Instant messaging (IM)—a quick form of communication that has already become popular in the brokerage industry—may be finding its way into banking.

Arlington, Mass.-based Leader Bank, a four year-old bank with $194 million in assets, has begun offering its retail customers the ability to send instant messages to managers in its three branches via desktop PCs. Customers can use IM to request quick transactions—such as account or wire transfers—or get quick loan rates and possibly even pre-approvals.

The service began as an internal project in which employees used instant chat and messaging to discuss new services or get quick answers to questions, says Jay Tuli, business development and marketing manager. For example, he says, if a customer requested a higher certificate of deposit rate or lower loan rate, the manager could send an instant message to the bank's CFO and get the request approved immediately.

"The internal program was so popular we decided to open it up to our customers, as well," Tuli says. He cited a customer who wanted to purchase a BMW. "He works in a firm in downtown Boston and doesn't have time to come to the branch. So he sent us a message on Friday to wire funds from a savings account into his checking account and have a check ready for pick up Saturday morning," Tuli says.

IM is commonly used by brokerage firms to allow investors to send immediate buy and sell orders and request instant stock quotes, says George Tubin, senior analyst for Needham, Mass.-based TowerGroup. Sara Radicati, CEO of Palo, Alto Calif.-based Radicati Group, estimates that close to one-third of U.S. banks use some form of IM, but mostly in the online chat format for online customers.

Online chat IM typically uses a bank's proprietary network, Tubin says. He says Leader is a pioneer in using a non-proprietary IM network, such as the one offered by AOL. The security issues associated with using an IM network not controlled by the bank, as well as the difficulty of ensuring timely response to customer messages, have so far kept most banks on the sidelines, he says.

"You can get the message to the recipient quickly, but if the recipient just sits on the request, you lose the effect," Tubin says.

Tuli says branch managers at Leader are required to connect to IM between 9 a.m. and 4 p.m. every day. Response times vary depending upon on the urgency of the request and what action is required, but many replies are instantaneous, he says.

In terms of security, Tuli says the 24 Leader employees using the IM network are instructed not to request or send account numbers or other personal customer information. "For the most part, the tool is used for information purposes, like, 'What are your current rates?'" Tuli says.

Tubin expects the popularity of IM among younger people to encourage more bank usage over time. "For people under 35, the choice between sending an instant text message and sending an e-mail is like the choice for older people between sending an e-mail or using regular mail," Tubin says. "Over time, young people are going to expect to be able to use IM for banking as well."

Tuli says regular e-mail is a poor substitute for IM. "With regular e-mail, messages often sit with a large group of other messages until the recipient gets around to checking his messages. With IM, it pops up on the screen and lets the recipient know this requires immediate attention and action."

Tubin says that IM makes sense for a Boston area bank, particularly one with a branch in Cambridge, where several prominent universities are located, but might not work in other areas of the country. "This works for a bank that is trying to differentiate itself and appeal to young adults and college students," Tubin says.

"Our customers in the Boston area tend to be more tech-savvy," Tuli says. "This might not work as well in a small community in the Midwest, where text messaging is not as popular."