Armchair Banking and Investing

By Stephen Koepp

Financial institutions rush to provide home services

The ad was a grabber: "Futuristic way of living arrives in South Florida... Bank at midnight from your living room." When Physician Alfred Damus of Coral Gables, Fla., ran across the announcement one day last week in the morning paper, his imagination went to work. With a system called Viewtron, the doctor and his wife Leatrice could monitor their bank accounts, pay bills, keep track of their stock portfolio and perform other financial tasks simply by tapping the buttons on a notebook-size keyboard. Later that morning his wife spent $600 for the Viewtron machine being advertised at a nearby Burdines department store.

Seven years and $26 million in the making, Viewtron made its debut in southeastern Florida last week as the first two-way home information system available in the U.S. The Knight-Ridder newspaper chain, operator of Viewtron, plans to introduce the system within about two years in 17 cities, including Boston, Detroit and Seattle. One of Viewtron's starring attractions, banking at home, presages a revolution in consumer finance. A sci-fi concept only five years ago, home banking is now being introduced by institutions ranging from New York City's Chemical Bank (deposits: $29.8 billion) to Washington, D.C.'s Madison National ($178 million). The biggest firms in U.S. banking, New York's Citibank and San Francisco's Bank of America, are also testing such programs.

A survey of major banks by the Direct Marketing Association showed that one-third plan to offer the service by 1990. William Wyman, who directed a study of home information systems for the consulting firm Booz Allen & Hamilton, estimates that in 1995, the home banking industry will have revenues of as much as $2.6 billion. Bankers plan to market the home tellers as a way for average depositors to liberate themselves from such hassles as long lobby lines and 3 p.m. closing times.

Chemical Bank last month began advertising its new Pronto system. With a TV set, an Atari 400 home computer (cost: about $60) and a modem ($75) to connect the terminal via a telephone line to the bank's computers, Pronto will do nearly every banking chore except dispense cash. Patrons can check their balances 24 hours a day, transfer money from one account to another, keep records on five separate budgets for such expenses as travel or household bills, and pay bills to about 350 companies ranging from Bloomingdale's to American Express. If the customers have any questions, they can send messages to Chemical staffers, who will answer the question within a day. The monthly service charge: $12.

Bankers believe that financial services will eventually be part of futuristic home information packages like Viewtron that supply everything from recipes to movie reviews. Therefore they are scrambling to organize joint ventures with communications firms. Four aggressive regional banks, Florida's Southeast, Ohio's Bane One, North Carolina's Wachovia and California's Security Pacific, have banded together to develop the financial services for Viewtron. Next spring some 20 institutions, including Milwaukee's First Wisconsin National Bank and Seattle's Peoples Bank, will team up with Automatic Data Processing and the Times Mirror communications firm to test-market Home Banking Interchange, a similar service, in 2,000 households across the U.S. and Canada.

Stock market trading, perhaps the ultimate video game for grownups, is now also available at home. In July clients of

CD. Anderson & Co., a small San Francisco discount brokerage firm, began using home computers to place stock trade orders. Tapping a few keystrokes on an Apple II or IBM Personal Computer, the customer is asked, "Buy or sell? Number of shares? Cash or margin account?" The broker charges an initial $195 for the software, a 100-to-400-per-minute connection fee and a brokerage commission. Anderson has 300 customers across the U.S. and hopes for 1,000 by year's end.

Such full-service securities companies as Merrill Lynch and E.E Hutton currently do not offer home trading services, fearing the technological short cut would eliminate their brokers' contact with customers. But banks, which are moving rapidly into discount brokerage, are eager to get the business. Washington's Madison National plans to offer stock trades on its Home Teller machines beginning in January.

Despite the convenience, home banking is still running into some serious customer resistance. Many consumers seem reluctant to buy the machines to hook up to the central computer systems unless they can find other uses for them. Viewtron's Sceptre terminal, for example, is available during the Florida introduction for $600 but later will cost $900. For the same money, customers can buy a home computer that can do more complex tasks like word processing. Moreover, after the initial expense, Viewtron customers pay a basic fee of $12 a month plus a $1-an-hour charge to the phone company. Some users may also find it necessary to spend $15 a month or more for a second telephone line so that they can receive calls while using the machines. A monthly bank-at-home bill can easily run up to $30.

Nonetheless, many experts believe the new technology will be successful because it will be such a boon for middle-class consumers who have neither the time for banking errands nor the luxury of a personal accountant. Said George Kagan, a Miami lawyer, after seeing a Viewtron demonstration last week: "This intrigues me. I can see in five years looking back and saying, 'How did we do without this?'" If enough consumers agree with Kagan, the table-top teller could become the hottest home appliance since the Cuisinart. --By Stephen Koepp. Reported by Marilyn Alva/Miami and Frederick Ungeheuer/New York

With reporting by Marilyn Alva, Frederick Ungeheuer This file is automatically generated by a robot program, so viewer discretion is required.