Now that recently completed mergers have ushered in interstate banking to the Washington area, consumers have reason to expect changes that go beyond reorganizations of banking institutions and access to more loanable funds.

Consumers have been told, after all, that interstate banking will increase competition which, in turn, will lead to better rates on products and services that banks offer.

Interstate mergers in the region and the entry of money-center banking giants into the Washington-Baltimore market will, in time, test the validity of that rationale.

It's possible that, as more players enter the market, financial institutions could become engaged in a highly competitive savings-rate war. Realistically, however, consumers should not expect to gain a bonanza from long-term pricing strategies employed by banks to win their loyalty.

The likely scenario is that some banks will aggressively go after consumer business initially by offering extremely attractive rates to borrowers and savers. Pressure will be strong for competitors to follow suit. According to conventional wisdom, however, pricing gimmicks and competitive pressures eventually will give way to bankers' concern for higher profit margins.

The larger question for bankers, then, is how they maintain customer loyalty and, indeed, an acceptable share of a market crowded by more competitors.

A survey commissioned last year by the industry's leading publication, The American Banker, found that consumers don't expect better prices on deposits as a result of interstate banking, even though they anticipate better and more services. Realistically, then, bankers in the area will have to fight the competitive wars on a front much broader than savings rates.

The findings of a Washington financial consultant are instructive for what they say about the needs of consumers and what they imply about how those needs ought to be addressed. A "winning position" for providers of financial services requires that they pay attention to the "basics of customer service; to meeting rational and psychological customer needs," says Edward E. Furash.

Furash's observations on customer needs formed the basis of an address -- "Consumer Perspectives on Financial Services" -- to members of a marketing association meeting in Washington last year. For regional bankers faced with competing in a new banking environment, Furash's remarks qualify as a guide to maintaining the competitive edge.

Consumers have several fundamental needs that providers of financial services must address, according to the president of Furash & Co. Among them, he noted, are: security and some degree of confidence; information, or knowledge of alternatives and their implications; convenience; respect; dignity and privacy.

"Financial services firms, especially depository institutions, are going to have to begin providing more savings, investment and credit options for consumers, along with information and advice on how and when to use them, and the relative risks of each," Furash asserted.

Good information and guidance "can create substantial perceived value for consumers," he added. Furash emphasized that value "is not just high rates on deposits or low rates on loans. Rather, [consumers'] perceptions of value are shaped by a number of factors, including service level and consistency, convenience, information, image, expertise, etc."

Consumers need dignity, privacy and respect, but most financial services institutions "lavish respect and attention on their best (and usually richest) customers," according to Furash. Consumers increasingly are complaining about the impersonal way they are treated, he noted.

A great many institutions "are totally insensitive to the need for privacy," and are unwilling, for example, to invest in private offices or dividers for use by loan officers or personal service representatives, he added. As a result of poor services and insensitivity to customers' need to be treated with dignity and respect, "Consumers are becoming less tolerant of depersonalization . . . of not getting respect and recognition as individuals," Furash continued.

"Often those whose job it is to streamline financial services forget that it is the details -- the little things that touch and affect your customer's psyche and mood -- that make or break you."

Fighting the rate war may be a key to survival, but it will take more, Furash's remarks imply. Depository institutions can charge a higher price and earn a better return, he suggested, by creating "perceived value added, through service, packaging, ease of doing business, and making your institution psychologically special to the consumer."

Take note, regional bankers. The process, as Furash emphasized, is called merchandising.