Citicorp chairman John S. Reed said Thursday that traditional banking is destined to wither away, surviving only as blips on computer networks - but not soon.
In fact, Mr. Reed said it could take 50 to 70 years for full-scale electronic banking to take hold with a majority of the population.
He caught many of the 500 people in his audience off guard. Attending a Treasury Department conference on electronic money developments, they had been anticipating a greater sense of urgency from one of the industry's leading technology lights.
Instead they got a coolly reasoned case for gradualism, from an executive who confessed to have missed the mark with assumptions he had made earlier in his 31-year Citicorp career.
"I can't tell you how many things I said would happen that didn't happen," Mr. Reed said.
His message even seemed to catch one of his lieutenants, senior technology officer Colin Crook, by surprise: "Because I work for John Reed, I was very relieved to find out we are working on a 50- to 70-year time frame."
As the tongue in Mr. Crook's cheek indicated, Mr. Reed still has Citicorp on one of banking's faster technology tracks. It leads the industry with 300,000 on-line banking customers.
Mr. Reed added, though, that he is not ready to "consummate a transaction on the Internet" because of concerns about safety and customer confidence. Asked when full-service banking might begin through Citibank's Web site, he said, "not until it's secure."
He said he is pushing the company to learn the ways of Microsoft, with the goal of becoming the kind of "content provider" that an "interactive electronic world" will demand. He said he does not see Microsoft or its ilk as immediate threats to "eradicate banks," and he believes banks can learn from Microsoft's ability to understand its customers and deliver the desired "content."
Mr. Reed also said he regards the Gillette Co. as a model - a consumer product company with hundreds of millions of customers around the world and a distribution system that exploits economies of scale.
"The underlying microeconomics of competition are rather different in an electronic world," he said. As marketing moves onto interactive systems like the Internet, and becomes less dependent on branches and direct mailings, "your marketplace is the world, and we will have global products."
He said major innovations can provide a lasting advantage, as Merrill Lynch achieved with its Cash Management Account, Fidelity Investments with its mass-marketed mutual funds, and Citicorp with its mass-issuance of credit cards. Though many competitors followed, all three still lead in their respective niches.
But a fully wired banking world "will take a while," Mr. Reed said.
"The consumer is still the boss, and always will be," he added. "Some are early innovators, and they will be your electronic banking customers. But the average consumer is not there yet, and isn't going to be there for a while.
"Privacy and security are at the top of the list" of consumers' concerns, the Citicorp chief said. "They won't deal with anyone who doesn't give them the necessary assurances," which he said should come in the form of a "written bill of rights."
He said success with electronic banking "is not a question of economics or efficiency. It is a question of trust. The consumer will have to trust you. The Internet is fundamentally flawed in that regard ... We have to be 100% right 100% of the time, and that degree of protection doesn't exist today electronically."
Mr. Reed's luncheon talk provided only some of the buzz at the conference, part of Treasury's effort to monitor the policy implications of the Internet, smart cards, and similar developments. Some 200 people who could not fit in the Sheraton Washington meeting room watched from a video feed at the Office of Thrift Supervision.
Treasury Secretary Robert E. Rubin announced two initiatives: a consumer electronic payments task force, with officials from the three U.S. banking agencies, the Federal Trade Commission, and Treasury; and a multinational study by the Group of 7 industrialized countries.
The U.S. task force aims to "sort out which laws apply today ... and look hard at the issues (of) disclosure, consumer confusion, and liability," said the panel's chairman, Comptroller of the Currency Eugene A. Ludwig.
Mr. Rubin said Group of 7 officials will seek to resolve international legal conflicts arising from electronic money and banking. Results are to be presented at a meeting of G-7 leaders in Denver next June.
Olaf de Senerpont Domis contributed to this article.