Go to a bank, look lost, and almost instantly an attendant will appear to ask how you are doing and if everything is OK.

Conventionally, Japanese banks have considered the friendliness of their tellers and other counter staff as important assets to lure customers, along with handing out towels and pictures of Snoopy or J. League mascots on bankbooks.

Junko Watanabe

Junko Watanabe’s challenge is to win customers in Cyberspace without the help of a teller’s smile. Manager of Em-town Corp., Fuji Bank’s first Internet bank, she oversees a Yokohama office where customers never come and a Web site where people can open savings and mutual fund accounts, take out housing loans, transfer funds, sign up for travel insurance and shop online.

All transactions are made 24-hours a day via the Internet and phone, with customers depositing their money at automated teller machines.

By doing away with the cost of maintaining branch offices, the bank is able to cut service fees and raise returns on savings accounts.

“We want to be considered our customers’ main bank,” Watanabe said. “We have the basics of what people expect from conventional banks right now. . . . We have to think about what else we can do.”

What else Em-town can do is likely to make the difference between success and failure. Internet banking’s main advantages — 24-hour banking and competitive rates — are being diminished by growing competition from other Net-specific banks and the online services of existing banks.

Em-town’s competitors include Japan Net Bank — a Net-specific bank set up by a consortium of Sakura Bank, NTT DoCoMo Inc. and Nippon Life Insurance Co. — and Sony Bank, which will open in May.

For savings accounts of 100,000 yen or more, Em-town offers a 0.3 percent interest rate, compared with the 0.03 percent on savings accounts of the same size at Fuji Bank. Service fees to transfer funds via Internet to accounts at other banks start at 210 yen, while transfers at ATMs at Mizuho Financial Group banks cost the same as at Fuji Bank, 420 yen.

Fuji Bank became part of the Mizuho group along with Industrial Bank of Japan and Dai-Ichi Kangyo Bank in September.

High rates and low service fees mean thin profit margins at the same time that signs of a rate skirmish are appearing.

While Em-town’s rates are higher than the 0.05 percent rate offered by competitor Japan Net Bank on all regular savings accounts, Em-town levies a 1,050 yen maintenance charge for accounts smaller than 300,000 yen, while Japan Net Bank is suspending its corresponding fee until March 31, 2002.

Japan Net Bank’s service fees for fund transfers to other banks start at 168 yen, or 20 percent lower than Em-town’s rates, while Japan Net Bank recently raised its rates for 2-year certificates of deposit to match Em-town’s.

Trying to gain a competitive edge in rates will reduce Internet banks’ thin margin and increase the pressure to secure the number of accounts necessary to make a profit.

Em-town hopes to sign up 100,000 new accounts by the end of next January — a target that Watanabe thinks is reachable — and 1 million accounts within three years.

In its first month since opening Jan. 31, Watanabe received about 10,000 requests to open accounts, she said. Of these, 30 percent to 40 percent are Fuji Bank customers.

But the future of Net banks in Japan remains in doubt, and at least one prospective participant in the field has already decided to withdraw.

In October, Sanwa Bank scrapped plans to open an online bank, saying the high cost of developing and maintaining the network and of advertising would not pay off.

It is still unclear how effective Net banks’ competitive rates and low fees will be in drawing customers. According to a recent survey by Japan Net Bank of its customers, only 15 percent who opened accounts said they were drawn by the Internet bank’s rates. The top two reasons listed were that the bank could be accessed around the clock and that “it looks fun.”

Watanabe, however, believes there is an untapped customer base to disprove the skeptics, who say the novelty will wear off once online banking services by “real” banks take off.

“When you’ve been working at a bank, you think everybody uses banks,” she said. “But I think there are enough people who are not exactly satisfied. We will keep expanding the scope of our services, and these customers will come.”

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