Vendors Help Small Banks Find a Place in Cyberspace

At City National Bank of Taylor, every employee has desktop access to the Internet, and customers can view the previous day's transactions by tapping into the bank's World Wide Web address.

The family-owned Texas community bank is one of many around the country in its size range - $115 million of assets - that are finding a place on the information highway. Through partnerships with technology vendors they can create on-line products and services that, in some cases, rival those of much larger competitors.

Designed with the help of Mesa Internet Systems Inc., City National's Web site offers 24-hour access to account information and funds transfers - as well as a detailed local weather report.

"Once we've password-enabled them, customers can actually see the checks that cleared yesterday, the deposits they made, and what charges were posted to their Visa or MasterCard," said Andrew D. Littlejohn, the bank's president.

Visitors also see pieces of animation that the site's designers added with Java programming: a waving flag, a calculator with dancing numbers, an airplane flying through clouds.

Soon the bank plans to train a video camera on Main Street and post the image on its Web site, so that anyone with Internet access can see what the home town of actor Rip Torn looks like at any given moment.

"City National Bank now has got just as pretty a Web site as Bank of America," said John A. Burns, chief executive of Mesa Internet Systems in nearby Austin.

In contrast to BankAmerica Corp.'s comprehensive on-line banking service, City National's site does not yet allow customers to pay bills. But its cost is a fraction of that of a top-of-the-line system, which is why the Internet can become a leveler of competitive distinctions.

In a recent survey of banks on the Web, the consulting firm Grant Thornton found that three out of four spent less than $20,000 on out-of- pocket expenses and staff to establish their sites. Of course, advance- function sites and ongoing maintenance add up to many times that figure.

Mr. Littlejohn would not specify how much his bank spent, but Mr. Burns said Mesa charges around $50,000 to develop transactional Web sites.

"You would probably spend up to $250,000 to do it yourself," Mr. Burns said.

Until recently, smaller banks had few options. Few vendors offered the technology, and those that did charged too much.

Now that more bankers have grown comfortable with on-line technology, vendors are stepping forward with lower-cost programs. Some, like Mesa and Edify Corp., already provide services to banks that give them leverage to branch into Internet technology.

"What we say is, here's an opportunity to compete effectively against much larger banks," said William A. Soward, director of application marketing for Edify in Santa Clara, Calif.

Mr. Soward helped provide the technology to City National Bank of Taylor and called the bank "pioneering in its market."

Mesa's Mr. Burns said he hopes to build on an endorsement from the Independent Bankers Association of Texas to convince the 300 member banks to post transactional Web sites in the next year or two.

Officials at Fitech Inc., Heathrow, Fla., are holding dozens of Internet seminars around the country to convince banks to use its services. Half-day seminars began last October at a cost of $175 per bank.

"Initially we were gearing it toward bringing people up from zero," said president Bob Chamberlain. "A lot of bankers had not even visited the Internet."

Eight months later, the progress is palpable. "We're finding more and more bankers now have a presence or have connected to the Web, and now we're spending more of our time helping them take advantage of it," Mr. Chamberlain said.

One bank that went to a Fitech seminar and decided to hire the firm was First National Bank and Trust of Fort Walton Beach, Fla. The $215 million- asset bank already allows customers to view account and credit card information. It plans to offer funds transfers (within 45 days) and bill payment (within 60-90 days).

"We hope in the future to offer anything on the Internet that we can offer at one of our brick-and-mortar branches," said Jimmy Tucker, chief information officer.

Mr. Chamberlain put the cost of a "proper" Internet strategy for a smaller bank - meaning a Web site with interactive features - at $20,000.

"Too many bankers out there think that just having a home page really is going to help them, and it doesn't," Mr. Chamberlain said. "In some ways, it gives them this false sense of presence."

One bank that has fully bought in is First National of Phillips County in Helena, Ark. The bank has become an Internet access provider for the 20,000 residents of Helena and West Helena, on the Mississippi River in the eastern part of the state. Each branch is set up with computers to demonstrate the $25-a-month service.

To make sure bank employees are facile with the technology, First National Bank is paying for them to receive Internet training at a local college. It is also making low-interest loans to employees who want to buy computers.

"We've kind of jumped into the water big time," said Bart R. Lindsey, the president.

The $105 million-asset bank's home page is stocked with civic information: the local hospital and blues festival each get a plug.

Though the Internet is very much a local tool for City National Bank - Taylor is just 35 miles from the high-tech center of Austin - it is also meant to attract a national audience. The bank hopes to make its name nationally as a resource for people who want to buy airplanes, and loan information is posted on its home page.

"Aviation banking (financing airplanes) is one of the niches that we've pursued," Mr. Littlejohn said. "I myself am a pilot, and we've found a lot of people like to do business with us because of that relationship."

Mr. Littlejohn described his single-office bank as "very traditional" but said entering cyberspace was "a strategic stepping stone for our future development."

"How far have we come?" he said. "I remember in 1983, when we started with our first IBM computer and we were happy we had both an 'A' and a 'B' drive."

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