Academic journal article ABA Banking Journal

'We're Not in Kansas Anymore.' (Changes in Electronic banking)(Column)

Academic journal article ABA Banking Journal

'We're Not in Kansas Anymore.' (Changes in Electronic banking)(Column)

Article excerpt

Strong winds of change have been blowing through the retail sector of banking for the past two decades. These days, human tellers handle only about half of all transactions, a share that will surely decline. Recently, some of the basic banking functions have moved into the home, and that's where a new storm is brewing.

Home banking today generally means calling up your bank on the phone to get your account balances and transfer funds between accounts. That's a nice "24x7" convenience.

In the 1980s, the personal computer added a visual dimension to check writing with graphics and sophisticated analyses of spending patterns, taxes, and investments. Meca was first with Managing Your Money. Intuit's Quicken captured 80% of the market. Microsoft came late to the market with Money.

Users still had to enter their own check information, because, until last year, these software packages weren't connected to their users' bank accounts.

The next evolutionary jump, in 1995, enabled personal finance software users in their homes to access their bank accounts. Intuit acquired a private network that downloads account information for Quicken users. Thwarted in an attempt to buy Intuit, Microsoft's home-banking strategy centered on exploiting its own about-to-be-born private network--which everyone assumed would overtake all other private networks.

From all sides (including this column), came the warning: "Watch out for Intuit and Microsoft! They want to become everybody's financial manager."

Then a funny thing happened on way to dinosaurhood (borrowing from a remark by Bill Gates about the future of banks). The Internet, specifically the World Wide Web portion of it, suddenly arose as the ideal medium for interconnecting every home and every business with every other home and business. And it promised to be cheaper than private networks. But it was perceived as not secure.

Last fall, old and new forces began to recombine themselves into what has become hurricane-strength changes in the electronic banking world. As home-banking pioneer Dale Reistad put it recently: "We're not in Kansas anymore."

The triggering event may have been the announcement by an obscure S&L in Kentucky that it was ready to deliver home banking via the World Wide Web from brickless and mortarless Security First Network Bank. …

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