Visa and MasterCard are racing to create a comprehensive standard for home banking but are moving in different directions with their services.

MasterCard's remote banking system is based on touch-tone telephones and PCs. Visa, meanwhile, is forging an alliance with Microsoft Corp. in an attempt to develop the premier home banking standard, offering a huge variety of services and options.

While some regional banks are adopting their own standards, the card association giants are betting that their systems will be the most economical way for member banks to offer remote banking. Services based on screen phones, PCs, and more exotic solutions such as voice-activated phone menus are starting to come on-line.

Banks started offering PC-based home banking in the 1980s. However, the technology was relatively new and cumbersome then. Only about 14 million households had a personal computer, and few of those had modems. Customer response to home banking was poor, and many bank executives were left disillusioned.

This time around, however, the card associations are betting that the now ubiquitous PC and other technologies will soon make home banking the most common way to pay bills and obtain balance information. More sophisticated financial services, such as buying and selling securities and applying for mortgages, will soon be available to remote customers.

While competing delivery systems, based on the telephone, PC, and television, are either available or in development, the final shape of remote banking is as yet unclear.

MasterCard went on-line almost two years ago with MasterBanking, its home banking system, and so far has 18 institutions committed to it. The New York-based association boasts 20 million transactions already conducted on its electronic bill payment system, the only service it currently offers.

The Visa system, while more comprehensive, is not yet available to customers.

While both associations are betting that PC-based banking will be a significant force, they differ on the implementation of screen phones, various other telephone-based systems, and the importance of futuristic solutions such as interactive television.

MasterCard is moving forward by adding services piecemeal to its relatively simpler system.

Last January, MasterCard put Chris Fredrick, a senior vice president for strategic planning, in charge of remote banking, where he had assumed responsibilities in July 1994. Before joining MasterCard, Mr. Fredrick had administered Fleet Financial Group's automated teller machine program.

In August 1994, Fraser Bullock, Mr. Fredrick's counterpart at Visa, was named president of Visa Interactive, the San Francisco-based card association's remote banking subsidiary. He had come to Visa from U.S. Order, a maker of screen-based telephones in Herndon, Va., after U.S. Order's technology and assets were acquired by Visa.

Despite technological advances in the U.S. phone system, on-line services such as the Internet have run into problems because of limits on phone line capacity. Mr. Bullock, however, said Visa does not feel constrained by telephone lines. The card association plans to pace its release of products with advances in telecommunications, such as the spread of digital phone lines.

These phone lines, based on fiber optic technology, will eliminate most problems associated with modem operation, including speed limitations.

While MasterCard builds on its system, Visa is pushing forward with an elaborate series of technology acquisitions and development arrangements with software providers and financial institutions to develop its all- encompassing solution.

In 1993, Visa began negotiations with Intuit Inc. to acquire Quicken - the most popular personal finance software package - to act as a delivery vehicle for its banking software. Intuit controls an estimated 75% to 80% of the personal finance software market. Quicken, its flagship product, shipped 2.1 million units in 1994.

Although its talks with Intuit went sour, Visa is now making arrangements with Microsoft to develop home banking standards.

Visa plans to launch a Windows-based remote banking software package in July that will be Quicken-compatible. By insuring compatibility with Quicken, Visa's package gives bankers a way to target generally affluent PC users who are already comfortable with the idea of using a computer for personal finance tasks.

Visa hopes that its standard will become the supermarket shelf of banking, with many banks offering competing services through the Visa/Microsoft on-line service. "We're trying to put the bank in the driver's seat," said Mr. Bullock. "You'll see the bank's name prominently displayed in every access device."

Visa has announced an agreement with InterVoice, a Dallas-based provider of voice recognition solutions as a supplier for the telephone component of its home banking system. The system will also include screen phones.

MasterCard's MasterBanking, on the other hand, doesn't include a screen phone service, and the card association doesn't have immediate plans to include voice automation as part of its telephone service.

Mr. Fredrick said he doesn't see an immediate future for screen phones or voice recognition, citing limitations in the retail distribution of screen phones and the reliability of voice software. "We will offer screen phones when you can buy it at Radio Shack," he said.

MasterBanking's first customer, Signet Bank, went live in September 1993. The 18 institutions that have committed themselves to the system include Chemical Bank, Wells Fargo, Comerica, First Interstate Bank of Denver, IBAA Bankcard, Centura, and USAA Federal Savings Bank.

About 50,000 customers use MasterCard's remote services, according to Mr. Fredrick, with about 50% banking by computer and 50% by touch-tone telephone.

Customers can use the service through Prodigy or by dialing directly into the MasterBanking servers. MasterCard has opted to maintain direct lines to its server because of concerns about the limited speed and abilities of services such as the Internet.

"I am unconvinced that the on-line networks, with their current speed and security issues, are prepared to do bill payment," said Mr. Fredrick. "It gets overloaded precisely at the time bills need (to be) paid."

When it goes on-line, said Mr. Bullock, the Visa system will allow real- time compatibility among its telephones, screen phones, and PC systems. If a customer is unable to get to his computer, he will be able to work on his finances using a touch-tone telephone. Any changes will then be visible on the PC.

Visa is also working on a slide-through, smart card feature. These cards, essentially credit cards with microprocessors, will allow users to withdraw virtual dollars at home. They could then use their cards to buy products, just as they now do with credit or debit cards.

The downloaded money would be deducted immediately from the user's account, instead of showing up as a loan on a monthly bill. Smart cards are already becoming popular in parts of Europe, where they avert the need to change currencies when crossing borders.

MasterCard's system does not support microchip cards or compatibility between PCs and telephones, although the association intends to add phone- to-PC compatibility soon.

MasterBanking now consists of a Mac- and DOS-compatible interface, but the association will soon have a Windows-based graphics interface as well. MasterBanking plans to add financial services this year, according to Mr. Fredrick.

Both Visa and MasterCard have expressed a long-term desire to make their systems compatible. Their strategy is to offer customers a full selection of competing products, without forcing them to choose one to the exclusion of all others.

"We hope that there will be some compatibility between the two systems, and we are making our standards available," said Mr. Bullock.

Projections from the Bank Administration Institute, a Chicago-based organization that offers information services to bankers, indicate that about 85% of financial institutions will support the PC as an access device for home banking - or small business banking - by 1997. Bankers' consensus is that about 40% of upscale consumers will use PCs as their home banking device within a couple of years.

There is little consensus on the importance of screen phones to home banking. Bank Administration Institute research indicates that screen phones are getting only moderate acceptance by financial institutions.

Rockwell Clancy, managing director of retail banking at the institute, cautioned the industry about prejudging winners. He likened the developing competition among home banking players to the battle between the VHS and Beta formats for video cassette recorders, a contest whose winner was impossible to predict.

"We are very encouraged by the various responses of Visa, MasterCard, and other players in the industry who are rising to the challenges of consumer demand," said Mr. Clancy, "but ultimately the consumer will decide which method will win."

Mr. Rudick is a freelance writer based in New York.

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