BANKING
DILEMMA
by Charline Allen
Charline Allen is managing editor of View magazine. Since 1979 she has been writing about cable TV and other new media.
Across the
nation, personal computer users are participating in pilot programs
that will determine whether home banking is indeed a viable business.
To date, the major concern registered by users is the fear that their
money will be lost in the system or that someone will illegally tap
into their account.According to Elise Berman of Chemical Bank, home banking is "as secure as, or more secure than, any MasterCard operation." Berman contends that money cannot get lost in the computer system because the bank has a listing of every step that every member makes on the system. In other words, the bank's computer keeps a record of each time a home user logs on, so any discrepancy can be checked against this listing.
As for the fear that someone could illegally tap into an account, Berman says this is virtually impossible because four verification steps must be taken by home users to access their accounts: they must input their household code, personal identification code (PIC), personal "handle" and household "handle." The bank has records of three of these codes, but not of the user's PIC (just as, in the case of automated teller machines, the bank knows everything about your account but the code you input when you begin using the machine). During its testing of the system, Chemical tried and failed to defeat its own program.
On the Frontier
Home banking customers must arrange with the bank for particular accounts to be paid electronically. For accounts like American Express, which has its own computers, funds are simply transferred electronically from the customer to the bank to Amex. Companies or individuals without computers can also be paid electronically. Chase credits their bank accounts with the amount requested, even if their account is with another bank. Most systems also allow regular monthly payment accounts to be set up for automatic debiting.
When you go on-line with Chase Manhattan's Paymaster to pay bills, for example, you tap in your password to bring up the menu. You can choose from: DISPLAY BALANCES, OBTAIN INFORMATION, PAYMENT/TRANSFER PLANNER, CALL CHASE and ACCESS UTILITY SERVICES. If you choose ACCESS UTILITY SERVICES, you select from another menu that includes: CHANGE PASSWORD, CONFIGURE SYSTEM, WRITE A MESSAGE, UPDATE MEMO CODES, ARCHIVE DATA and CHECKBOOK REGISTER. Choosing the latter, you see your balance forward, credits and debits as ol the last date you tapped into the system. You then punch I to input a transaction and enter N for a new check. If you change your mind, you hit ESCAPE, the transaction is voided and you again see your balance, credits and debits. If you wish to go ahead and make a payment, the system asks on your computer screen: TO NEW YORK TELEPHONE, $100 FOR PAYMENT. CORRECT? You answer yes or no, and the transaction is complete.
Who Needs Home Banking?
Many of the home banking pilots now under way began in 1981. A few started out by offering free home banking services, but then charged $8 to $10 after the test began-primarily, they say, to determine whether people are actually willing to pay for the service.
Major banks like Chemical, Citibank and Chase Manhattan have taken a "stand-alone" approach in their pilot projects and offer only home banking. Customers can make account balance inquiries, pay bills, automatically reconcile their accounts, track checks, budget household and personal expenditures and communicate electronically with other users. Some pilot programs allow customers to buy traveler's checks, open new accounts, set up future payments as far as twelve months in advance and obtain current rates on certificates of deposit as well as forecasts from the bank's economists.
Just two months after Chemical began marketing its Pronto home banking system, for which it spent a reported $20 million in development costs, 500 people in the New York area signed on as users (with 2,500 customers projected in its first year). With agreements with some 200 banks in California, Connecticut, Pennsylvania, Michigan and Arkansas, Chemical is among the first to make the service available on a large scale. In order to garner as large a share as possible of the home computer user's on-line time, other computer functions, including teleshopping, portfolio analysis and information retrieval, are also being offered.
Citibank has made the Dow Jones News/Retrieval Service part of its $10 monthly package. Customers feel the service is well worth the cost, having previously paid $160 a month for subscriptions to the financial news service.
At-home shopping and information dissemination, a far cry from traditional bank services, are as yet unavailable due to the ongoing deregulation of commercial banking. In fact, deregulation is proceeding so rapidly that some federal regulators are calling for a temporary halt to assess the implications. Now much more than a place for one's money to reside, banks are becoming one-stop financial department stores; if these banking pilots succeed, they will also become providers of information as well as electronic order centers for merchandise.
While home banking services are being developed, another phenomenon is taking form at brokerage houses. E. F. Hutton, Merrill Lynch, Shearson/American Express and Dean Witter Reynolds have been developing complete home computer financial services. E. F. Hutton was first out of the gate with Huttonline, inaugurated in September 1983 as part of the experimental Viewtron Videotext service. Huttonline is also available to other home computer users through the CompuServe data network, which reaches 300 cities. For an initial $25 sign-up fee and $17 per month, the user can access personal account information including portfolio positions, cash and margin balances, open orders, asset management and asset reserve.
The Viewtron service on which Huttonline is an option is a joint venture of Knight-Ridder newspapers and AT&T. Other videotext services are being developed by such companies as CBS (in partnership with American Bell), KEYCOM (a joint venture of Honeywell, Field Enterprises and Centel Corp.) and Times Mirror Corp. (together with Videotext America). Videotext is a two-way text and graphics service providing a variety of computerized data bases accessed over phone lines by a personal computer or via a separate coaxial cable by a terminal that attaches to the TV set. Surveys among pilot users of the Times Mirror videotext service indicate that home banking is one of the most popular offerings on the menu.
In Your Future?
Some analysts are convinced that home banking can be a viable business only on a stand-alone basis, integrated into a full-menu videotext service like Viewtron. Others say only time will determine the extent of consumer acceptance of home banking, either as an incremental offering or as part of a full-service videotext package. As of this writing, all predictions are highly speculative since neither type of service has been put on a commercial basis.
No matter how many services are attached to systems offered by banks and videotext providers, the future of home banking depends on factors beyond the control of either. Truly user-friendly software must be developed, home computer penetration must increase significantly and adequate transmission links (phone lines or cable) must be in place.
Home banking's true test will be consumer acceptance or rejection, and not every pilot user has had a positive reaction. One New York writer dropped out of a home banking pilot after just six months. He found it impossible, he reports, to transfer funds to his son's account at the same bank. Moreover, he was receiving dunning letters from his creditors.
Even when all the bugs are out, will home banking reach the mass-market proportions predicted for it? Given the increasing sophistication of personal financial management by people in all walks of life, it looks like you just might be able to bank on it.
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