They talked tough, but fear was evident among bankers at the Retail Delivery '98 conference here last week.

Speaker after speaker insisted banks must use technology to deliver fast, easy, low-cost service or risk losing customers to rivals such as Microsoft, State Farm, and Charles Schwab.

"If we let these companies take over our businesses then we are dead," said Edward D. Horowitz, Citibank's corporate executive vice president. "I'd be lying if I didn't admit it's a hard fight."

In 10 years, Citibank's three biggest competitors could be one of the software giants SAP or Microsoft, one of the Baby Bell telephone companies, and "a start-up we haven't heard of that came out of Eastern Europe," he said.

With technology the great equalizer, Citibank's Web strategist predicted: "This playing field is going to jump-start small, nimble companies that can eat our lunch."

Other bankers featured during the three-day conference-Bank One's John B. McCoy and Firstar's Jerry A. Grundhofer-agreed.

"Just doing business like you've always done it isn't going to work," said Mr. McCoy, president and chief executive officer, who just moved to Chicago after Bank One acquired First Chicago NBD. While he confessed he would just as soon still be in Columbus, Ohio, overseeing 25 branches, Mr. McCoy illustrated his point by noting Bank One recently agreed to pay the portal company Excite up to $125 million for a place on its gateway site. And the $90 million the bank spent for a spot on Microsoft's Web page is more than the bank's annual profits 20 years ago.

Mr. Grundhofer, Firstar's president and CEO, touted the bank's six delivery channels that allow customers to bank 24 hours a day, seven days a week. Its ATMs dispense foreign currency, bus passes, and even remember how much cash a customer last withdrew and automatically proposes that amount. "The only choice today is the fast lane," he said.

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James M. McCormick, president of First Manhattan Consulting Group in New York, told the 3,500 bankers attending the Bank Administration Institute's conference that increased competition will make growth difficult.

"This business will be a magnet for competitors," he said. "Interlopers will be the billionaires of tomorrow."

One of today's billionaires, H. Ross Perot, warned in his keynote speech last Thursday that competitors spring up when an industry is reaping record profits and entrenched companies get complacent. He won huge applause by declaring banks have too much capital. "It's like a narcotic. It makes you stupid."

It's natural to stick with the status quo, Mr. Perot said. "But then someone like Steve Jobs or Bill Gates comes out of nowhere and blows our head off."

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Las Vegas provided an apt analogy for the technology gathering: A bank is gambling with its future unless it accepts the fact that technology is revolutionizing its business.

Many of the speakers cited successful companies surprised by technologically savvy up-starts. Amazon.com was the most frequent example. The on-line bookseller came from nowhere to challenge industry leaders like Barnes & Noble.

Blaise Heltai, an executive vice president at Fleet Financial Group in Boston, said giant AT&T was stunned when MCI doubled its share of the long- distance market with its "Friends and Family" promotion.

Mr. Horowitz, who spent 25 years in the media industry before joining Citibank in January 1997, recalled how the cable companies ambushed the television networks. In the early 1970s, 98% of U.S. households watched the three networks. The proliferation of cable news, sports, and music shows has whittled that total to 45% today.

"What cable and satellites did to television, the Internet is going to do to financial services," Mr. Horowitz said.

The face of the enemy is not Microsoft chief executive Bill Gates or Schwab president David S. Pottruck, who addressed the conference Thursday morning with Mr. Horowitz. "It's hubris, arrogance" inside the bank, Mr. Horowitz said. "The list of companies ... undone by change is long."

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Conference organizers did their best to jolt attendees into change. Before Mr. McCoy's keynote, they blared "Roll With the Changes," an REO Speedwagon song, during a light show better suited to introducing a rock star than a bank CEO.

Among the attendees looking for new ideas, one executive wondered if bankers were willing to "turn some pages," a line from the 1970s hit.

Donna Embry, senior vice president at Vital Processing Services of Tempe, Ariz., characterized bankers' mentality at the meeting as "stodgy."

Banks need to think more like retailers and adopt more creative marketing plans, Ms. Embry said. "There's not a lot of stirring of the pot," she said of the bankers making presentations. "Take those pinstripes off."

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Thomas K. Brown, managing director at Tiger Management, took bank CEOs to task, blaming "poor leadership at the very top" for large banks' "disappointing" progress.

"CEOs would rather do acquisitions than deal with the tougher job of trying to change their companies."

Market share does not dictate profits, he said, citing statistics that showed less than 30% of market share leaders also earned the highest returns.

CEOs need to get their hands around three developments that are changing the face of banking: information-based marketing, human resources, and the evolving delivery system.

"Information-based marketing is not data base marketing," Mr. Brown said. "It's much more complex," requiring continuous loops of inquiry and "never being satisfied you have an answer."

Recruiting, rewarding, and recognizing talent is another top order of business, he said. "CEOs don't seem committed to winning the talent war. They need to spend more time."

With banks' 400- to 500-basis-point spreads narrowing to 100 points, "costs have got to be taken out of delivery every year." At the same time, sales methods need to be improved so they result in higher revenues.

Too often, banks sell products to unprofitable customers, lowering potential revenue gains. Or they sell the right product to the right customer, but through the wrong channel. Approving two of every 20 credit card applications solicited through the Internet, for example, is an unprofitable way to generate those accounts.

Mr. Brown's prediction: "At least one, maybe two big banks will make the transition" to being competitive. "The vast majority won't."

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The '98 conference was no exception to the rule that wherever bankers and vendors of payment technology meet, electronic bill payment and presentment is front and center.

Mr. McCoy of Bank One mentioned it in his keynote address, saying electronic delivery of bills and related payments "will take 40% of the cost out of" the company's First USA credit card subsidiary.

Mr. Horowitz of Citibank went into a long explanation of why his company bought a piece of the Transpoint billing venture-the partners are First Data Corp. and Microsoft Corp.-citing the perceived urgency and strategic importance. Several companies made bill-presentment-related product announcements, most notably Oracle Corp.

Despite the frenzy, the fact remains that this is a formative market, still primarily in what technologists call beta test stages.

Robert B. Hedges, managing director of retail distribution for Fleet Financial Group, said bankers should not get their hopes up about this vaunted "killer app." He said a billing and payment service will quickly become commoditized, and banks must view the Web as "a whole lot more" to differentiate themselves.

"We won't win the eyeball war" with bill payment, he said. "We need more compelling ways to do that."

"I think it will take time for bill presentment to be embraced-it is not an overnight sensation," said William Harris, president of Intuit Inc.

Intuit is ready, having built the capability into its Quicken systems. It has a close relationship with Checkfree Corp., the leading bill-payment processor, but has yet to reach an agreement to accept bills published through Transpoint.

Bill presentment "absolutely will come," Mr. Harris said in an interview. "The idea that one can get, pay, and track bills with one click is just too powerful for it not to be a great thing."

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"I've been at this conference five years and every year there is a new technology innovation," said Gene Galloway, executive vice president of Sanwa Bank at the conference wrap-up session on Friday morning. "But this is the first year I've come away with no 'wow!'" he said.

That wasn't from lack of trying by vendors though. The exhibit hall took up nearly eight acres and housed over 400 exhibitors.

On opening day, M&I Data Services hired look-alikes of Sammy Davis Jr., Dean Martin, and Frank Sinatra of the Rat Pack to pose with guests, smoke cigars, and drink designer martinis at their party in the New York-New York Hotel and Casino.

Security First Technologies provided the best night entertainment for clients and friends on Wednesday with dinner at Treasure Island followed by tickets to see the famous Cirque du Soleil show "Mystere."

But Compaq Computer did even better. It hired acrobats from the other Cirque du Soleil show, "O" playing at the new Bellagio hotel, for its stand in the exhibit hall. Their flexible limbs drew the crowds and then Compaq offered attendees the chance to enter a raffle to win computers.

It seemed that celebrity faces and celebrity places could attract the crowds. Visa hired the athletes Picabo Street and Jonny Mosely to autograph photos.

Fujitsu rented out the Harley-Davidson Cafe on Wednesday night while Oracle had the Motown Cafe just down the Las Vegas strip. Also on Wednesday, Sun Microsystems hosted a dinner in the MGM Grand's Coyote Cafe for several of its key customers. And Microsoft's pre-publicized bash ended in a whimper with two-thirds of the Hard Rock Cafe's party room empty and bouncers at the door insisting on invites to get in.

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