Last September, Thomas M. Bass ushered in the age of electronic nationwide banking when he inserted a plastic card in a robot teller machine in a Clifton, N.J., parking lot. Within 12 seconds the machine spat out $20 in cash, withdrawn from his account at Old National Bank a continent away in Spokane, Wash.
Shoppers at Kroger Co.'s Hartwell Supermarket in Cincinnati no longer need to carry cash or checks. Instead, they can use their plastic bank cards to pay for groceries at a point-of-sale checkout terminal that instantaneously transfers funds from their bank accounts to Kroger's.
In New York City, some Chemical Bank customers don't have to leave their homes to go to the bank. Using home computer terminals, they can dial up their accounts directly and pay bills or switch funds from checking to savings accounts.
A technological revolution is sweeping the once hidebound banking industry. At many institutions, "bankers hours" is a term of the past.
From California to Coney Island banks are learning to harness the computer, the plastic card, and electronic communications to give retail customers the ability to deal with their banks whenever and, often, wherever they choose.
Banks are rediscovering the consumer and offering increased convenience and exotic services. Had Buck Rogers been a banker, the comic books of the 1940s might well have foreshadowed the often startling new developments in the electronic banking of the 1980s.
Automated teller machines, rare in all but a few urban areas only five years ago, are becoming as common as mailboxes in many cities. The 32,000 machines in place represent a four-fold increase since 1977 and they are growing by 25 percent a year, according to the American Bankers Association.
In a few years, nearly all teller machines will be joined together in vast networks.
By the 1990s, if the futurists are right, electronic cash registers and supermarket scanner machines will be linked to bank computers across the country. And home banking will be the norm for a large number of customers. John Russell, director of marketing at Ohio's Bank One, sees the day when a $50 home computer will display a customer's account on his television screen.
As usually happens with technology, newer versions of machines are not only more reliable and versatile, they are cheaper. It happened with the pocket calculator and it is happening with the automatic teller machine. A robot teller that cost $40,000 in 1973 costs $14,000 today.
Banks have discovered robot tellers do the job more efficiently than human tellers, although terminals so far have not supplanted many of the 250,000 human bank tellers. Bankers hope that eventually they will not only need to hire fewer tellers but can close some expensive branches.
James Rogers, executive vice president of American Security Bank, estimates that 60 percent or more of all bank transactions today can be handled by machines.
John G. McCoy--vice chairman of Banc One Corp., which owns Ohio's Bank One--said his bank closed branches for the first time in 40 years last year. The bank also is substituting inexpensive 90-square-foot kiosks--with limited human teller service and 24-hour robot teller service--for some existing branches.
Teller machines no longer will be bound to bank branches. Already they are popping up in gas stations, supermarkets and even furniture stores. By next October, 93 local Safeway Stores will have automatic teller machines that can be used by customers of 22 area banks that are part of the Network Exchange. Officials at Baltimore's Crown Central Petroleum see the bank teller machine as the centerpiece of the gas station of the future--which also will sell groceries and other services. Bank of Virginia plans to put machines at five Crown Central stations.
Regional shared automatic teller machine networks like the Network Exchange soon will be common. These networks permit customers of one bank to use the machines of other banks or independent teller machines owned by no specific bank.
Besides Network Exchange, there are three other shared networks in the Washington area. The Most system links American Security Bank, NS&T Bank, Columbia First Federal and Bank of Bethesda. About 90 other institutions are planning to join. Virginia National Bank and Riggs National Bank are partners in the Cash Flow system, with Mercantile National Bank of Maryland due to join.
The oldest network in the area, Money Exchange, is run by the First American Banks of Washington, Maryland and Virginia. Several hundred others are planned or in operation around the country.
Soon many banks will join nationwide teller networks--transcontinental versions of regional networks that many claim will make federal prohibitions against interstate banking obsolete. Bass inaugurated the first of these last September in that New Jersey parking lot. It is called Exchange and ties together 440 terminals in 22 states. Bass also is president of Exchange.
Several more nationwide networks are supposed to begin operations this year. Two of them, Cirrus and Plus, will be run by bankers. The two major bank credit card associations--Visa and MasterCard--are planning separate systems.
Initially, Visa and MasterCard tried to sell a service that any bank could join. But most bankers did not want to belong to a network that also admitted their major competitors. Both Visa and MasterCard now grant exclusive regional franchises like Cirrus and Plus.
Some bankers, like American Security's Rogers, think Visa and MasterCard's first approach is better--that any card holder should be able to communicate with his or her bank at any machine in the country. Some states, like Iowa, require such universal teller machines. Retailers, who want only one machine on their premises, will push banks into universal tellers, Rogers said.
Giant Food Inc., Safeway's big rival here, declines to put even shared network machines in its stores and instead is thinking of installing its own machines and letting all banks tie into them.
By 1993, according to Banc One Corp. vice chairman McCoy, home banking will be commonplace. With their home computers, consumers will call up their bank's computers--either over the telephone lines or television cables--and perform most routine banking transactions except getting cash.
Bankers and retailers hope customers will use their bank cards to pay their shopping bills on the spot, rather than using checks or credit cards. The retailer would run the card through a special machine and funds to cover the purchase would automatically be transferred from the customer's account to the retailer's.
Electronics promises to deliver banking services both more conveniently and less expensively. With the cost of deposits rising rapidly, control of other costs becomes paramount to bankers. The more services bankers can deliver electronically, the less paper they will have to process.
Paper--checks and credit card slips--is the expensive logjam in the banking system. Each of the 36 billion checks written each year costs between 30 cents and $2 to process. An electronic teller machine transaction can cost a quarter or less. A point-of-sale transaction may cost as little as 6 or 7 cents, according to Ned Harness, executive vice president of Cincinnati's Central Trust Co., Kroger's partner in the Hartwell store experiment. Already banks are moving to encourage use of teller machines, charging more for checks than for electronic tranfers.
Many banks are trying to persuade their customers that they don't need to receive their cancelled checks each month and can make do with an itemized monthly list.
Retailers have a similar motivation. According to William J. Sinkula, Kroger Co.'s chief financial officer, the chain cashed $10 billion worth of checks last year. Transactions done electronically not only will cut down on the supermarket's paper processing costs--Kroger may spend 50 cents to process a check--but also will reduce check fraud, which cost the entire grocery industry about $650 million last year.
A Texaco gasoline station owner in Springfield, Ill., is reducing cash and credit card transactions by using a point-of-sale terminal at the pumps. A motorist can pay for fuel by inserting a special bank card into the terminal and the amount of the purchase is immediately subtracted from the customer's bank account and transferred to the station owner's.
On its face, the bank card looks like the same thin plastic credit card that has been a staple of American life for years.
But when a strip of encoded magnetic tape--the same kind that plays music in cassette desks--is attached, the card becomes a ticket to the world of electronic funds transfer.
By inserting the card into an automatic teller machine, then typing in the proper indentification code, the cardholder can talk directly to a computer that controls his or her bank account.
The cardholder can ask for cash. The bank computer scans the customer's account, then tells the cash machine to dispense money or to refuse the transaction. The customer also can transfer funds from a savings account to a checking account. Or make a deposit. Or ask for an account balance.
The machines still can break down or run out of cash. But banks say that the machines' reliability is growing. Consumers who at first resisted the "new technology" now often say they prefer the convenience of the 24-hour robot teller.
There are 35 million bank teller cards in the United States. "Automatic teller machine usage exceeds that of credit cards," according to Karen Haskamp, a Kroger executive in charge of the chain's in-store banking experiments.
"Three or four years ago we were giving customers a free ticket for a hamburger or an ice cream cone to get customers to use automatic teller machines. We now have them in retirement communities," said Joseph J. Pinola, chairman of First Interstate Bank in Los Angeles.
The teller machines that are easily linked to a bank's main computer--usually by telephone lines--can just as easily be linked to a central computer that routes messages to the proper bank. Customers of one bank can use another bank's machine.
In much the same way, cash registers can be linked to banks, so that a customer at the "point of sale" can direct his bank to pay the retailer's bank for a purchase. John McGillicuddy, chairman of Manufacturers Hanover Trust Co., says point of sale is where banks and retailers stand to save the most money.
However, Kroger's Haskamp said, the consumer today realizes few benefits from "point of sale." Supermarkets take checks. Most department stores take credit cards. Not until checks become more expensive than electronic payments will consumers warm to "point-of-sale" experiments.
The allure of stay-at-home banking, however, is real, especially for computer buffs and the affluent. It may even become attractive to the average customer.
Chemical Bank senior vice president John Farnsworth notes that consumers now pay about 8 billion bills a year, most of them by check. Banks stand to save so much money if consumers pay their bills electronically that it might be worthwhile to give customers inexpensive home terminals.
Chemical Bank is testing a home banking service, called Pronto, for customers who own Atari personal computers. With a computer cartridge supplied by the bank, customers could bank at home at a cost of about $8 a month, Farnsworth predicts.
There are several dozen home banking experiments in operation today and a few are in commercial operation. Some operate over telephone lines; others through cable television connections.
Each is slightly different, but all permit customers to punch instructions into a home terminal and order transactions from their accounts. Confirmations and other responses are displayed on the terminal screen.
At California First Bank in San Diego, consumers can pay bills owed to any of 2,500 area merchants from home by telling the Cal First computer to transfer funds from their account to the merchant's. Consumers can transfer funds from their savings account to their checking account, or vice versa. They can see if a bill was paid or a deposit was credited. They can even get a loan.
Cal First's Charles Pederson said that in 20 years or so a consumer's bank account will serve as an electronic mailbox. Bills no longer will be sent home but to the depositor's attention at the bank.
Ohio's Bank One, which installed teller machines as long ago as 1972, last February joined with three other banks to launch a commercial home banking service called Videofinancial Services. Videofinancial is one of several offerings on Viewtron, a home computer service that is a joint venture of Knight-Ridder Newspapers Inc. and American Telephone and Telegraph Corp.'s American Bell subsidiary.
Many banks are holding off on home banking, fearing to take the lead or buy another bank's system until a technology is established as the industry norm.
McCoy, of Bank One, is not reticent. "We don't think home banking will be profitable until 1992 or 1993," he said. "But if you want to make money on it then, you've got to spend money on it now." NEXT: Revolution outpaces regulators.