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Advances in online banking and the immense popularity of the Internet are threatening the retail banking franchise. Many bank CEOs are now aware that the environment for retail banking has grown so intensely competitive that they need to act immediately, as individual banks and as an industry, to secure their organizations' position and ensure continued survival. A growing number of banking institutions are responding to competitive challenges by developing strategies for online payments and online delivery of banking services. By doing so, these banks hope that they will be able to boost the value of their retail franchises and leverage the value of their relationships with their current customers. Four areas relevant to the development of online strategies are examined. These are customer behavior, the economics of delivery, opportunities and options.

Many banks are responding to customer demands by providing interactive delivery of their services to make it easier for their customers to deal with them. This development within the banking industry is a wise decision given that nonbank competitors are increasingly relying on cyberspace to snare their customers. The most popular instrument that these banks are choosing are online services and the Internet which are steadily becoming popular among current and prospective customers. To secure the success of their interactive services, banks should ensure that three elements are in place. Their online service should feature a compelling content that is suitable to the online environment. Moreover, it should provide customers with an easy access to the content and a secure online payment system.

The information superhighway presents new opportunities and challenges to the banking industry. Bank executives, realizing the potential of the information technology, are therefore taking steps to take advantage of the superhighway although they are hampered by the fact that it is still evolving, making it difficult to determine the most appropriate move to make. These executives are also aware of competition from the non-bank sector which is greatly aided by the superhighway. Entities such as Microsoft, America Online and telephone companies are threatening to become major challengers of the banking industry and have the technological facility to realize this potential. Nevertheless, bank executives are confident that their incumbency will help them retain their dominant hold of the market for a long time. Nevertheless, this should not give them a false sense of security and find ways to fortify their leadership.