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From the outside, Meritanordbanken in Helsinki looks like a typical staid European bank. Merita's ornate headquarters hall, with its rose marble columns and gilded cornices, harks back to the 19th century, when the Czar of Russia still ruled Finland. But don't be fooled. Behind the historic decor, Merita has become one of the world's most advanced banks, using the Internet and mobile phones to conduct most of its business. Some 1.2 million of its customers use the Web to bank, a world record, while only 6% of the institution's transactions are processed through a traditional branch. What's more, Merita has taken the lead in allowing customers to bank via mobile phones. Not bad for a bank with just $173 billion in assets, only Europe's 25th largest.

All this high-tech prowess is a matter of necessity. MeritaNordbanken controls about 40% of Finland's banking market, so a merger with another domestic bank to cut costs was out of the question on antitrust grounds. Merita therefore embarked on a two-pronged strategy: use mobile and Internet technology to cut overhead, and become Europe's most aggressive bank in expanding across borders. In April it completed a merger with Denmark's Unidanmark three years after Merita joined forces with Sweden's Nordbanken. The deals have made Merita the largest bank in Scandinavia. "We see ourselves as a pan-Nordic bank with a very powerful distribution network," says Vesa Vainio, who became chairman in April.

Bo Harald, a Merita executive vice president, estimates that an Internet transaction costs the bank only 11[cents], a tenth the cost of a local branch transaction. And every month customers make 4.1 million bill payments over the Internet. The migration to the Net also allowed Merita to close two-thirds of its 800 branches, resulting in huge savings.

Merita's bid to become Northern Europe's phone-in bank of the future depends a lot on the latest technology. Customers can use cutting-edge wireless application protocol (WAP) browsers, built into the latest generation of European phones, which allow customers to enjoy full Internet access to their accounts. WAP phone owners can check account balances, pay bills, transfer money and even buy shares on the Finnish stock market.

And more is on the way. One service already attracting a lot of attention is a pilot project between MeritaNordbanken, the Finnish cell-phone maker Nokia, and Visa International, the credit-card company. Nokia will soon have available in Finland cell phones that contain two chips, one for mobile-telephone service and one from Visa that adds a nifty credit-card function to the handset. The Visa chip will allow a customer to hold the phone near a cash register and push a button to pay a bill rather than having a clerk swipe a credit card. The digital mobile phone can replace the customer's signature as well.

Perhaps Merita's greatest accomplishment so far has been in getting customers to pay for all its services, which even some U.S. banks are giving away to encourage Web use. "The customer doesn't realize its value if you don't charge," says Harald. Maybe that's one reason banks as far away as Canada send over executives to observe how MeritaNordbanken is using technology.