Bank industry 'techies' develop branch-free future; move to on-line banking similar to earlier ATM trend.

High-tech gurus of the banking world are spending a lot of time these days dreaming up the bank of the future. And it is not a cleaner, brighter, more-modern version of the bank branch customers go to now. If things go as some techies predict, the bank branch of the future will likely be customers' own living rooms.

Automated teller machines were only the first step in creating a branch-free banking future. What many bank customers are not aware of is that the other half of the future, banking from home over the phone or via a personal computer modem, is here. It is not widely available, but many big names in banking and in computer software are betting that it won't be too long before most bank customers head home, rather to the local branch, to take care of their banking needs.

Though going "on-line" to conduct banking business is still a lesser-known option, bankers say the same factors that pushed banks to put in ATMs is now pushing them to go "on-line."

Customer service has increasingly become a concern to banks in their struggle to maintain market share. And the name of the game is meeting customers' demands in the most convenient ways and at the times customers deem most convenient.

In fast-paced California, banks are leading the way in providing electronic banking options that include banking by phone and "home banking." What is driving the technological innovation, according to T. Christian Armstrong, First Interstate Bank of California's senior vice president of marketing, is the customers' needs. "Customers continue to show us what their needs are," said Armstrong. "They demand information and transaction capability at more times and in more places than we have given them in the past."

To that end, First Interstate has not extended the business hours of its branches or expanded the number of its branch locations. Rather, it has made more functions available through its automated teller machines and has made banking by phone a larger part of its operations.

Banking by phone, said Armstrong, provides First Interstate customers with access to account information from any place at any time. First Interstate used to receive, on average, 100,000 phone calls per day from customers seeking information about their accounts. When the automated interface was incorporated into the phone system, the number of calls was multiplied by a factor of five.

Via telephone lines, First Interstate customers can receive information about all their accounts, can transact fund transfers between accounts, and can get checks verified. Customers can also order over the phone a faxed account statement.

At present, First Interstate does not offer "home banking," an industry catch-phrase which refers to banking via personal computer. Armstrong is one of the skeptics about the viability of home banking. "No bank has successfully offered a home banking product," he said. At this point in time, he said, it does not make financial sense because there are not enough subscribers.

Wells Fargo Bank and Bank of America, two of the largest retail operations in the Los Angeles area, have been riding the information superhighway for some time now. And they say the ride has been smooth and prosperous so far.

One of the main reasons for that is the concentration of their efforts in California, the state which leads the nation in home computer users. While only 25 percent of all households in the United States own personal computers, 40 percent of all California households are plugged in, and that 40-percent figure continues to grow. The figure in California just three years ago was 25 percent, according to Carmen Castain, manager of Wells Fargo On-Line, a division dedicated to developing home banking.

In answer to the high-tech skeptics, Castain remarked that "they said the same thing about ATMs years ago."

Wells Fargo first went on-line with Prodigy in 1989. (Prodigy is an on-line service offering users access to a broad spectrum of information.) Now, the bank offers its own custom software to bank customers, enabling them to direct dial into Wells to perform a variety of transactions via personal computer. Castain commented that most Wells Fargo PC customers are not only satisfied, but addicted.

With the Wells Fargo software, customers can check account balances, check their statements, pay monthly bills and send electronic mail to their branch if there are problems with the account.

The strongest sign that home banking is the wave of the future is that "it generates loyal customers," said Mark Vogel, Bank of America's director of on-line consumer financial services. Not only is it true that more households have computers now than ever before, but a growing number of those computers are being set up with modems, said Vogel.

Vogel compared banking to doing laundry, saying: "It (banking) is something that you have to do and, if you have to do it, you want to do it in the most convenient way possible."

Banking executives are not the only ones who see opportunities for growth in the field of home banking. Software king Bill Gates has also recently thrown his hat into that ring -- and that has added fuel to the fire. In February of this year, Microsoft Corp. introduced its new "Money" program. The program is in a pilot phase, with Microsoft having signed agreements with three regional banks. But Microsoft plans to sign up more banks in the months and years to come.

According to Leslie Koch, general manager for personal finance products at Microsoft, Gates' crew at the company's headquarters in Redmond, Wash., envision a great future in providing home banking software products to consumers. "It is the beginning of a trend," she said. A convergence of factors explains why home banking is the wave of the future, according to Koch.

Many customers simply don't have time to visit branches any more, and consumers are becoming increasingly aware of the PC-driven options and are willing to subscribe.

For bankers, Koch pointed out, branch offices are expensive to run and many are focusing their efforts on turning customers on to new investment products, such as mutual funds.

The unique feature of the Microsoft package, however, is that it presents an integrated approach to financial planning. Bank customers can download their information from the bank and manipulate it. For example, the program categorizes expenses, enabling customers to get a handle on how much they spend on clothing or travel.

It may also level the playing field for home banking. Several large banks have moved into home banking, but the start-up costs associated with buying or developing home-banking software have been prohibitive for some smaller institutions.

Although no California banks are part of the pilot phase of Microsoft Money, Koch said Microsoft expects to sign on some "very large California banks within the year."