Giving consumers the products they want at the right price and through the preferred channels will help ensure bank's future.

Twenty years ago, electronic banking visionaries proclaimed the advent of the "cashless society." Today, our industry is still endeavoring to achieve that goal by working to eliminate checks, encouraging consumers to utilize self-service banking devices and developing products and systems to shift transactions from the bank branch to remote locations.

The challenge in retail banking in 1995 is to provide consumers with a range of services, like point-of-sale debit and remote banking, that meet their growing demands for increased value and that offer convenient access to, and control over, their personal finances.

Clearly we have not gotten the remote banking formula right yet with consumers. We in the financial services industry must begin by realizing that "getting it right" means satisfying consumer expectations by delivering the right mix of products and services, at the right price, through the right distribution channels and access devices.

It's particularly important that we "get it right" now because we have reached a critical threshold in the payments industry. It has become increasingly obvious that financial institutions no longer own or control the payments system. Our industry gave up that control when we first allowed the automated clearing house (ACH) to start up in the 1970s. Now, a host of well-financed, well-positioned competitors can enter the payments system through the ACH and other avenues.

However, we have an excellent opportunity to "get it right" in the mid-1990s because financial institutions still control the primary deposit relationship with the consumer. It's essential to our future growth and profitability that we protect this very important franchise.

[Expanded Picture]The first step in "getting it right" is to develop a clear understanding of what consumers really need and want from remote banking services. To help financial institutions gain this insight, MasterCard has conducted extensive consumer research.

First, and perhaps most significant, we found that consumers identify remote banking as an important tool to help them attain their number one priority: control over their finances. in the short term, consumers want help juggling their day-to-day finances. They want to know where their money is going and whether they are making the best use of their cash. In the long term, consumers are seeking advice on investment and retirement planning.

Consumers are particularly interested in remote banking to help them with bill-paying, banking transactions and investing activities. For bill paying, they want enhanced flexibility and the ability to categorize payments. For banking transactions, they expect current information and a snapshot of their finances, together with 24-hour access to their funds. For investing, they demand a steady stream of information and personal advice based on their overall individual financial scenario.

For each of these services, consumers want in-hand receipts, tie-ins with financial software and information that's real-time and on-line.

The question now is: How can financial institutions utilize this information about consumers to "get it right" this time around?

First, financial institutions must understand the key' trends that are paving the way for more widespread consumer acceptance of remote banking. Today's consumers are more comfortable with technology and self-service than ever before., and that technology is less expensive, more powerful and easier to use. At the same time, traditional branch service has become the most costly way to do banking. Therefore as financial institutions come under growing pressure to lower their costs, it's increasingly vital that they automate their services to meet consumer demands.

Second, financial institutions must develop products and services that are driven by consumer demand. Consumers are clamoring for remote banking products and services that can be accessed through the distribution channel of their choice. They want to be able to switch distribution channels and use the most convenient access device - whether it's a PC, telephone or some other device.

This points to the need for an enormous training and support infrastructure to provide consumers with the information and services required to ease their comfort level with remote banking. To accomplish this, it's essential that banks understand the kinds of questions consumers will ask and anticipate the problems they may encounter. MasterCard's ongoing research provides some of this vital information.

Third, it's particularly important that financial institutions observe the remote banking marketplace and evaluate the various options currently available to them. Those who have been following this rapidly changing industry recognize that the real winners have yet to emerge. New financial management software players are constantly entering the market, but the long-term viability of these various software providers has yet to be established.

Fourth, financial institutions must avoid the costly error of buying into faddish trends and technologies. For example, screen phones may be squeezed out by cheaper and more user-friendly PCs, unless competitive pricing and functionality requirements are met.

Finally, I would suggest that banks ought to lean on their bankcard associations to shoulder some of the risks. Because of their scale and brand strength, the associations can be valuable partners, helping financial institutions to exploit a wealth of new opportunities. These include:

* Building the technological infrastructure to leverage scale.

* Sharing the cost of investing in the technology to support remote banking.

* Developing partnerships with service providers.

* Researching consumer demographics and needs.

* Creating platforms that support true device independence and easy connectivity.

* Helping banks integrate their product and service offerings to consumers, including debit, remote banking and other deposit-access products.

In MasterCard's case, the growth of our MasterBanking product has reflected the evolution of the remote banking industry over the past two years. Launched in 1993, MasterBanking initially offered bill payment and banking services via touchtone telephone and PC. Today, over 20 financial institutions and more than 50,000 consumers utilize MasterBanking, generating in excess of 400,000 bill payments each month

Financial institutions can now obtain the information, technology and tools they need to "get it right" with the consumer, but there are still some major obstacles ahead on the road to remote banking success.

The first of these is "price inversion," meaning that consumers are increasingly aware of the fees imposed by banks for such services as remote banking, telephone, ATM and POS use. They realize that financial institutions are charging consumers for their most cost-effective services, while giving away free service at their most expensive delivery point - the branch. Sooner or later, this will become a real problem between consumers and their banks.

Consumers are also concerned about security. They need assurance that others can't gain access to their personal information and financial accounts. In order to override these concerns, financial institutions will have to provide service guarantees and offer premium customer service.

And lastly, financial institutions face the challenge of maintaining and strengthening relationships with a customer they no longer see or interact with personally. The development of ATMs and remote banking services has rendered the bank customer somewhat "invisible." Nevertheless, MasterCard's research supports the prevailing belief that the trust and loyalty of this "invisible" customer can be built up by financial institution branding of remote banking services and by offering a high level of customer service.

MasterCard's proven experience demonstrates that remote banking services can greatly benefit financial institutions. Our research will continue to provide banks with the valuable information they need to "get it right" with their customers.

By providing consumers with an integrated offering of remote banking, POS debit and other banking services they truly need and want, financial institutions will be well positioned to begin reestablishing control of the evolving payments systems industry.

That's when consumers will tell us that we have "gotten it light."

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