A year ago, when the first U.S. bank was launched giving customers account access through the Internet, nearly half of all banks in a survey said they had no plans to follow its lead.

They have since changed their minds. The Internet is high on bankers' emerging-technology priority lists, according to the 1996 American Banker technology survey.

"The Internet is a medium that no banker can ignore," said Mary Donadoni, an analyst with Payment Systems Inc., the Tampa-based research firm that conducted the survey. To ignore it "is like saying you are not going to put a branch on Main Street."

Over the past year, the number of U.S. banks, thrifts, and credit unions on the Internet's World Wide Web has grown from 132 to more than 1,000, according to James Bruene, editor of the Online Banking Report newsletter.

"Banks are making decisions now," said William A. Soward, director of application marketing for Edify Corp. in Santa Clara, Calif. "Twelve months ago, they were kicking tires and trying to understand what the issues were."

The American Banker/PSI survey showed one-third of the top 300 banks view Internet-related issues as the most critical they face - second only to the 35% who cited nonbank competition.

Though only 10% of the top 300 U.S. banks offer Internet access to customers, 92% plan to by 1998.

Community banks are expressing slightly more reluctance about the medium. Some 8% now offer Internet access, and half said they plan to do so within two years. They placed the Internet second on their list of concerns, behind general technology and software issues.

"We're seeing more and more banks jumping on the bandwagon and saying, 'I need to do this,'" Mr. Soward said. "There is an emerging perception that a lot of the security issues have been addressed, but I'm not sure that's gotten out to the consumers."

The bankers' thoughts about interactive services are being translated into action, with much of the emphasis on home banking via personal computer.

Many of the higher-profile moves by big banks - such as Citibank's slashing of fees for on-line customers, which caused subscribership to soar - were complemented by community banking initiatives. In its first five months of operation, the $2.4 billion Commerce Bancorp in Cherry Hill, N.J., attracted 5% of its customer base to a software product designed by Portland, Ore.-based CFI Proservices Inc.

Overall, though, the percentage of U.S. households banking by computer remains relatively low - below 2%, according to most market experts. It has created a classic chicken-and-egg problem: Banks haven't offered personal computer banking because not enough people use it, and not enough people use it because too few banks offer it.

The Internet, if it becomes a truly mass medium, could go a long way toward removing those obstacles.

Surveys by Microsoft Corp. have found that financial applications are the third most popular reason why consumers buy personal computers, after being able to work at home and providing educational products for children.

But a recent semiannual survey of on-line computer use by Odyssey Inc. of San Francisco found that home banking and shopping were among the least popular reasons for going on-line - after electronic mail, research, news, and entertainment.

That has not stopped home banking's protagonists from predicting a popularity explosion. Nearly 37% of households have a personal computer, and 60% are expected to have one by 2000, widening the potential pool of people who bank from home.

Among institutions in the American Banker/PSI survey, telephone touch-tone processing and voice recognition systems are in place at 60% and 28%, respectively. Direct personal computer access is offered by only 20%, although 81% plan to implement access by 1998.

Banks are already beginning to bet on the Internet, the survey showed. Access through third-party, on-line services, now offered by only 18% of respondents, is expected to grow to 45% in the next two years.

Asked when they anticipated most major U.S. commercial banks would have Web sites, 14% said 1996, 36% 1997, and 27% 1998.

Asked when those major bank Web sites would allow for financial transactions, 17% said 1997, 23% 1998, 13% 1999, and 33% 2000.

"Now that they have staked out a spot on the Web, they will start doing things," said Mr. Bruene. "It is like a brand-new canvas, and they will start being innovative and competing with Web sites. As a marketing tool, it has tremendous potential."

Because the Internet has an open architecture, accommodating many computer platforms, it becomes practical to share data within and across bank departments. With data mining tools being built by International Business Machines Corp., Unisys Corp., and others, bankers can turn that shared data into marketing strategies, and hopefully results.

"Data warehousing, workflow automation, and imaging technology are still very hot," said David Medeiros, a technology analyst with the Wellesley, Mass.-based Tower Group.

The Internet also holds promise in the realm of electronic commerce.

The survey found that more than half of institutions of all sizes do not expect payments for recurring household bills to be handled electronically until 2000 or later.

The survey asked bankers about the prevalence of various technology services by 1998: 18% of the banks said direct deposit of nongovernment payroll checks will be universal by that year; 23% said nationwide electronic benefits transfer will be fully in place; and 39% said direct deposit of federal entitlement payments will be universal.

More than 60% of Social Security payments are already deposited electronically, and the government's resolution to make its domestic disbursements mandatory by 1999 is likely to spur electronic transactions.

Another new technology area - smart cards - was viewed by survey respondents as years away from maturation.

Only 21% anticipated nationwide smart card access prior to 2000. About three-fourths said national smart card access will come after the turn of the century.

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