Change has always been painful for small community banks, so it's no surprise that a lot are having a hard time adjusting to the World Wide Web. Many are lucky to have Internet access; others don't even have e-mail.

But technology is exploding with new offerings of products and services that will double in the next few years. Why should your bank be among the Neanderthals that will disappear for lack of initiative?

Traditional banking products - such as checking, money market accounts, individual retirement accounts, and lines of credit - are being touted on all the brokerage Web sites. Their rates are more than competitive and accounts are easier to open.

New banks and initiatives such as Ebank.com and WingspanBank.com are spending millions to lure customers.

Their growth has been dramatic, and so are their distribution savings. For example, an on-line transaction costs about 18 cents, versus a traditional transaction's $1.20.

One consulting company suggests that changes are occurring in three waves: technology, new business models, and business and industry reconfiguration.

Small banks are trying to keep up with the first wave. Many are lagging behind other financial and retail industries. With the use of electronic cash spreading, how can a bank that has not even introduced debit cards catch up? Smart cards will likely become the currency medium for the next generation.

New business models have bankers baffled. But if they don't accept them, they will be unable to operate. They won't even be able to lend to businesses that use new operating models.

Bankers cannot move into the third wave - reconfiguration - until they understand the new models. New industries will appear that we can't even fathom today; other industries will be restructured. Will banking be what it is today? No, but few can even hypothesize what it might be.

Budgets must be earmarked for on-line strategy. This is going to be difficult at institutions whose marketing budgets are 1% of total assets and primarily used for print, radio, and promotional advertising.

Capital expenditures must be diverted to information technology and new distribution channels. Most successful companies don't even use return on investment when evaluating the Internet, because they can't get a handle on the real numbers. Internet banking is about opportunity. It can be a stand-alone product or advantageously used in adding value to a bank's product line. It offers the potential to retain customers longer and provide better pricing, service, and control of their funds, which are building blocks for strong relationships.

Internet banking can attract customers with savvy products packaged on interactive home pages. Those pages can help in your community relations efforts. Links can provide directories for business customers. The marketing possibilities are endless.

So, what is a bank to do? The opportunities are in rate management and the capability to adjust to market conditions rapidly. Start-up costs should not be prohibitive when compared to those of a new ATM ($40,000) or branch. Advertising can be effectively directed to different segments offering more profitability. Channels for communication with customers are streamlined.

Internet banking offers an advantage in time, value, and service. Community banks that offer it sooner will be around later. Ms. Leavitt is a partner with EB Works Inc., a strategic planning firm in Hadley, Mass., that focuses on electronic commerce. Mr. Ball is associate professor, dean of information technology initiatives, and co-director of the Interdisciplinary Center for Electronic Enterprise at the University of Massachusetts, Amherst.

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