Academic journal article ABA Banking Journal

'Web' Banking: Threat and Leveler

Academic journal article ABA Banking Journal

'Web' Banking: Threat and Leveler

Article excerpt

Thirteen months ago we ran our first article on the potential of the Internet for banking. In that article, by contributing editor Bill Orr, was a quote from James Mahan, CEO of Cardinal Bankshares, a $500 million-asset bank holding company in Lexington, Ky. "Banking is information," said Mahan; "I am interested, excited, and infatuated with the net and the changes it can make in the banking business."

A year later that infatuation blossomed into Security First Network Bank, a new bank created for and operating (mostly) on the Internet--a true "cyberbank"--and the subject of this month's cover story. Those of you with Internet access can go see for yourself. Security First's World Wide Web address is

Many banks will be watching this effort closely. Two large banks, Wachovia and Huntington already have investments in Security First. Community banks will wonder if the Internet bank is a threat or a savior.

One of the most powerful aspects of using the Internet as a distribution system for the bank is that it means that virtually every personal computer in the world equipped with a modem is a potential branch for Security First. There are some technicalities to be sure--the need for an Internet access service and for Netscape browser software among them--but already literally millions of people meet those requirements. (This month's cover admittedly is a bit of a stretch to make the point, although a small satellite dish would do the trick if the man had a way to power it.

That kind of business reach could be a threat to banks wondering how they will attract and hold technology-savvy consumers.

On the other hand, Security First is a small bank (technically a thrift) that is part of a modest sized bank holding company. As Mahan observed last year, electronic banking is a great leveler in terms of size. Furthermore, the whole Internet package the bank uses can be licensed, or purchased on a turnkey basis, from the company that developed it for Security First.

* * *

It's anyone's guess whether the "dogs will like the dog food." Results for the bank's first six weeks were impressive. Mahan himself states that he's not after all bank customers, but the "early adapters"--the people like him who are infatuated by, and use, the Internet.

In an interview we ran in the October issue, Intuit Inc. …

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