As a slew of competitors scramble to unleash interactive home banking services in the coming months, the result is likely to be more akin to a head-on collision.
It isn't just that electronic banking sits at the exact intersection of the financial service, telecommunications and computer software and hardware sectors. Electronic banking also straddles the highly charged nexus of consumer anxiety that erupts when money concerns slam into fears of new technology.
"There is a very small group of people who are most willing to allow their money to go `electronic' and become `invisible,'*" said Rita Denny, an anthropologist with B/R/S Group, a Mill Valley, Calif.-based market research and consulting company. "For the more general audience, it is a whole different ball game."
Still, banks, credit card companies, software developers and telecommunications providers are betting big bucks-and big hopes-on interactive technology. The strategy is two-pronged: to help consumers manage their money more efficiently, and, more importantly, to help the financial institutions and technology providers prepare for the arrival of electronic cash.
"Banks are putting an unprecedented amount of capital behind building interactive `virtual banking' centers that will
fundamentally change the way they service retail customers," said David Shpilberg, national director of information technology consulting at Ernst & Young.
According to an Ernst & Young survey to be released later this month, technology spending at banks is expected to rise 21% to $19.8 billion in 1997, compared with $16.3 billion last year.
In addition, the percent of transactions made at actual "brick and mortar" bank branches is expected to fall to 44% by 1997 from 61% last year. The falloff can be attributed to new high-tech delivery mechanisms: online services, screen phones and automated teller machines capable of more sophisticated transactions.
"We are talking about a whole new class of applications that goes way beyond ATMs. In effect, you are really reaching out to `hire' the customer; you are bringing them into the business process and weaving them into your operations," said Glover Ferguson, director of Andersen Consulting's Center for Strategic Technology Research, which is helping clients develop virtual banks and online financial services.
Interactive banking is not new. Several banks, including Chase Manhattan Bank, tried offering online software 10 years ago, but consumers didn't buy into it.
This time around, however, the biggest players in the industry are weaving a tangled web of alliances as they try to ensure their place in the future.
Microsoft Corp., for example, is in the process of acquiring Intuit, marketer of Quicken, the hot financial management and bill paying software. Microsoft markets a similar product, Microsoft Money, that will be sold to Novell to allay antitrust concerns-if the Intuit deal is allowed.
Microsoft also struck a deal last November with Visa International to develop software for secure online transactions.
Visa, meanwhile, is forming its own alliances with banks to offer their customers bill-paying software. The credit card company says it has signed up more than 30 financial institutions, including six of the nation's top 20 banks, to use its system, scheduled to be phased in during 1995.
Microsoft Money is the backbone for transaction software several other banks are marketing to their customers.
Chase Manhattan, for example, began advertising its Microsoft Money-based software to customers in October. Nearly 5,000 people have signed up for the service, more than double the target number. Other banks that market Microsoft Money to their customers include First National Bank of Chicago, U.S. Bank and Michigan National Bank.
Citibank offers a similar program, with the choice of a screen phone or computer software.
MasterCard International last week signed a deal with Netscape Communications Corp. to create a secure payment system for Internet transactions. The system is expected to be available later this year. MasterCard also has a deal with Checkfree Corp. to provide software for computer or screen phone banking.
Online services aren't about to be left out of the fray; Prodigy Services Corp. enables the customers of 17 banks to transfer money and pay bills. Block Financial Corp., a subsidiary of H&R Block and sister company to CompuServe, will sell bank-branded versions of its Managing Your Money software starting in the first quarter.
But one financial institution's difficulties in broadening the use of a more modest technology-ATMs-provides a glimpse into the subtle factors and considerations that can come into play in the new "technobanking" arena.
As recounted by Claremont Graduate School professor Peter Farquhar at a conference at Northwestern University last summer, Citibank discovered that older adults weren't frequent users of ATMs, but obvious steps like increasing the size of the machine's buttons to make them easier to read failed to remedy the situation.
Closer study found that the concern lay not in pressing buttons, but in watching a machine gobble up the ATM card and fearing it wouldn't be returned. Once the problem was recognized, the solution was simple: Citibank installed swipe-through card readers.
Still, there is a significant body of skeptics who doubt new technology can overcome consumers' fear of giving up control of their money to a computer.
B/R/S's Ms. Denny draws a comparison between online banking and the low consumer acceptance of debit cards.
"People are likely to see electronic banking as being more like using a debit card rather than the credit card," she said. "Each provides direct access to your bank account, and people have the perception that a debit card leaves them more vulnerable than a credit card does."
The argument that online banking is impersonal doesn't wash for Joseph Nocera, author of "Piece of the Action," a recently published book chronicling the way credit cards and other developments have changed consumer behavior.
One of the reasons for the failure of earlier home banking services "was that there was nothing else like it out there," said Mr. Nocera. "It was a different way of doing business, but now it seems like a natural progression for a lot of things with which we are familiar."
Successfully dealing with the challenges connected with online services will be crucial for the retail banking sector.
"The financial services industry is going to change dramatically in the next few years because of the ease of online access, and banks could easily lose the whole customer service function," said Anatole Gershman, director of the human systems integration laboratory at Andersen Consulting.
"When you walk up to an ATM, do you notice the bank outside of which the ATM is located? This is a wake-up call for the retail banking industry.'