Kurt Ming, an investment officer with the Bank of Bermuda, has been following the rapid growth of online trading and can see it really cutting into the bottom line of local firms on the Island this year. People are going to look at the difference in cost -- $8 to $10 a trade online compared to $75 and more locally -- and head for cyberspace.

As an example of how big the competition is getting E-Trade Group Inc. the number two online broker, said last week its new Web site had signed up about 500,000 members since September, when the company began a $100 million marketing campaign. There are now about 90 firms offering online trading including Charles Schwab Corp., E-Trade Group Inc., and Ameritrade Holding Corp.

"A lot of people are getting hip to trading outside of Bermuda,'' Mr. Ming said. "Online trading in the year to come is going to catch on a lot. More people are buying computers and are learning how to trade over the Internet.

It's hard for local brokerages and banks to compete with that. We are going to have to rely on the older crowd -- who don't want to use a computer -- for business.'' And while brokers here will counter they offer value for the money with advice -- so do the online trading firms. What were once no-frills sites now offer institutional research, access to initial public offerings and mortgage advice. These extras come for additional fees.

Local retailers are another group who should be worried about the competition from the Internet. Consumers overseas flocked to the Internet for their Christmas shopping. Here I'm sure shoppers did so as well, but probably for gifts to send to friends overseas. One friend of mine used online book retailer amazon.com to send gifts off to friends and family. The Internet has allowed me to easily send off gifts to people I wouldn't have given to before.

According to market researcher Yankee Group, Internet sales over the holiday period were expected to reach $2.55 billion, three times more than last year.

I talked recently with Bank of Bermuda executive vice president of corporate administration Barry Shailer who wanted to give an update of the company's Year 2000 progress. As previously stated in this column, the bank is on track to meet its compliance target of February 28, 1999.

A concern now is the unknown factor of public perception on how safe customer accounts will be if a failure does occur. Mr. Shailer, like other executives at other banks, are keen to reassure customers about the safety of their money. Banks have been at the forefront in dealing with the Year 2000 computer problem. A perception of instability in the banking system could be a self fulfilling problem as has happened in the past when runs have occurred.

If everyone decided to withdraw their cash and stash it under their beds until the Millennium partying is over banks would quickly have to sell off investments to meet the demand.

"We are going to be addressing managing people's expectations,'' Mr. Shailer said. "We have to try and generate a genuine level of trust. "Customers should not be wondering about the accuracy of their balances and integrity of their banking accounts.'' Every account has a paper statement backup in case of data problems, whether caused by the Year 2000 bug or some other foul up. Contingency plans in place in case everything goes horribly wrong. Contingency, backups and disaster recovery are all part of a bank's operations anyway.

"Business continuity is the focus,'' he said. "Our approach to that is to look at all the deliverables, look at the things we have to do, rather than look at the process.'' The bank's efforts to become Year 2000 compliant has taken an estimated 30-man years of work plus $3 million in incremental costs.

"What we don't count is the diversion of resources to deal with the problem,'' Mr. Shailer said. "It's huge but you can't get away from it. We need to give our customers the level of confidence they expect. The unknown is human perception and failure of others to deliver what they say they will deliver.'' To deal with human perception the bank produces a regular newsletter for clients solely devoted to outlining its progress on the Year 2000 problem. In dealing with suppliers the bank is monitoring their progress and will decide whether to stick with them or switch to another as 2000 approaches. "There are no winners, only losers in the year 2000,'' Mr. Shailer said.

Disturbing statistic of the month: About 93 percent of personal computers shipped before 1997 will fail to some degree at 2000, according to Greenwich Mean Time. The Virginia-based company also predicts 47 percent of personal computers shipped in 1997 are at risk, as are 11 percent of those shipped in 1998. Check out www.microsoft.com/technet/topics/year2k/default.htm which lists Microsoft products and their degree of compliance.

Sign of the times: America Online Inc. (AOL) became the first Internet stock added to the benchmark Standard & Poor's 500 Index on December 22. The online service replaced retailer Venator Group Inc., the former Woolworth Corp. AOL has a market value of $63 billion, larger than Walt Disney Co. and almost equal to Ford Motor Co. Yet Ford Motor had 1997 revenues of $153.6 billion, 59 times that of AOL's $2.6 billion. AOL went public in 1992 at 36 cents a share (adjusted for stock splits) and went to $138 a share on the day it got on the S&P 500. Seems almost unfair, doesn't it? Or are investors just too exuberant? Tech Tattle is about issues concerning technology. Contact Ahmed at 295-5881 ext. 248 or 238-3854 or techtattle ygazette.newsmedia.com.