conference theme or of Mr. Hagel's book, which is subtitled: "Shaping Markets When Customers Make the Rules."

Mr. Kvamme of USWeb/CKS said the Internet-age reality is that "the consumer is in control and will want to know, 'what's in it for me?'" To be good, banks and others will have to have answers.

"The Internet is all about getting immediate feedback," Mr. Kvamme said. "Do something, learn from it, and you can counteract it quickly."

"E-commerce is all about changing the basis of competition into a world where the buyer is king," said Joel P. Friedman, Andersen Consulting's top banking industry consultant. This notion brings "unbelievable change in most industries."

"Consumers are willing participants because as they get more power they feel better off," Mr. Friedman said.

"Caveat emptor is now emptor rex-the consumer is king," said Nicholas Donatiello Jr., president of Odyssey, a San Francisco market research company.

He presented data that painted a less-than-flattering picture of banks' achievements in the on-line market. But he also said consumers are poised to adopt on-line banking and that, unless banks are ready, others will get the business.

Praising Wells Fargo-he said Wells is not a client-Mr. Donatiello added, "If I need help, I want to know I can get somebody at the other end of the line. They have done that well."


King Consumer has established some patterns that may or may not work to financial companies' advantage.

Mr. Friedman pointed out that from 1993 to 1997, the proportion of customers using four or more financial service providers rose from 10% to 23%.

Despite bankers' much-expressed desire to cross-sell and get people to consolidate their relationships, "you've conditioned people to shop," Mr. Friedman told the ABA audience.

Mr. Kvamme said that though "Joe Consumer has multiple relationships ... Yahoo is training consumers to have one place to go, when, where, and how they want it."


Because banks own the checking account and have electronic bill presentment on the horizon, the opportunity to win the consumer's loyalty is "ours to lose," said Ms. Osberg of Wells Fargo.

Meanwhile, a Yahoo or an eBay might be deterred by another force- regulation, which bankers are more accustomed to dealing with.

Deborah Thoren-Peden, a Los Angeles-based lawyer in the Pillsbury Madison & Sutro firm, prepared a 36-page paper summarizing privacy issues and regulations-a reminder that cyberspace has not repealed government oversight.

When an audience member asked Schwab's Ms. Deevy whether eBay might muscle in on securities trading by auction, she replied: "They shouldn't want to get into a regulated market. The regulators are looking at any company that may be toe-dipping in the world of regulated securities."

Mr. Hilton said KeyCorp jumped through hoops getting approval from the Office of the Comptroller of the Currency for its minority stake in Econex, a business-to-business e-commerce venture.

"We had a huge problem with the OCC because (Econex) is in nontraditional banking products," Mr. Hilton said. "The regulatory folks are at the table with us, and making a lot of noise."

Days later, when he heard about Mr. Hilton's comment, Clifford Wilke, the OCC's director of bank technology, said, "That's exactly the problem we are trying to solve."

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