Two of the biggest US financial institutions have delivered starkly opposing views on the viability of using the Internet as a vehicle for large scale electronic commerce.
While Charles Schwab & Co, the US' largest discount stockbroker, this week decided to allow foreign investors to begin trading domestic stocks via its Web site, the head of the country?s second largest bank, Citicorp, warned that current Internet-based banking is unsafe.
Speaking at an Electronic Money and Banking Conference in Washington, hosted by the Treasury Department, John Reed, chief executive of Citicorp, said the Internet was not ready to handle large scale financial transactions, gloomily predicting that it would be another 50 years before all business could be handled online.
Other leading US banks, including Wells Fargo and Bank of America, allow customers to pay bills and transfer funds via the Internet, but although Citicorp has a Web-based banking product ready, it has no plans to roll it out in the near future. "It will be a long time before Citicorp does big transactions on the Internet," Reed warned.
Reed, who was formerly chief technology officer for the New York-headquartered bank, said his main concern was lack of security on the Net, adding that he personally refuses to put his credit card number on to Web sites and uses the telephone instead.
His comments are likely to carry a lot of weight in the US financial services industry, where Citicorp is regarded as a technology pioneer. For example, it was the first major bank in the US to implement a large scale ATM network.
But over at Charles Schwab, enthusiasm for online securities trading has grown since May when the company began offering its US customers an Internet trading facility. The company estimates that it has around 100,000 domestic customers trading via its Web site.
This number is set to rise with the decision to expand the Internet trading option to customers of its Schwab International division. Foreign investors currently have to deal on the telephone with Schwab brokers. Gloria Lau, senior vice president of Schwab International, said: "The goal is to fill the information gap that exists for our overseas clients."
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