Consumer Interest in Home Banking Poses Puzzle for Banks: How to Plug In?

By Kutler, Jeffrey | American Banker, December 16, 1994 | Go to article overview

Consumer Interest in Home Banking Poses Puzzle for Banks: How to Plug In?


Kutler, Jeffrey, American Banker


PCs! Screen phones!

If bankers' debates over how to deliver a home banking service are beginning to sound like an old beer commercial, they can only be accused of responding well to their public.

Just as Miller Lite wanted both to "taste great" and be "less filling," consumers in the 1994 American Banker/Gallup survey feel strongly both ways about home, banking devices.

Already accustomed to doing routine banking business over conventional telephones, many people would prefer having a small screen to help them visualize transactions. They might even be willing to pay extra for it.

Meanwhile, more than 40% of the survey respondents reported they have a personal computer at home, and a majority of those -- including a contingent with desirable "upscale" demoraphics -- are interested in a PC-based banking service.

Bankers thus have good reasons to go in multiple directions.

"The telephone is the direction the consumer is moving in .. it is the key to our retail delivery strategy," P. Sue Perrotty, group executive vice president of Meridian Bancorp, Reading, Pa., said at a recent Bank Administration Institute conference. "But PC developments are explosive, unlike anything we've seen in the past."

The speed and complexity of the technological changes "preclude simple choices," Ms. Perrotty said. So Meridian, like Barnett Banks Inc., NationsBank Corp., and others puzzling over the remote-banking alternatives, has been keeping its options open.

Bank strategists say they cannot know how the PC-phone competition will play out, nor the potential influence of interactive television and wireless technologies.

So they test various alternatives, even though they may be emphasizing the telephone call center, as in Meridian's case, or a screen-phone product aimed at the mass market, as NationsBank is offering in the Washington area.

Similarly, Visa International tilted in favor of screen phones with its 1993 acquisition of a portion of U.S. Order, a Herndon, Va., company that markets a device called PhonePlus.

But Visa is also helping to usher banks into PC services through an alliance with Block Financial Corp. and its Managing Your Money personal finance software.

In competition with Nations-Bank in and around Washington, Citibank in September began advertising "Banking Without Boundaries"' a "virtual banking" package that addresses consumers' leanings two ways -- it lets customers choose between screen phones and PCs.

Citibank's phone is from Philips Home Services, a unit of the Dutch electronics giant, and retails for $500 to $600, or five times the cost of the simpler Online Resources and Communications Corp. device NationsBank is marketing.

The Citibank-NationsBank face-off could have a nationwide impact on the way home banking is marketed, through what devices, and at what price.

Some observers ask, Why bother with screen phones, even the powerful models like Philips'? PCs are spreading so quickly, with added functionality and ever-lower prices -- wouldn't it make sense to skip the interim step and go straight to computer banking?

"Looking at the entire market, the PC is still relatively negligible." answered William M. Randle, senior vice president of Huntington Bancshares, Columbus, Ohio.

"It does get at an attractive end of the market, a lot of which is tied to small business as opposed to consumer banking needs.

"The real future is in the smart phone," said Mr. Randle.

One of the bankers who is farthest along the information superhighway, Mr. Randle says he is prepared to support any number of delivery systems and devices.

Huntington also has created a "direct bank," delivering services mainly via telephone; and a "virtual branch" that is almost entirely automated, with two-way video hookups available for talking to bank personnel. …

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