Electronic Banking Brings Lobby to the Living Room

ARE you ready to change the way you bank?

Increasingly banks and technology firms think so.

They want to lure Americans on-line to pay bills, refinance mortgages, and buy investments from the comfort of their home- computer keyboards.

Citicorp, America's biggest bank, joined the fast-growing list of innovators Tuesday. Its Citibank subsidiary will no longer charge fees for electronic banking transactions, including those done by computer or telephone as well as at automated teller machines (ATMs).

Though losing revenue in the short run, Citibank hopes the cut-rate services will reel in new customers not just for checking accounts but for loans and investments, says spokeswoman Susan Weeks.

''That's got to be the wave of the future,'' says market researcher Gary Arlen, referring to the Citibank strategy.

Though only a tiny share of banking today is done from home, the long-run potential is too big to ignore. Within five years, 15 percent of the nation's 200 million checking accounts could be serviced on-line, predicts Mr. Arlen, president of Arlen Communications in Bethesda, Md.

The technological shift could transform the banking industry. After all, if customers don't need a hometown bank lobby anymore, do they need a hometown bank? Consumers may move their checking and savings accounts to institutions offering the best services and highest interest rates, even if they are 1,000 miles away.

''You will see in the next few years many banks going to national banking without branches,'' says Bruce Burchfield, chairman of Intuit Services Corporation, a subsidiary of Intuit Inc., in Menlo Park, Calif.

Microsoft a proponent

The loudest proponent of on-line finance, arguably, is not a bank but Microsoft Corporation, the software giant that stands to benefit from the proliferation of home computers. The firm's restless resolve to pioneer home banking was a key reason it recently abandoned a planned buyout of Intuit, which makes the leading personal-finance software. The United States Justice Department was trying to block the merger, and Microsoft didn't want its home-banking efforts delayed by a lengthy lawsuit and appeals.

For consumers, banking from home computers could be just the tip of the iceberg. On-line networks, led by the Internet, will open up an electronic marketplace that could grow to rival catalog shopping, which is a $53 billion industry.

But creating these new services and making them fraud proof will be costly, and the market's size is far from certain. Last year, for example, electronic commerce amounted to just $200 million in purchases by American households.

To lessen the risk of failure, many companies are pursuing their high-tech dreams through alliances. The players fall into several categories:

* Service providers, such as banks and other financial companies.

* Software firms like Intuit, whose programs help customers use services such as on-line bill-paying.

* Delivery firms, which act as intermediaries.

Many banks had feared that the combination of Intuit and Microsoft, with its forthcoming on-line service, would create a monopoly in the two latter categories, leading to hefty fees for banks and their customers. This worry was shared by the Justice Department, though many analysts say the monopoly scenario was never valid.

Now, without the merger, there is sure to be competition across the board, analysts say.

In personal-finance software, Intuit's Quicken software has about 80 percent of the market, but Microsoft is likely to redouble its efforts to sell its competing software, called Money. Both firms have been lining up bank partners, but many banks may not go with either. BankAmerica and NationsBank, the nation's No. 2 and No. 3 banks, this month announced a buyout of MECA Software, maker of the third-ranked personal-finance software, Managing Your Money.

Citibank offers its own software, as do some nonbank financial companies such as Fidelity Investments. And Citibank isn't the only one cutting fees.

Electronic bill-paying

This fall, both Microsoft and Intuit will offer new versions of their programs that, for the first time, make it cheaper to pay a bill electronically than by mail. Current services charge about 50 cents per transaction. Mr. Burchfield foresees Intuit's price as low as 32 cents -- the price of a first-class stamp without the additional cost of a check.

Big questions remain about whether consumers are ready for on-line banking. After nearly two decades of experimenting with home-banking services, banks have little to show for it. Only 8 percent of US banks offered computer-based services last year, according to a survey by the American Bankers Association; 12 percent plan to offer such services by 1996. Telephone-based home banking is more popular, but far from mainstream.

But ATMs had a long rollout period, too, with banks waiting a decade before consumers converted to the cash machines.

If home banking does bloom, who will dominate it? Many eyes will be on Microsoft, with its on-line service due out this fall -- the Microsoft Network. This could become a high-profile platform for financial transactions.

But some analysts downplay the Redmond, Wash., firm's clout.

''The kind of transport that Microsoft brings to the party is a generic kind of capability,'' says David Ludlum, an analyst at LINK Resources, a New York consulting firm. The Internet, the free-form global computer network, will allow many firms to act as intermediaries.

To Mr. Ludlum, the likeliest winners will be those who control the software at the customer end (notably Intuit) and those controlling transactions at the other (banks and other financial firms).