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Net safe for e-banking

NationsBank, the fifth-largest U.S. bank, is moving business banking onto the Net because it considers the Net safer than private networks.

NationsBank (NB), the fifth-largest U.S. bank, is moving business banking transactions onto the Internet because it considers the Net safer (and cheaper) than e-banking on private networks.

The bank today unveiled its NationsBank Direct service, now being pilot tested by about a dozen unnamed corporate customers, making it one of a handful of major banks moving business banking--not just home banking--onto the Internet. The service now offers so-called treasury services: monitoring receipts and payments during a business day, moving money between accounts, and handling foreign currency transactions.

"We feel this is better than anything our industry is [using]," said Nick Alex, an executive with NationsBank's treasury and trade product unit. "We are moving to a more secure environment."

E-commerce analyst Scott Smith of Current Analysis said he would qualify that claim. "I can't see it would be safer, but it certainly would be as safe."

NationsBank's announcement comes a day after IBM chairman Lou Gerstner warned Wall Street securities firms that their entire industry, not just discount brokerages, would move to the Net, underscoring a key IBM initiative in that sector. (See related story)

But Internet security remains a stumbling block for conservative financial institutions.

Today, most banks provide business customers with proprietary software to use over secure, dedicated connections to the bank, using Personal Identification Numbers (PINs) and passwords to control who gets access. The NationsBank Direct service uses VeriSign digital certificates to verify identities, 128-bit SSL encryption, and firewall software, along with PINs and passwords.

On the consumer banking side, NationsBank is running an Internet home banking trial using software from Integrion, a joint venture of IBM, Visa, and 17 of North America's largest banks.

In the spring, it will join an e-checking trial to pay contractors to the U.S. Department of Defense electronically.

NationsBank has found Internet technologies to be cheaper, Alex said, because users only need a Web browser, not full-scale client software. The Internet banking applications, built internally by NationsBank, utilize reusable software objects based on the CORBA specification. That means the same software code for making a bank deposit, for example, can be used in multiple applications.

In addition, since many companies already have Internet connections, connection fees are lower over the Net than via dedicated phone lines between businesses and banks.

NationsBank began testing Internet-based business banking in mid-1996 for foreign currency and wire transactions. In October 1996, it began testing an online system to let businesses monitor deposits to their accounts when the bank's "lockbox" service opens, deposits, and posts checks. That system was moved to the Internet in early 1997.

In today's announcement, the company lumped those two services under its new NationsBank Direct program.

On Monday, NationsBank will debut a feature as part of the same program that lets customers monitor during the day whether checks they have written have been cashed. Future releases will add more currency and payment features, treasury management, trade finance, investments, and borrowing--all handled over the Internet.

"It's an indicator of the kind of thing you're going to continue seeing," said analyst Smith, a former bank technologist. "I would expect to see more of these announcements and applications [from banks] as we go along. It's a smart way for a larger institution to continue to leverage technology to enhance the business they have."