Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, November 17, 1995 TAG: 9511170103
SECTION: BUSINESS PAGE: G-1 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Long
You want to update your register, so you flip on the computer and call up your bank statement, which is complete through last night. The program automatically compares the check numbers and names and - oops - again you forgot to post an ATM withdrawal.
Now to pay the bills. Calling up that program, you type in checks for utilities and to Sears, along with a gift to your uncle in Duluth. But the Apco bill isn't due for two weeks, so you make that notation to the bank.
And you sign off the computer, confident that your bank will transfer money electronically to the utilities and Sears, then write a paper check and mail it to Duluth. And pay the Apco bill 14 days later.
In case you haven't guessed already, this scene is possible only with computers - your PC talking to the bank's mainframe.
Though it sounds futuristic, it becomes reality for Virginians on Nov. 27 when Crestar Bank introduces its new computer banking service.
Other banks are right behind as Americans move quickly into the age of electronic banking when transactions are blips on a computer screen and cash takes the form of refillable cards. First Union, Signet and NationsBank all have plans to introduce home banking in 1996.
There are some traditional banking services not yet available without stopping by a bank. Currently, only a branch office or an ATM can dispense cash or accept a paper check deposit. But a group of banks, including First Union Corp., is experimenting with ways of encrypting credit card numbers so consumers can buy things on the Internet.
Despite this technological onslaught, many people still are not ready to do business with a cash machine, much less pay bills via a telephone with a screen or bank by personal computer.
In a study released in October conducted by the Gallup Organization for the American Bankers Association, three out of four participants said they still prefer to do their banking face-to-face with a human teller.
But preference for technology increased significantly with education and income, and, not surprisingly, decreased with advancing age. More than twice as many college graduates are willing to use technology than those with just a high school diploma.
The study turned up no gender bias regarding technology, but interest in banking from home was highest among higher-income households.
Over the past 20 years, however, the number of people willing to use ATMs has risen, the ABA said. The Gallup survey found that slightly over half of those questioned use cash machines.
Focus on customers under age 35 and the percentage of people using ATMs jumps to 72 percent. Compare that to the 29 percent of those over the age of 54 who use the machines, and it appears that in time the technology will be more accepted.
Right now, however, only about 25 percent of households own personal computers. Of those, only half have the modem necessary to connect with the outside world.
However, Vernon C. Plack, who follows the banking industry for Scott & Stringfellow Inc., said companies are not taking a risk by offering home computer banking service.
The number of home computers will rise exponentially in the next three to four years, Plack predicted, and all computers manufactured today come equipped with a modem. Besides, he said, the largest number of computers are in the homes of the young and well-to-do - banks' most coveted customers.
Also, banks can provide home banking by spending relatively little money, he said, although he had see no industry-wide figures.
All banks, Plack said, should be getting into the market faster than many of them are.
Charles O. Meiburg, professor of business administration at the Darden Graduate School of Business Administration of the University of Virginia, said the banks are not at risk because the technology is "not terribly expensive." But he believes that it will take a very long time before computer banking becomes common. He said his children will live to see that day.
The Gallup survey found that convenience, cited by 39 percent of respondents, is the most important factor in selecting a bank. And what could be more convenient than banking from your own home at a time of your own choosing?
\ Mike Woodward, vice president for consumer product management and development at Crestar Bank, said 6 million families own Intuit's Quicken and another million use Microsoft's Money, the two leading financial management software programs. Together they account for about 80 percent of the market.
Both of those programs will work with Crestar's on-line banking system, although customers must upgrade to Quicken Windows Version 5 or to Money's Windows 95.
As a security measure, Crestar customers will be connected by direct line to the bank rather than via the Internet. Computer customers will have a bank identification number, plus a personal identification number known only to the user.
Woodward said the basic statement service through Crestar will cost $3.50 a month in addition to any other applicable account fees. Anyone who wants Intuit to send out their checks will pay $6 a month for 20 payments and 45 cents a payment after that.
Fred Winkler, senior vice president of the card products division at First Union Corp., said his bank is engaged in a joint venture with Southern Bell on developing banking by interactive television using a remote control device or touching the screen. First Union has spent more than $300 million in the last five years on technology and systems development.
First Union has set up a page on the Internet giving information about the bank and its offerings, essentially an advertisement for the bank's services. Winkler said First Union receives 5,000 electronic mail inquiries a single day from 82 countries. The page generates 50 credit card applications a day - plus inquiries about car loans and home equity loans. Consumers can, for instance, use information on the screen to do retirement planning.
Come January, its "WEBInVision" service will allow commercial customers to use the Internet to access bank account information. This will be enhanced later to allow financial transactions.
First Union provides a free software package called Network Navigator to allow customers to connect to its page.
About the middle of next year, Winkler said, First Union customers will be able to start banking on the Internet. He said he was not concerned about using the Internet because it's as secure as it needs to be. Layers of security will be added, he said, and users will be warned if their personal computers lack the encryption capability for proper security.
\ Although bank branches still handle between 70 percent and 80 percent of all transactions, the trend away from in-person banking has started, said Chris Oddleifson, executive vice president for consumer banking at Signet Bank. The rate of decline is about 2 percent to 3 percent a year. ATMs and phone banking, meanwhile, are gaining rapidly although the numbers are small.
Cash machines were established in the early 1970s, he said, but they weren't used much until in recent years.
Now telephone use is growing, although you can't get cash or deposit a check by phone. Still, Oddleifson said, people are dialing Signet's 800 number between 40 percent and 50 percent more often than they did last year to open accounts or apply for loans.
For personal computer users, Signet has a site on the World Wide Web with information about consumer products such as student loans.
Sometime next year, in partnership with Edify, a supplier of voice response equipment, Signet will offer customers the opportunity of performing some banking transaction on the Internet.
"We are on the case" of security, Oddleifson said. One day, he said, there will be a direct line from a customer's house to the bank, which will be even more secure.
NationsBank and Bank of America formed a partnership last spring to jointly purchase Meca Software Inc. from H&R Block. Its money management program has about 600,000 users, and NationsBank will rely on Meca to serve its computer customers.
Mark Critchett, assistant vice president for marketing, said NationsBank is running two pilot programs.
One system being tested in the Washington area operates with a screen phone that allows customers to pay bills, transfer funds and check balances. When the vendor being paid is not on the electronic transfer system, the bank will write a paper check.
NationsBank is also working with personal computer banking in the Texas market. Critchett said no date has been set for the introduction of computer banking in Virginia, but that should come some time next year.
\ First Union and NationsBank, among others, are pioneering the next step in computer banking, the so-called smart card.
A smart card is plastic - like a credit card - embedded with a memory chip where a cash value is assigned. As you spend money, perhaps to buy gas or a newspaper, the merchant swipes the card, deducting some of the value.
When the card's value has been spent, the card itself can be discarded. Or, in another incarnation, the card can be "refilled" from the owner's bank account, perhaps through an ATM.
Ultimately, of course, the goal is to refill the card from the user's bank account via the personal computer. To accomplish this goal, computers must be sold with a slot where the card will fit.
Also, Congress is wresting with this new technology, trying to decide whether the smart card is a debit card requiring the merchant to supply a printed receipt or whether it is like cash. Banks and merchants argue that they cannot afford to give a printed receipt for small purchases such as a daily newspaper or a pack of gum.
Banks are not waiting, however. First Union and NationsBank will introduce the smart card during the summer Olympics in Atlanta next year. The cards will be used in the Olympic Village, but merchants in the city are also moving to accept them as well.
First Union announced last week that 12 nationally recognized merchants are committed to the program, including Domino's Pizza, Chick-fil-A, Baskin Robbins and Taco Bell.
First Union's Winkler said "the smart card will revolutionize the way people make small purchases for generations to come. Now there is an alternative to crumpled bills and loose change."
The dilemma is to get enough merchants to accept the cards so that people will use them instead of cash - and to get enough people to use them so that news stands and candy stores will install the necessary terminals. This, said Signet's Oddleifson, is no trivial undertaking.
First Union's approach, Winkler said, is to unroll the cards city by city after Atlanta, starting first in the biggest cities. Winkler projected that smart cards will reach Richmond in 1998, but he had no date for the Roanoke Valley. It will likely be the turn of the century before customers see them in Western Virginia.
As smart cards will replace cash, perhaps a decade from now, Oddleifson said, wire and on-line transfers will replace checks for deposit. He said computer users will have a "purse" of electronic "coins" that will be sent via computer networks to other people's electronic purses.
This technology, he said, is "very, very early" and there is no means of securing such transactions today. Oddleifson estimated that it will take 20 years to perfect this system.
When those days come, Winkler said, people "will hardly set foot in a bank." Customers will rely instead of personal computers and perhaps ATMs.
And, Winkler said, the system will be international because the United States is "behind the curve." The developing Third World, Winkler said, will skip over checks and credit cards, moving directly to stored value cards. Russians, he said, are already using stored value cards and Finland plans "by the year 2000 to be out of the currency business."
We cannot completely imagine the dominant technology of the future, said Woodward of Crestar. Some companies, he said, are experimenting with banking by interactive television rather than by computers. Many people don't have computers in their homes, he pointed out, but virtually everyone has a TV set.
People who are experimenting with screen telephones in the Washington area say they like that system as well, Woodward said, although that system today is "very vanilla." Users cannot, for instance, download statements for automatic reconciliation. But Woodward envisions the possibility having a smart card reader on the telephone screen one day.
The telephone, he noted, has one great advantage. It can be carried with you everywhere by hand while the personal computer is back home and probably difficult to lug along. That could make the telephone the ultimate in banking convenience.
by CNB