Experts predicted online banking would explode when it was first introduced. But its record so far has been timid -- probably due to regulatory requirements.

• Currently, federal regulators are overseeing fewer than a dozen online banks that appeared in the past four years.

• Since the first "pure" Internet bank went online in May 1995, the federal Office of Thrift Supervision has approved five charters and three more are in the pipeline.

• Add to those an additional three approved by the Office of the Comptroller of the Currency and one supervised by the Federal Deposit Insurance Corporation.

• Regulators and analysts predict that the real growth in Internet banking will come from Internet divisions created by traditional brick-and-mortar banks -- using the traditional banks' existing charters, rather than going through the lengthy and complex process of applying for new ones.

Security and privacy are two of federal regulators' primary concerns. The OTS requires Internet banks to pass "hacker" tests in which outside experts attempt to break in to test security measures. Regulators are also interested in how assets are invested, the volatility of deposits, and whether banks are planning to sell their charters.

It costs a bank about a penny to execute a transaction online, compared to a dollar for a manual transaction at a branch bank. Most estimates say that six million customers now use Internet banking. That number is expected to grow to 24 million by 2002.

Source: Cindy Skrzycki, "Follow the Virtual Money," Washington Post, October 22, 1999.