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     Technology Pushes Banks To Be
More Competitive 03/27/95 CHICAGO,
ILLINOIS, U.S.A., 1995 MAR 27 (NB) --
The banking industry is healthy, but
"banks are asleep," when it comes to
technology, J. Richard Fredericks,
senior managing director, Montgomery
Securities, told the audience at the
"Commerce and Banking on the
Information Superhighway" conference,
held in Chicago last Friday.

    "Banking is not business as
usual," he said. Banks are losing
market share, Fredericks said,
because other segments of the market
are growing faster. "Banks are
carrying old baggage around," he
remarked when citing the fact that
the number of banks are going down
yet the number of branches is going
up. Also, he said more people have
money in money market funds than
savings and CDs (certificate of
deposits).

    What's more, he said, is that
customers are getting more
technically savvy and more demanding.
Not only are people banking more by
phone and by ATM (automatic teller
machine), but they want 24 hour a day
access. He said this is not only true
of the younger generation, but of
people aged 50 to 64 years of age.
Plus, he said PC penetration is
steadily growing and more people are
having their salaries directly
deposited to checking and savings
accounts.

    "Everyone's getting into
electronics," he said. Institutions
like local banks, General Electric,
and Fidelity are leaning to ATMs,
phone services, and gas station
services; non-traditional purveyors
of bank products like AT&T, regional
Bell operators, cable companies, and
Microsoft are using computers to
"plug in," he said. Because of this,
he said banks are in "for a rude
awakening. "Banking is essential to a
modern economy, but banks don't have
to be the agent," Fredericks said.

    He said when banks go to the
"alternate channels" of home banking
and the like, "significant share" is
up for grabs. If enough value is
added to these services, perceptions
will be changed, and a premium price
can be charged for convenience, time
saved, and information.

    "No one knows who wins and loses,
and no one knows what roles people
will play in the future," Fredericks
said. "There's risk and opportunity
in this. But you've gotta try. You've
gotta experiment."

    (Bob Woods/19950325)

    Checking/Debit In The Electronic
Age 03/27/95 CHICAGO, ILLINOIS,
U.S.A., 1995 MAR 27 (NB) -- Where
electronic debit transactions are
today, how they're going to move onto
the so-called "information
superhighway," and the challenges and
issues of making that move were the
subjects of a presentation given at
the "Commerce and Banking on the
Information Superhighway" conference
in Chicago last Friday.

    Raedene Keeton, president of the
consulting firm Process Efficiency
Partners, gave a picture of where the
market stands today. She stated
electronic debit and electronic
checking started because customers,
retailers, and financial institutions
were looking for greater efficiency
and better service; less time in line
(as opposed to using a check for
payment), reduction of fraud losses,
and convenience. Electronic debit
today, she said, is viewed by
consumers as a substitution for check
and cash transactions between $12 and
$150, and debit POS (point of sale)
transactions have grown at an average
rate of 39%, a figure Keeton called
"pretty substantial."

    Randy Kahn, senior vice president
of First Interstate Bank, said that
the system originally used for ATM
transactions is being used
increasingly for debit at the point
of sale. "We already have this
backbone system in place, now what we
have to figure out is how to move
this into cyberspace, interactive
television, and other media."

    But he said there's still a long
way to go with consumers and
merchants today. Kahn cited recent
statistics that show cash is still
king in the checkout line. The
challenges that lie ahead for
electronic debit, he said, are
building the commercial
infrastructure and conventions,
security, and convincing people to
use the new system.

    Finally, Scott Loftesness,
executive vice president of First
Data Corporation, took up the issue
of where electronic debit is headed
in the future. He said the concept of
online transactions are in a "period
of significant experimentation." The
online industry is in a similar
position to where the direct
marketing industry was about fifteen
years ago, he said, and new
technologies are enabling the
creation of the new electronic
community. Online commerce will
become a "significant segment" of
consumer payment over the next 5 to
10 years, and credit/debit cards will
lead the "charge."

    Ultimately, the implications are
that, in his words, "any new approach
will be based upon a shake-out among
the multiple approaches being tried
today, to a set of open industry
standards."

    (Bob Woods/19950325)


     Banking On The Info Superhighway
03/27/95 CHICAGO, ILLINOIS, U.S.A.,
1995 MAR 27 (NB) -- Online services
and the Internet are informational
highways for now, but for them to be
commercially successful, they need to
become "transactional," said the Bank
of Boston's John Doggett. He spoke to
an audience of mainly banking and
financial professionals at the
"Commerce and Banking on the
Information Superhighway" conference,
sponsored by International
Communications for Management, in
Chicago last Friday.

    Doggett, who is the director of
applied technology for the Bank of
Boston, first spoke on how banking on
the so-called "information
superhighway" is conducted today. He
said online services and the Internet
mainly give access to information
like annual reports, product
information, and even job
opportunities. Even though more and
more banks are constructing World
Wide Web home pages, and companies
like First Virtual and DigiCash are
helping electronic commerce on the
Internet, most of the actual
transactions are taking place
offline, or outside of the Internet.

    This is the problem, and "we need
an Internet ATM (automatic teller
machine)," Doggett said. What's
needed is bill-payment capabilities,
the ability to apply for accounts,
and other banking activities over the
Internet, he said. Doggett cited one
bank, Cardinal Bancshares National
Bank, that he claimed will be
providing these and other services
over the Internet by October. But he
said what's missing from the
electronic mix right now are features
like customer authentication,
transaction security, credit
extension capability, and depositing
of funds.

    The "Network Bank of Tomorrow,"
he said, must have features like
outstanding customer service through
electronic mail (e-mail) and the
telephone. Doggett called customer
service an "immense problem right
now."

    Tomorrow's electronic bank must
also have excellent security,
accessibility 24 hours a day, seven
days a week, and a global scope and
access. He also said banks in the
future will provide existing products
faster and better, provide services
like asset certification and risk
information, and provide financial
markets with services like management
of bids and offers, and loan
placements.

    To acquire this control, he said
banks must form alliances with
telecommunications and network
companies; provide dynamic services
"to compete with Hollywood;" and
provide confidence through marketing
and through bank branches, because
"there's some reality in this virtual
reality."

    Doggett added, "It's not a
question of if. It's a question of
when."

    (Bob Woods/19950325)