Direct banking still has a long way to go - even in the United States where 30 million households have personal computers and modems.

The Bank Administration Institute, a non-profit company, organised a direct banking conference recently in San Diego, California, which was attended by about 400 people.

Allied Irish Bank in New York sent two representatives as it prepares to launch an Internet banking service for Irish Americans who wish to do business with an Irish bank.

Ms Caroline Sullivan, vice president at AIB New York said: "The lesson we learnt is that Internet banking is a game of survival. We knew that before we came but it was stressed here even more from the large banks to the small banks."

Ms Veronica Cranny, head of operations and information systems at AIB New York commented: "The future of Internet banking is about strategic alliances with non-financial institutions." Most companies, she said, need to have a five-year plan in order to optimise data-mining and cross-selling.

The non-financial institutions certainly have a role to play as evidenced by the participation of representatives from Excite, America On-line, Hewlett-Packard, Microsoft, Checkfree and BellSouth. Building a direct banking infrastructure starts with understanding customers and their needs, said Mr Jack Antonini, executive vice president of First Union in the opening key note address.

"You have to look at each customer encounter as more than a single transaction," he said. "Today, customers' desires and needs are changing.

They want quick response times, minimal hassle and a bank to be available to them whenever they want." In fact, their wish, he said, is to have seamless service over multiple locations and channels.

These include moving from the more traditional brick and mortar branches to alternative delivery channels such as automated teller machines, telephones, personal computers and the Internet. "Keep the product set simple in the direct banking environment," said Mr. Antonini. "Give customers choice and make it convenient for them."

This involves gathering and leveraging customer information and backing it up with outstanding service. "It really requires a pervasive, cultural commitment to have outstanding service," he said.

America On-line (AOL), the number one Internet service provider in the world, has stepped into the role of providing financial services with its BankNow product. AOL has connections with 12 million households and receives eight million web hits a day. In addition, Mr Darryl Shrock of AOL said the brokerage field has really "exploded on AOL," and it is the "brands that win."

Another non-bank success story is Excite which is a four-year-old company that acts as a search engine on the World Wide Web. It is the number two Web-based revenue site in the world and it gets money from advertising sales, sponsorship and conducting transactions. "We're a channel for commerce," said Mr Jim Desrosier, executive vice president of Excite. "There'll be billions of dollars from commerce on-line faster than you can think," he said. Excite's success, he added, was due to a "combination of risk, vision and skill in building a value added service to customers."

AOL's Mr Shrock said there are challenges to going it alone instead of partnering, but that if a company builds a service on the Internet, customers will come. "You need to be where people are looking for on-line banking," he said.

One of the first banks to be up and running with a user-friendly Internet banking solution, was National Bank of Commerce in Memphis, Tennessee (www.nbcbank.com). It worked with two providers, Security First Technologies of Atlanta and Hewlett-Packard.

The bank first targeted its existing customers and then looked at younger, more affluent, educated people who fit the typical Internet banking customer profile.

Payment Systems, a consulting group carried out research that shows visits to bank branches are declining just as PC usage, telephone banking and ATM transactions are increasing. Branches still function as transaction centres but about 10 per cent of tellers' time is spent selling products, 60 per cent doing transactions and 30 per cent resolving problems.

On-line, the research shows, the primary activities are checking account balances and seeing what cheques have cleared. It seems that the key barriers to increased usage by consumers are the perceived lack of security and privacy. Despite this, "we believe seamless access to accounts will emerge and proliferate in financial services - among banks and non-banks", said Mr Neal Chambliss, group vice president of PSI.

Several of the speakers at BAI's Direct Banking two day conference tackled the issue of integrating their call centres with Web banking. This means a change in focus and migrating from a private, dial up service to an open, Internet-based solution. "An integrated architecture is what you need," said Mr Michael Sanchez, chairman of Sanchez Computer Associates.

Keybank of Cleveland, Ohio, for example, has all its applications available from the desktop, so phone calls and emails are integrated into one message system. This way, bank representatives see an updated view of customers' accounts and customers receive a consistent service.

"The more educated, active consumer wants anytime/anywhere banking," said Mr Mark LaPenta of Summit Bank in New Jersey. "We feel customer retention is our number one reason for doing electronic spending. We're adamant that our Web site only works if it's a personal experience," he said.

Banks need to choose wise partners, said Mr Gary Meshell, executive vice president of Benton International. They also need the muscle of the Integrion consortium (made up of Visa, IBM and 18 major banks) to act soon or else Microsoft will take the banks' business away from them.