How would you like to be able to pay bills, get your balances on savings and checking as well as on mortgage and credit card accounts, stop checks, transfer funds between accounts, track deposits, learn the latest interest rates and even order presigned travelers checks -- all from your home?
This is the pitch being offered by proponents of electronic home banking. They are banks, systems operators and terminal manufacturers, all part of the legion of companies engaged in the home computer revolution. There are some 83 experiments under way -- about half in the United States -- involving an investment of $250 million.
Sales of home computers amounted to $120 million last year. By 1985 they will amount to $475 million annually, according to Future Computing Illustrated of Richardson, Tex.
Robert P. Cady, executive vice president of Electronic Banking Inc. in Atlanta, estimates there are between 600,000 and 800,000 home computers in this country. William H. Moore, senior vice president of Payments Systems, Inc. of Atlanta, projects that by 1985 there will be 8 million U.S. households using terminals.
Hardware, or equipment, will represent a $900 million market, and software, or services for terminals, will amount to a $3 billion to $5 billion industry. Strategic Inc. of San Jose, Calif., looks to the end of the decade when 45 million homes, with computers worth $19 billion, will be spending $16 billion annually for services.
This kind of fanfare accompanied the introduction of electronic home banking last fall. Banc One, which Time magazine called "perhaps the most advanced financial institution in the U.S.," wired 200 homes in Columbus, Ohio, to the 21st Century. United American Service Corp. of Tennessee wired twice as many and promised the service would be available nationwide in 1981.
Where is home banking today, nearly a year later?
Banc One's vice president and director of marketing John A. Russell discussed what happened in Columbus. "People got carried away by the 90-day experiment. Eighty percent said they'd be willing to pay up to $20 a month for the service. Yet we think if we could convince two-thirds of our customers to sign up by 1990, we'd be doing very well." He said it would take $2 million to develop the system properly, and "we won't do it for just a few people."
Banc One -- which pioneered the automated teller machine and convinced Bank of America it could act as a clearing house for a national credit card, and was involved in the creation of Merrill Lynch's Cash Management Account -- will spend the next 12 months developing software for its Channel 2001.
This program, the forerunner of a full-scale service, is scheduled to start within two years. To succeed, Russell added, an electronic banking system must be nationwide, accessible to all banks and tied into the Federal Reserve.
United American Service Corp., the holding company for United American Bank, is the first -- and so far only -- company in the country to offer home banking on a continuing basis. It reports that 350 terminals, manufactured by its partner, Tandy Corp., have been sold in Knoxville. Customers can buy the $650 machines from the bank on the installment plan. There is a $5 monthly service fee for bill paying and balance requests.
Moreover, the company says it plans to grant a dozen franchises in the next year in 10 top U.S. cities. The fee for a $1 billion financial institution will be $100,000.
Automatic Data Processing Inc. of Seattle has a two-year study of 5,000 consumers under way to determine what services they want and will be willing to pay for. Other experimenters listed by EFT Report include Southeast First National Bank of Miami, which participated in the Knight-Ridder Newspapers project, and Security Pacific National Bank in San Diego in conjunction with two other banks.
More recently, several major New York banks have entered the field experimentally. Starting in November, Chase Manhattan hopes to sell a home banking and bill-paying service to financial institutions nationwide. Chase's equipment, consisting of a telephone-type terminal with a display panel, will cost about $200. The monthly fee will be about $6.
Chemical Bank is testing software for use on its Pronto system, which can be operated over telephone or cable television lines, according to the American Banker. Manufacturers Hanover Trust Co. will participate in the San Diego pilot. Citibank appears to have the most ambitious project: development of its own portable terminal with a five-inch screen and a full keyboard. This terminal will even permit a person to order presigned Citicorp travelers checks (which are then sent out by mail).
After the ballyhoo surrounding the Columbus and Knoxville tests, the absence of publicity in New York -- indeed the reluctance on the part of some to give any details -- suggests, in Robert Cady's words, that home banking is still "very fledgling." Beside the inherent conservatism of banks that weighs against their jumping headlong into untried waters, the profit squeeze caused by high interest rates limits the amount of money they have to invest in research and development.
The technology of home banking is uncertain. There are two basic systems competing with each other. The first, which appears to have the edge now, combines a television set with an adapter linked to a keyboard and telephone lines. The second, which offers more potential, is cable television. The high price of home computers is another hindrance.
Technical feasibility aside, it remains for promoters to demonstrate to banks that electronic banking will be economical. Banks in turn must convince their customers that home banking can be to their benefit before it takes hold.
Moreover, banking will be in competition with other information services such as shopping, entertainment and education. PSI's study showed that of the 22 possible services that might be offered via a home terminal network, respondents ranked two financial services -- record-keeping and bill paying -- among their top five choices. Over half (54 percent) of what PSI calls "early adopters" indicated they would be willing to pay a $50 monthly fee for a complete package of services.
Despite these findings, the study concluded that the home computer will require a "substantial modification of the consumer's existing behavior and a lengthy adoption process." It cites such psychological obstacles as privacy, security and depersonalization.
Remembering the cool initial reception that greeted point-of-sale terminals, bill-payer services and even automated teller machines, Peter D. Louderback, the national practice director for Peat Marwick Mitchell's bank consulting division, predicts home banking will be slow to develop in the 1980s, although it will attract considerable attention.