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Some consumers are undoubtedly abandoning their local banks because of what they consider to be rude or indifferent service or hard-to-correct computer errors. In California, class-action suits have been filed against six leading banks on the grounds that they are gouging customers by charging up to $10 for handling checks drawn on insufficient funds. Some claim that the service actually costs the banks less than $1 a check. Many bank customers have learned that the old financial catchall, "The check is in the mail," has been replaced by a new one, "The computer lost your deposit."
The first reaction in banking circles to the new competition has been greater specialization. Says James Alef, a vice president of the First National Bank of Chicago: "It is increasingly difficult for a bank to be all things to all people." Many of the larger banks have decided to reduce their consumer business. The $50.6 billion Morgan Guaranty Trust Co. did not abandon its retail clients completely; it simply instituted a $60 monthly fee on checking accounts with balances of less than $5,000, a quick way of brushing aside all but the well off.
Some banks, on the other hand, have decided to go after consumer business and de-emphasize the corporate side of finance. The most innovative of these is Citibank, which has sunk $225 million into new consumer technology. It has installed 468 automated-teller machines that now dot the streets of New York City like so many telephone booths. The new tellers can take deposits, issue cash and transfer funds from a savings account to checking. The machines already handle about 30% of the bank's consumer business at one-half the cost of transactions handled by human tellers. Says Bank Chairman Wriston: "People love them. The machines are polite, bilingual in English and Spanish, and are available 24 hours a day, without coffee breaks."
Citibank's foray into the future goes beyond automatic tellers. This month a hundred Citibank customers in the New York City borough of Queens will give up their checkbooks in favor of small computer terminals installed by the bank in their homes. These desktop devices will enable customers to electronically pay their bills or rent, stop payment on a previously paid bill, take out a loan, open a new savings account or check on the balance of an existing one.
The bank is also promoting a new way of making a cash withdrawal. Customers telephone a designated number, give a code word like "hot dog," and traveler's checks with a perfect electronic copy of the customer's signature are sent out. The checks are insured against loss or theft, and the bank believes that they will soon be as popular as cash.
Such innovations are not limited to the major financial centers. The United American Bank in Knoxville, Tenn., in a joint venture with Radio Shack, is offering home banking as part of a private computer service. Customers can pay bills, study current interest rates and apply for a loan from their living room or den. Under one option, checks are no longer mailed back to people but are classified by family-budget category and then stored. At the end of the year the bank provides a handy accounting of all money spent for mortgage payments, education, charitable contributions and other budget items.