As the telephone, personal computer, and television vie for the attention of bankers who are weighing their options for New Age delivery systems, one hybrid device has streaked to an early lead.
This device, the screen telephone, falls somewhere between the basic phone and personal computer in sophistication. Its compact screen allows banks and other companies to deliver services through menus similar to those on automated teller machines or PCs.
The screen-phone idea has spawned several competing product-design and marketing philosophies, but all purveyors agree that they can capitalize more quickly than PCs on the consumer's comfort and familiar-with the traditional telephone.
In the telephone context, home banking is already old hat. According to Payment Systems Inc., a Tampa, Fla.-based research firm, 62% of U.S. households have conducted a banking transaction by phone, up from 7% of households in 1983.
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Automated telephone-response systems alone handle between 25% and 30% of today's retail banking transactions, according to PSI.
By contrast, households using personal computers for home banking have hovered at around 1% for several years.
Although PSI predicts growth in both screen phones and PCs for home banking over the next three years, the research indicates that potential demand for screen phones is greater.
At a cost of $150 for the phone and $15 a month for the service, about 10% of households express a willingness to use a screen phone.
Only 4% to 5% say they would use a PC with a $10 monthly fee, assuming they already own the necessary hardware.
Based on these findings, Neal Chambliss, vice president at PSI, said PCs will probably represent a "niche market" for the foreseeable future.
Payment Systems' research is reinforced by the 1994 American Banker/Gallup consumer survey, in which 47% of respondents said they preferred a screen phone over a regular phone for banking transactions.
The prevailing explanation for screen phones' attractiveness is that the devices build upon existing telephone habits.
Many bankers are coming to view screen phones as a likely part of the long-term future rather than as an "interim device" that will become obsolete as higher-capacity PCs proliferate.
Bradley Earhart, a marketing director at Chase Manhattan Corp., sees the home banking market as a pyramid. PC users, the smallest population segment, are at the top, and telephone users, representing the largest number of users, are at the base.
"It's the middle ground -- a customer segment that wants something more than a telephone, but not as complicated as a computer -- that the bank is after," Mr. Earhart said.
Chase, with $117 billion in assets, plans next year to begin testing the Callbook 220, a telephone attachment with a screen, manufactured by a Boston-based company called Momentum Inc.
Since the Callbook is compact -- about the size of a VCR tape -- and attachable to any phone, it is much more portable than current screen phones. It also does not require the replacement of existing phones. In volume production, the Callbook will be available to consumers for under $200, said Mr. Earhart.
Like Chase, other financial institutions have chosen the screen phone as an interactive entry point into the home.
Huntington Bancshares, Columbus, Ohio, hopes to have its screen phone, developed by the bank and some former AT&T Corp. engineers, in the market by mid-1995.
William M. Randle, senior vice president of the $17 billion-asset banking company, feels that screen phones have a promising future, though his bank is also gearing up to offer home banking through other channels. "All the research suggests that the screen phone market, at the right price point, is significant," he said.
Other institutions offering screen phone services, even while keeping other options open, include NationsBank Corp., Citicorp, Bank of Boston Corp., and Bank South Corp.
In addition, a variety of companies offer to support home banking through screen phones, including Visa Interactive, SmartPhone Communications Inc. of Stamford, Conn., and Interactive Transaction Partners, a joint venture of Electronic Data Systems Corp., US West, and France Telecom.
Visa Interactive, a subsidiary of Visa International, provides screen phone services to participating banks using the PhonePlus, a device manufactured by Herndon, Va.-based U.S. Order. Visa recently bought the electronic banking services division of that company.
Fraser Bullock, president of Visa Interactive, says the screen phone market is "just getting its roots, gaining momentum, and will be significant in the future."
While the majority of Visa Interactive's customers own PCs, they prefer to do their banking in a simpler format than is typically available via computer, which is why the screen phone appeals to them, he said.
Mr. Bullock stressed that the company also provides touchtone phone services and will soon support PCs, so that financial institutions will be able to choose the channel they want to use.
While demand for screen phones appears promising, many industry observers say the device won't become popular until it can be bought off retail shelves for well under $200.
Current models range from the $99 ScreenPhone from Online Resources and Communications Corp., McLean, Va., to the more sophisticated $500 to $600 device developed by Philips Home Services Inc., a Massachusetts-based unit of the Dutch electronics company.
Until volume production of screen phones causes prices to drop, banks may need to be more creative in the short term to get the devices into the home.
"There's a good case to be made for giving away the phone, or adjusting price based on balances maintained," said Matthew P. Lawlor, president of Online Resources.
"A bank makes an average of $150 a year per new customer," he continued. "Why wouldn't they severely underwrite or give away the phone to bind up that customer?"
Online Resources' phone is currently being marketed by NationsBank in the Washington area.
Another factor that may help launch the screen phone into the retail market is the interest that is building from Regional Bell Operating Companies. Like banks, the telephone companies stand to increase their core business income from widespread deployment of the device.
The telephone companies are increasingly selling enhanced services like Caller ID and Call Waiting, which screens make much easier to use.
The lure of these high-margin services is leading many RBOCs, as the regional Bell companies are known, to form partnerships with banks. Together, they plan to market a mix of financial and telephone services they hope will appeal to a wide spectrum of consumers.
One such alliance exists between Bank South and BellSouth Telecommunications Inc. The Atlanta bank, which is testing a home banking service that will be available in 1995, has not yet revealed the screen phone manufacturer it will be working with.
Calvin D. Johnson, director of electronic banking research and development at Bank South, said the partnership gives the $6.7 billion-asset institution the opportunity to work with a company that has information superhighway expertise.
The bank brings to the relationship its in-depth knowledge of retail customers. Its network of 49 offices in Kroger supermarkets in metropolitan Atlanta will play an important role in marketing the screen phone service, Mr. Johnson said.
He believes that as more features and functions are delivered through screen phones, the device's appeal will grow. Bank partnerships with telephone companies offer "remarkable synergies," he added.
Other bank-Bell partnerships include Citibank with both Nynex in the Northeast and Ameritech in the Midwest, which are marketing the Philips phone.
U.S. Order will soon ally with two major telephone companies to market screen phone services through Visa member banks, according to Scott Corzine, vice president of the screen phone company. Three more telephone companies will be on board next year, he said.
The combined push of banks and telephone companies will eventually get screen phones into consumer electronics stores, such as Radio Shack and Nobody Beats the Wiz, said Mr. Corzine. He believes this will happen in the next two years.
While financial institutions recognize the screen phone as a potential mass-market device, they realize they should also be prepared for consumer demand for other delivery mechanisms.
For example, the prospect of delivering banking services via interactive television is starting to gain the attention of banks and cable companies.
The telephone companies, too, are delving further into the interactive market with the development of "full-service networks" that will enable the delivery of voice, data, and video applications over phone lines to a range of devices, including screen phones, PCs, and televisions.
These networks, permissible under the "video dialtone" regulations issued by the Federal Communications Commission in 1992, will serve as competition to cable providers.
Most industry observers believe the various interactive devices and services will fill different niches, with no one offering necessarily eliminating the others.
"The key is to get started with something," said Online Resources' Matthew Lawlor, speaking to bankers. "Get the necessary marketing and service experience. Don't get hung up on debates."
