Banking at home for fun and profit

The date is Oct. 15,2020. The time is 7 p.m. winston Smith, an energy exploration consultant living in Boulder, Colo., has just finished dinner. Since it is payday, he decides to do his banking.

He enters his study and takes a seat in front of his personal microcomputer. By dialing a special telephone number and entering his secret personal code, he links his computer to his personal banking files at First Interstate Bank, in Los Angeles.

First, Mr. Smith displays his checking account statement on the video screen. Once he is sure that all of his deposits (including today's pay) and withdrawals have been posted to his account, he prepares to pay bills. He makes payments to the Inter-Mountain Gas & Electric Company, two department stores, and several loan accounts and the date in the future when the bill is to be paid. He also notices that his insurance and computer rental payments will automatically post to his account the next day.

Now Mr. Smith tells the computer to balance the account. The computer indicates that he has $10,000 in excess balances free for investment. He tells the computer the amount he wishes to invest and for how long. Instantly, the computer responds with a display of investment alternatives available at various banks and brokers which fit his needs. He selects and purchases a four-month gold certificate offered by Interstate Bank. He has now completed his monthly banking in less than 20 minutes.

He and Mrs. Smith go out to a movie. They stop at a "Cash One" automated teller. The teller reads an electronic chip embedded in his plastic "Cash One" card, recognizes his voice, and gives him $100 in cash. At the movie, he uses the same card to purchase tickets and refreshments. The movie attendant uses a small computer to verify his voice and to authorize and complete the purchase.

The example is not a mundane excerpt from a science fiction novel; it illustrates how computer technology may change the way you and I use banking services in the future.

Banks have long realized that the revolution in computer technology creates opportunities to offer cheap, reliable, and convenient services to their customers. With labor costs rising at 15 percent per year and computer costs falling by at least 10 percent per year, it makes economic sense for banks to offer services directly to customers through computers.

During the early 1970s, glowing forecasts were made by bankers of a "checkless society," which would rapidly replace traditional banking methods. A decade later, electornic banking is still in its infancy, and the exact way in which the new technology will be used remains uncertain. It is clear, however, that consumers will continue to choose how financial services are performed. Only when a bank offers an electronic service that provides a clear advantage to consumers and merchants in the payment system will that service succeed. In any event, the pace of change will not be rapid, but a gradual evolution over the next several decades.

Technology has been applied in banking successfully. Automated teller machines (ATMs) are microcomputers that provide services traditionally supplied by bank tellers. AT present, there are more than 15,000 ATMs in the United States. Consumers appreciate the 24-hour convenience, safety, and privacy they offer.

Two areas in which technology can improve banking services are: banking at home and at the point of sale. At present, both areas are in the experimental stage.

One direction that banking at home has taken is paying telephone bills. In many cities, consumers can call a computer and use the telephone to pay bills and inquire about account balances. The telephone is used as a terminal to enter and receive information. The ephone has one major limitation: The user cannot see information or verify data as it is entered, to check for errors.

For in-home banking to capture the consumer's imagination and be easy to use, a display device will be required. Several tests of visual in-home banking are under way in the United States. In Columbus, Ohio, consumers can use their cable television and a special keyboard to pay bills and retrieve other banking information from home. In Knoxville, Tenn., customers can use personal computers to see account information, shop, and pay bills. Both approaches, cable television and home computers, hold great promise; their results will be watched closely by banks and consumers.

With the point-of-sale setup, consumers now pay for goods and services by cash or plastic card. Declining prices for microcomputers have allowed banks and merchants to distribute point-of-sale terminals widely. Typically, terminals are operated by store personnel and they utilize account information encoded on the magnetic stripe of a plastic card. They allow merchants to process sales inexpensively and quickly, and to eliminate losses due to fraudulent use of cards and checks.Further declines in the price of computer hardware will allow additional proliferation of point-of-sale terminals.

The example cited at the beginning of this article shows what microcomputer technology may do to banking in the future. We also know that electronic banking is in the state of experimentation and initial acceptance. How quickly it makes the transition from experimental systems to the predominant method of banking is not a question of economics or technology; it is more a question of how quickly consumers will adopt the new systems.

For the average person to accept a computer as a bank, he must "trust" the computer. Banks have compounded the trust problem by explaining past errors with the standard "the computer made a mistake." In fact, computers rarely make mistakes; people do. Bankers must now accept the "computer phobia" of consumers which they helped create.

Consumers can expect a gradual evolution toward electronic banking systems. Congress has ensured through legislation that electronic banking cannot be forced upon consumers through discriminatory pricing. The same laws protect us from financial liability for errors in the system.

Computers will change banking eventually, but only the bank customer will dec ide how soon.

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