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Money Daily: Tuesday, September 24, 1996

IBM, Bank Alliance May Speed Acceptance of Online
Banking

By Lloyd Chrein

If one muscle-bound company is what it will take to turn online banking into
a household word, then the recently- formed Integrion Financial Network, a
conglomeration of IBM and 15 heavy-hitting U.S. and Canadian banks, may have
the right formula, say analysts. In many ways Integrion appears a natural
fit: the meeting of a major data-processing player -- IBM -- and
institutions that will potentially need a lot of online data processed --
banks.

The new company, a separate entity with its own CEO and board of directors,
will offer the means for consumers to connect to their banks (via the IBM
Global Network, the Internet or commercial online services) and will partner
with developers of the necessary online banking software. It is expected to
begin operating in early 1997.

"If they can use the clout of all these big banks, plus IBM, to decrease the
cost of providing online banking and ultimately lower costs and improve
service for consumers, then they're going to coax more consumers into online
banking," says Karen Epper, an analyst with Forrester Research. "The
question is whether this big ship can move quickly enough to keep up with
the changes in the online world and stay in the race." As things stand now,
it seems like there is a lot of ground to be made up. A recent study by the
San Francisco-based Odyssey L.P. found that just a handful of American
households use the 'Net for banking -- just 1% of the 14% of U.S. households
with access to an online service.

"Online banking is confined to a small minority of a small minority," said
Nicholas Donatiello president of Odyssey. "But I think it has the potential
to be bigger."

Members of Integrion, however, took issue with the Odyssey report. "Those
numbers don't seem right," said David Fortney, in charge of access and
payment strategies for the Charlotte based NationsBank. "But we do agree
that there are not a lot of people banking online. We see that as a huge
opportunity. We think there is a lot of pent-up demand."

A Barnett Bank spokeswoman said that 25% of the bank's current customers use
the telephone for home banking, an indicator that online banking through
Integrion -- which should be more convenient -- will also be a hit. "We will
see an explosion in this area," she predicted. The problem with online
banking as it exists now, say Integrion members, is that each bank offers
different levels of service, uses different software, and has to bear the
full cost of designing and managing its online system. With Integrion, they
note, banks will be able to take advantage of economies of scale, ultimately
offering consumers a wider choice of software programs and means of
accessing their accounts than if they went it alone.

"What we hope to do is speed the pace at which electronic banking services
will reach the consumer," says Chuck Hieronymi, senior vice president of
marketing at NationsBank. "We also hope to speed the rate at which banks
will adopt online banking. We hope to attract as many banks to join as
possible."

The company intends to eventually allow consumers to use most of the major
personal finance software, including Microsoft Money and Intuit's Quicken,
as well as Internet browsers like Netscape Navigator and Microsoft Explorer
and online services Prodigy, America Online and CompuServe. While Integrion
hasn't formed any alliances with developers or online services so far,
potential partners are warm to the concept. "We fully expect our products
and technology will be a part of this," says Matt Cone, business development
manager for Microsoft, who notes that there are also potential uses for
Windows NT and BackOffice.

To attract all the major players under one roof, Integrion needs to be big.
And it is: the 15 member banks comprise over half the retail banking
population in North America -- more than 60 million households. Member banks
are: ABN AMRO, BANC ONE, Bank of America, Barnett Bank, Comerica, First Bank
Systems, First Chicago NBD, Fleet Financial Group, KeyCorp , Mellon Bank,
Michigan National Bank, NationsBank, PNC Bank, Royal Bank of Canada, and
Washington Mutual, Inc. Of course, there is competition, mainly from data
processing companies such as CheckFree and Visa Interactive -- IBM will
perform their functions for Integrion member banks. Yet according to Epper,
even the competitors are potential partners in cyberspace.

"CheckFree will compete for the same bill payment system contracts as
Integrion, but it will also work with Integrion to support bill payment
systems," says Epper. "In the online world, companies that are competitors
are also working together. That has been the paradigm for a long time."

To have any effect on improving online banking's numbers, Integrion will
have to stay on the cutting edge, reacting quickly to rapid changes in
security, authentication and other technological advancements. Hieronymi
claims that the company will be able to make quick decisions and won't be
weighed down by the girth of its many members.

But Epper has her doubts. "This company has been speculated about for two
years and in serious discussion for the past year," she says. "At the rate
at which online banking is moving, if they take that long to make decisions
they are likely to lose a real advantage. As it is, they're already a little
late to the party."

For more Web-formation, visit:

http://www.checkfree.comfor CheckFree

http://www.forrester.com for Forrester Research

http://www.ibm.com for IBM

http://www.intuit.com for Intuit

http://www.nationsbank.com for NationsBank



Computerworld: September 23, 1996

Can Banks Survive the Online Onslaught?

By Ralph Soucie

Recently, Hugh McColl, chairman of NationsBank, admitted to The Wall Street
Journal that he is scared of what technology might do to his business. That
isn't something you'd expect from the architect of a $ 192 billion banking
powerhouse. Clearly, though, trouble lies ahead for banks. The endgame of
the recent bank merger wave looks pretty bleak. Eventually, some eight to 12
banking behemoths will blanket the country. These giants will look, act and
smell the same to consumers. Absent some sort of blockbuster development,
the entire industry seems headed for the same fate suffered recently by the
large retailers.

But that blockbuster development is inevitable, and it surely will be driven
by information technology. Technology at least the leading-edge stuff that
creates monster opportunities isn't most banking executives' major
stock-in-trade, so they don't even know where their future competitors are
going to come from.

To be sure, banks are trying some new tricks as they scrounge for growth.
Some, for instance, are using automated teller machines to dispense coupons
and sell event tickets. Not a bad idea, but it still doesn't solve the core
problem. Electronic home banking software seems a better fit, but so far, it
has generated me-too products and little profit.

Meanwhile, bankers' favorite retail customers cash-rich individuals with low
transaction activity are a threatened species. Taking money from these
customers and lending it to free-spending Baby Boomers is really the heart
of retail banking nowadays. But families who inherit such liquid assets from
their parents are likely to apply much of this loot to debt reduction.

The problem is that consumers don't perceive high value in generic banking
services, and with good reason. As surely as you're reading this, within a
generation we'll be carrying our financial assets around on some form of
smart card. You'll deal with your depository bank much as you interact with
the bank that issues your credit card.

But the irony is that all this doesn't have to be the death knell for the
banking industry. Banking executives simply need to worry less about
high-tech rivals and more about the value they add to customer services.

Take the lowly bank statement, for example. What if a bank offered small
businesses the option of receiving their bank statements in electronic form,
say, as an Excel spreadsheet file? Why not provide a listing of canceled
checks for the entire fiscal year? The owner could then take this disk file,
along with his check register, to his accountant. The accountant would then
add data such as payee name and the date the check was written.

For a small business that writes 100 checks per month, this could save a few
hundred dollars in fees. That's a bank service that packs a punch, yet the
incremental cost to the bank of providing the service would be very small.

Numerous variations are possible. For instance, nonbusiness bank customers
might find it useful to flag tax-deductible payments by putting an X in a
box when they write the check. The bank can then provide a year-end listing
of tax deductions a great headache-buster at tax time.

It doesn't take advanced technology to deliver services such as these. What
it takes is customer-oriented thinking, combined with simple awareness of
how technology can support a new value proposition.

So, while bankers should heed Andy Grove's "paranoia is good" message, they
should worry less about technology threats and more about an industry
culture that's rooted in an assumption of entitlement.


Money Daily: Thursday, September 19, 1996

Privacy Storm Shows the Best and Worst of the 'Net

By Michael Brush

The flap over a new service from Lexis-Nexis is probably misguided, but
raises interesting questions about privacy and the power of online
communication.

An online brouhaha that broke out this week over alleged privacy breaches
caused by a new Lexis-Nexis product has put both the best and worst of the
'Net community in high profile.

The Dayton, Ohio-based online database company has been swamped with phone
calls and faxes this week because of a flurry of e-mails and news-group
postings warning readers of the allegedly dire consequences of its new
product called P- TRAK. Many of the warnings falsely claim that P-TRAK
provides a wide range of potentially sensitive personal information ranging
from social security numbers to medical and credit histories.

On the bright side, the controversy shows the huge power of the 'Net when
used by public-spirited advocates to mobilize a response to a perceived
danger -- in this case, a threat to privacy. On the dark side, the fact that
many of the allegations in the electronic correspondence are plain wrong
shows how easy it is to spread misinformation and, potentially, raise what
could amount to an online lynch mob.

At issue is a product launched last June which provides Nexis-Lexis clients
with basic public information about anyone in a 300 million-name database.
The information available is culled from credit bureau records. It is
limited to your name, your maiden name or alias (if any), your current and
two most recent past addresses, the month and year of your birth, and your
phone number -- though not all of that information is available on every
person.

For nine days after the product was released last June 2, P- TRAK also
included your social security number. But the SSNs were pulled on June 11
because of complaints, says Lexis- Nexis spokesman Steve Edwards. If you
already know someone's social security number, though, you can search for
him or her using that number.

P-TRAK is meant to help attorneys track down witnesses, heirs or parents who
have stopped paying child support, says Edwards.

While the scope of P-TRAK is relatively limited compared to, say, credit
reports, which carry news of your payment history, bankruptcies and other
such sensitive material, it nonetheless sparked the ire of many 'Net users.

For example, one posting that was later widely circulated this week claimed
that your social security number, "mother's maiden name, birth date and
other personal information are now available to anyone with a credit card."
It postulated that the information could allow someone to commit credit card
fraud or use your identity.

The truth is somewhat tamer. The SSN and mother's maiden name are not
included, for example, and the database is available only to clients like
law firms and news organizations that can afford Lexis-Nexis's relatively
hefty fees.

Furthermore, Money Daily's spot check shows that the information available
is spotty at best. A search of P-TRAK run on our behalf by the Time Inc.
Research Center turned up the right addresses but no phone or birth date for
this author. It got the addresses and birth year correct for Money Daily
editor Kevin McKean, but had an obsolete phone number. And when confronted
with relatively more common names of two other Money Online staffers -- tech
director Wilson Smith and reporter Joseph "Tripp" Reynolds -- turned up
dozens of people, none of whom proved to be the correct ones.

Those limitations notwithstanding, the roar on the 'Net was heard at
Lexis-Nexis headquarters. "We have been deluged with people calling, writing
and faxing," says Edwards.

"People are asking us: 'Why are you putting my medical records, my mother's
maiden name, and my credit card history out there?' This has been testing
the limits of our customer service."

In response, Lexis-Nexis posted a statement on its home page to correct
false information about the product and also a form you can use to remove
your name from the list, something the company says people could have done
all along by calling. By next Monday, Edwards says the firm will also have
an 800 number that callers can use. People who phone the company's current
800 number are told to fax name-removal requests to 513-865-1930.

The company has stopped short of posting responses in news groups or
bulletin boards, though. "There are different schools of thought on that,"
says Edwards. "One says that you should never respond to news groups from a
company standpoint because that increases the amount of flaming. But at this
point, I don't know how much worse it could get."

In the company's place, other news group participants have stepped in to set
the record straight. "I think you owe a post to correct this error," one
such correspondent scolded in a reply that pointed out several errors in the
message quoted above.

Ironically, the information available in P-TRAK is mild compared to what is
available elsewhere in the vast Lexis- Nexis database.

A related product, called P-FIND, for example, offers additional household
information like the appraised value of a home in many states and the number
of dependents (both of which are public information). The main Nexis
database digs up information from news stories -- often from local papers --
published around the world and in several different languages. Many of those
stories, of course, contain information of arrests and charges that may
later prove groundless, as well as a volume of personal information about
the people cited in the articles. And the legal Lexis service contains not
only details from civil and criminal court cases around the nation, but also
other potentially sensitive information, such as tax liens and judgments
against individuals.

Before you get your hackles up over invasion of privacy, though, consider
that all of the above is public information -- and, of course, much of it is
potentially more sensitive than your previous address.

For more Web-formation, visit:

Lexis-Nexis (http://www.lexis-nexis.com )

Lexis-Nexis statement ( http://www.lexis-nexis.com/lncc/p-trak/index.html)

Form to remove your name from the Lexis-Nexus database
(http://www.lexis-nexis.com/lncc/about/ptrak.html)


Reuters: Friday, September 20, 1996

Summers: Electronic Cash Won't Affect Economy Much

The advent of electronic money is not expected to have any major
macroeconomic effect in the medium term, U.S. Deputy Treasury Secretary
Lawrence Summers said on Friday.

"I do not anticipate in the near and medium term significant macro-economic
effects," Summers told reporters following a speech to a conference on
electronic money sponsored by the Treasury Department.

Some analysts have speculated that the Federal Reserve's ability to conduct
monetary policy may be undermined by the issuance of electronic money over
the Internet or elsewhere.

Others have suggested that the Fed and Treasury could lose profits from
seigniorage -- the income earned by currency issuers because currency pays
no interest to holders.

Summers though played down both those concerns. He noted that much U.S.
currency is held abroad and said electronic money is unlikely to substitute
for that anytime soon.

As for monetary policy, it already works indirectly through open market
operations, he noted.

"As we move from credit cards to debit cards to stored value cards, I think
the Fed will continue to have the ability, by operating in the government
securities market, to have a substantial influence on the level of interest
rates," Summers said.

He saw macroeconomic benefits to be gained from the advent of electronic
money and stored value. If, like credit cards, they make it easier for
consumers to purchase goods during economic downturns, then they can act as
a stabilizing force on consumption.

"To the extent that these technologies and the Internet make markets more
competitive, they will tend to ... be a force against inflation," he added.


Reuters: Wednesday, September 18, 1996

Germany to Let Only Banks Issue E-Cash

By Catherine O'Mahony

Bundesbank council member Franz-Christoph Zeitler on Wednesday welcomed
government plans to give only banks the right to issue pre-paid cards or
so-called electronic purses.

Stressing the German central bank's concern about electronic money, he said
banks were the safest guardians of electronic cash systems since they had to
meet legally-imposed liquidity restrictions and had long experience of
cashless payments.

Zeitler said in a statement that electronic money innovations were
fundamentally positive as a way to speed up transfers. But "it is also
important that the security of payment transfers and currency stability do
not get left behind," he added.

Electronic purses are plastic cards with an inbuilt micro-chip which stores
the electronic cash value of users' accounts and can be reloaded at special
machines.

The proposal to restrict such projects to banks is part of a new German
banking law which is still under preparation but which is expected to be
enforced in 1997.

Zeitler said issuers of electronic cash had to be extremely reliable because
a sudden collapse of an electronic cash system, due to forgery or technical
failure, could have "significant negative" consequences for the economy.

While electronic purses, also known as smart cards, are not yet available in
cash-dominated Germany, tests are being run on several projects. Current
projects being tested in the Munich region include a card to pay for
telephone calls and local train tickets and another with broader
application, which can be used for small purchases up to 50 marks ($ 33.03).

Worldwide, the most prominent electronic purse project is Mondex which was
developed in Britain by National Westminster Bank and is on trial in the
town of Swindon.

Zeitler said it was likely that Bonn would also restrict the rights to
create and maintain of Internet-based electronic cash systems to the banking
industry.

Internet banking is slowly gaining credence in Germany. Bavaria's Bayerische
Hypotheken und Wechsel Bank recently launched a securities account
accessible via the Internet.

($ 1=1.5138 Mark)


American Banker: Thursday, September 19, 1996

Seeking Security, Banks Turn to Internet Certification

By DREW CLARK

On the Internet, no one can tell if you're a dog.

This line, from a New Yorker cartoon, belies a serious problem for banks and
merchants setting up sites on the World Wide Web: There is no widely
accepted method for authenticating the claims -- or the identity -- of those
conducting business on-line.

To help solve this problem, two companies have begun certifying businesses
by granting them "seals of approval" on the Web.

"There needs to be some way that consumers can easily recognize when a site
is secure and when it is not secure," said Michael S. Karlin, president of
the Security First Network Bank. "Consumers are afraid, even in an
FDIC-approved banking situation, and they want the feeling that it is
secure."

One of the first systems to offer authentication for commercial sites on the
World Wide Web is TrueSite, developed by Application Programming and
Development Inc. of Camp Springs, Md.

BankAmerica Corp., Mellon Bank Corp., and First Bank System Inc. are among
30 financial institutions and 2,000 businesses whose Web sites have been
certified.

Though the Web provides businesses with a flexible, highly visible medium
for presenting their message, on-line business has its drawbacks. A Web site
user can download the entire contents of a Web page, alter it, and establish
a dummy site at a new location.

TrueSite guards against such occurrences by letting certified banks and
businesses put a blue check mark symbol on their home pages for an annual
fee of $495, which has been waived for six months. Users clicking on the
logo will be warned if it has been fraudulently copied.

"A user won't have to ask, 'Did I get to the correct site in the first
place?,'" said Mark Burnett, president of Application Programming, which has
annual revenues of $2 million.

"Whether consumers feel comfortable engaging in transactions on the Internet
is a function of how they feel," added Jack Rogers, president of the
Fairfax, Va.-based American Finance & Investment Corp. "Their perception is
as important as reality."

Another certification was launched in July by the National Computer Security
Association in Carlisle, Pa.

The association requires that certified companies protect their Web sites
against Internet attacks by using data encryption, by maintaining detailed
logs, and by establishing firewalls within the computers that host Web
sites.

"You better have some confidence that a hacker doesn't have access to
checking accounts," said Kevin J. Stevens, a product manager at the for-
profit association, which has annual revenues of $5 million. "If banks don't
take the steps to be certified and give their market some indication that
they have instituted a security program, no public relations is going to
resolve only one slip-up."

So far six companies have each paid upwards of $8,500 for a detailed on-
site audit before getting the association's stamp of approval. Mr. Stevens
declined to identify them, but said they include one of the big three auto
companies.

"This is a great first step. What the NCSA has done is to put the bar up,"
said Security First's Mr. Karlin. He anticipates that the virtual bank will
be certified within two months and hopes that the association will
eventually introduce a system with several passing grades.

America Online Inc. and the Better Business Bureau are also getting into the
certification business.

In conjunction with America Online's move to the New York Stock Exchange
from Nasdaq, its top officials reemphasized the features of the largest
on-line service and announced 10 new criteria that merchants will be
required to meet.

The standards include processing orders and responding to E-mails within one
day of receipt and giving on-line customers equal priority with telephone
customers.

"AOL members will come to know and have confidence in people who display the
seal of approval," said Michael J. Minigan, the service's vice president of
interactive marketing. "It is our hope that at some point, merchants doing
business on the Web would want to have the AOL seal on their Web sites."

Officials at the Better Business Bureau promote self-regulation and full
disclosure of company complaints to fill cues missing from on-line commerce.

"For $30 a month, a business can design a fabulous Web page that can lead a
consumer to think they are a Fortune 500 company," said spokeswoman Holly
Cheriko. "The consumer is left without the cues in the traditional
marketplace like being able to visit, talk to the sales clerk, and view the
quality of the marketplace. They need a trusted means to determine which
businesses are reliable and what commitment they have made to the consumer."

---

<a href="mailto:dlv@bwalk.dm.com">Dr.Dimitri Vulis KOTM</a>
Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps