On-line auctions of certificates of deposit will soon hit prime time, with 50 banks poised to make CDs available through MaxRate.com, a start-up company expected to announce its formation today.

The MaxRate-branded Web site, which is expected to begin operations sometime in April, will enable financial institutions to accept bids from investors across the country who will name the rate they desire on a CD. The service is intended to lower the cost of acquiring CD customers while giving banks an opportunity to anonymously offer customers they are targeting - say those in a particular age group or locality - better rates. The expectation is that banks could then cross-sell additional products to these desirable customers.

MaxRate is capitalizing on a small but growing interest in on-line auctions of financial products. So far, only PNC Bank Corp. and USABancshares.com hold regular on-line auctions of CDs. Many banks have resisted the trend because of fear of putting too much pricing pressure on CD rates.

But MaxRate.com expects to lower customer-acquisition costs by so much that banks are compelled to climb aboard. The company's auction service theoretically could eliminate the entire cost of originating a CD, estimated at $102 by MaxRate, company officials said. CD origination costs through MaxRate would include an undisclosed but nominal transaction fee.

"We expect to significantly reduce the origination costs for banks, and frankly, that is a large part of our value proposition to banks," said Kevin Link, president and chief executive officer of the Atlanta-based company.

Charles Blair, chief executive officer of $140-million asset First National Bank of Commerce, a five-branch community bank in Commerce, Ga., said he plans to use MaxRate.

"I think it gives a bank such as ours the ability to attract customers," he said. "What you are leveraging is their marketing capabilities and the money they will spend to promote their site to get CD rates and CDs," he said.

MaxRate plans to market and advertise its site extensively. Participating banks would not be required to buy any hardware or software and would pay a transaction fee only when a CD purchase has settled.

The service promotes market efficiency because a local community in Georgia may be "capital-intensive or capital-deprived," Mr. Link said, and these conditions would be reflected in rates offered by those local banks.

"Financial institutions will get a chance to gain access to brand-new markets and brand-new customers," Mr. Link said. "If you are a community bank in Georgia, you now have the ability to raise deposits nationally."

Mr. Blair of First National said he plans to use MaxRate to select the kinds of customers to whom he'd be willing to offer premium rates. For instance, he said he would offer better rates to people living in distinct vicinities or within certain age brackets who would be candidates for other products.

"I am not out there looking for rate shoppers," Mr. Blair said. "What MaxRate brings to the table is the ability to qualify that customer a little better so that you don't just get customers who come to you because of the rate."

Customers would learn the identity of the bank after the CD product has been sold and settled. The process prevents rate seekers from asking their local institutions to match the maximum rate offered.

T. Steven Johnson, chairman of MaxRate and a co-founder and chairman of the Internet bank NetBank Inc., said, "All we are doing is taking the broker out of the brokered CD business, and we are delivering those deposits at about a third of what it costs to go through the brokers."

He added, "I think a lot of Internet banks will have to look at MaxRate and ask, 'Do I pay another 10 basis points to add a customer or do I spend some money on banner ads and newspapers and TV?' "

MaxRate's site and underlying technology will undergo a test phase over the next several weeks. The service will become operational early in April in a few markets, and will become commercially available later this year. One of the 50 banks with a contract pending with MaxRate is among the top 10 in assets.

Bill Doyle, an analyst at Forrester Research, said MaxRate has a good chance of succeeding, even though it will probably raise the ire of some banks.

"If they develop a good track record for beating generally-available prices and can attract steady supply of inventory, they could pull this off," Mr. Doyle said. "It strikes me that far more banks will be put off by this because it does create rate competition, and that is not something that banks will necessarily want to do."

Still, a growing number of banks and technology companies are getting involved in on-line bidding schemes.

PrimeStreet Corp. of Menlo Park, Calif., has developed a bidding service for the small-business lending market and earlier this week announced it has entered the Canadian market through an agreement with Royal Bank of Canada.

Several business leaders in the Atlanta area formed MaxRate in December 1999. Michael McChesney, co-founder of Security First Network Bank and the current chairman of WebTone Technologies Inc., and Tripp Rackley, vice chairman of Digital Insight, are members of MaxRate.com's board of directors.

MaxRate is expected to announce today that it has raised $3 million in venture capital from Atlanta-based Noro-Moseley Partners and Wakefield Group of Charlotte, N.C.

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