How IBM Helped the Banking World Escape Jurassic Park

Banks have risen from the dead in the information technology world.

Financial services companies, which as a whole so far have been slow to accept Internet technology and even more reticent to implement it, were reincarnated this week by the formation of Integrion Financial Network by IBM and 15 banks.

Integrion, a new company as opposed to a mere alliance, will offer interactive banking and electronic commerce services through the Internet, online services such as America Online, Dulles, Va., and telephone companies beginning in 1997.

CEOs and presidents of some of the banks, which include NationsBank, Banc One and Bank of America, along with IBM Chairman Louis Gerstner, held a joint press conference Monday to announce the project.

"We are now witnessing a very remarkable comeback," said Robert Gillespie, CEO of KeyCorp. The creation of the company comes after much of the high-tech industry had written off banks as behind the times and Microsoft Corp. Chairman Bill Gates called banks "dinosaurs." "If we are dinosaurs... I would suggest today that it's a new breed evolving," Gillespie said.

Key Corp's chief executive may have a point. Banding together allows banks to save money in building an infrastructure and attracting users, without forfeiting their traditional roles. Moreover, banks will be able to customize their offerings and still plug individual brand names.

For IBM, the foundation of Integrion is yet another step forward in its strategy to promote a "network-centric" computer industry. And in an oblique slam at Microsoft and Intuit Corp., Gerstner made a point of explaining that IBM, unlike other computer companies, would not become a content provider.

The credibility, including security expertise and name brand, that banks give to Internet banking is hoped to make electronic commerce a reality. Through projects like this, claimed Gerstner, businesses will finally make money on the Internet. "It's about moving from browsing to buying," he said. "Sheer connectivity is not and has never been the Holy Grail."

Internet banking so far has not caught on because of its lack of open standards, said the Integrion founders. "The home banking you see today is based on old proprietary software," said Gerstner.

While the founders of Integrion expect to profit, they must also sell services to other banks and technology companies. The 15 banks, each of which put up "several million" dollars along with IBM to launch the project, will pay the same fees to use the network as other bank customers. Similarly, although IBM is a co-owner and has the original systems integration and networking contract, other technology companies will be able to cash in on the market as well.

For instance, Gerstner said he hoped Intuit would make an open standards-based financial planning program. "This will create an explosion of opportunity for hardware and software companies," said Gerstner. Only time will tell. For the moment Integrion may encourage certain industry executives to revise their opinions concerning the banking industry's demise.


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