INTERNET BANKING

On January 21, 1997, the Royal Bank Scotland announced that it had completed the technological fine-tuning and was now Britain's first fully-fledged Internet Bank (1). The announcement generated the suspected editorial comments that suggested that retail banking is dead, and that a brave new world of cyber transactions are the wave of the future. Is Internet Banking the trend to watch out for?

That's the leading question behind the banking industry's

top-to-bottom redesign of the entire retail operations of some of the world's largest banks, a concept some analysts are calling "Future Banks." This concept is a mix of all the elements believed necessary for banks to survive onslaughts from brokerage firms and mutual-fund houses and from industry consolidation and technology (2).

Most of these banks are developing aggressive, sales-oriented cultures and going after new customers with new banking channels. The Internet banking concept is the most visible of these channels, the most confusing, possibly the most profitable while at the same time possibly the most dangerous (3).

This paper will examine that potential danger by exploring: (a) the history of Internet Banking, (b) the banking industry's commitment to Internet Banking, (c) the technological implications, and (d) an analysis of the reasons that the technology is available, but will probably not be widely accepted or us

million. Electronic funds transfer or EFT, wherein an individual accesses the payment system by means of a debit card reader or a personal computer, basically brings the wiring of money down to the level of the retail transaction (26). Why banks love EFT is the simple fact that it makes wiring money much cheaper and therefore more profitable. The more a bank's customers use EFT, the less money that bank has to spend on clearing and recording checks, and the less money is wasted on bad checks. But most analysts see these and other technology changes as evolutionary rather than revolutionary, typically superficial rather than profound. The "behind the scenes deposit transfer" remains the same as it did in Genoa in 1200. A second form of digital money -- an alternative to the deposit-transfer method of payment -- has recently appeared on the horizon. Developments in cryptography are responsible for what is being called "digital currency." That works like this. Balance information is maintained in a secret, uncrackable coded string of digits, that are maintained by a bank and transferred to the account holder in the form of a "smart" plastic card with an imbedded microchip, or which can also be kept on a computer hard driv