Bank On It - online banking - Industry Trend or Event

Home Office Computing, May, 2000 by Jeffery D. Zbar

Online banking is fast, convenient, and (almost) paper-free

FOR MEGAN CYTRON, PAPER-BASED BANKING is passe.

Transactions at the corner bank? She gave them up in 1994 when she took to banking by phone; she now goes to the bank only to make deposits. Monthly statements by mail? She's done little more than file them since she started banking online last July.

Online, Cytron checks her account balances, transfers funds, and pays her bills. Good thing. Between locating the bill, writing a check, and finding the time to mail it, bill paying always got pushed to the bottom of the to-do list.

"I was always disorganized and paying late fees," says Cytron, principal Web designer and developer with Alpha 60 Design Shop (www.alpha60.com), a Washington, D.C.-based Web and print design company. The move to online banking cut almost two hours off her monthly bill-paying process--"probably more if you count the inevitable search for stamps. I jumped at the chance to bank and pay bills online as soon as my bank offered it," she recalls.

Although online banking is fast, convenient, and has been around for several years, Cytron is considered an early adopter. Analysts say fewer than 6 percent of small-business owners currently bank online, with a predicted increase of only 1 percent this year.

The growth may seem slight, but Gartner Group analyst Laura Starita says she doesn't consider it slow, adding that several factors have kept consumers from adopting online banking. "What is available on the Internet has not been compelling enough over what's available through other channels [like automated telephone systems and ATMs]," she says.

Quick and Convenient In a recent Bank One Corp. survey of small-business and home office owners, 18 percent of the respondents said traveling back and forth to their bank was their most time-consuming business activity. Moreover, banks have begun to realize that small-business owners are more profitable than typical personal-banking consumers. They purchase more products and are more likely to stay with the bank, explains Kathleen McClave, industry sector head in New York City with Tillinghast Towers Perrin, a financial services management consultancy.

"Small-business owners need to bank off-hours, because they spend their business hours doing business. Online access is highly important. If you don't [provide it], somebody else will. And it may not be a bank," McClave adds.

Companies such as CompuBank. com, ebank.com, Netbank.com, and OneCore.com provide the convenience of 24/7 account access as well as products that mirror those offered by brick-and-mortar banks, such as checking and merchant accounts, payroll services, and credit and debit cards. They also offer lines of credit, CDs, money market accounts, direct deposit, and wire transfers.

But these companies don't simply copy the traditional banking model to the virtual world; they provide services attuned to small-business needs. Whether it's transferring money between accounts at midnight, or banking from a computer at a cybercafe in Seattle or a lounge at the Chicago O'Hare International Airport, "small business doesn't need the corner bank anymore," says OneCore.com president Barry L. Star.

Convinced it's time to bank online? Head over to bankonline.com, which identifies banks, credit unions, and savings and loans in your area offering online banking and bill-payment services. Traditional financial institutions, like Citibank and Wells Fargo, also have their own online offerings, and most online banks offer a demonstration--providing a peek at the service's layout, functions, and sample ledgers.

Does Your Bank Have ... Whether you choose to use the online services of your local brick-and-mortar bank or take your business to one of the new crop of online-only banks, get these questions answered:

* What types of online services does the bank offer? Ask about interest on checking account balances, free check writing, and low-cost electronic bill payments.

* Does it provide real-time account updates and e-mail alerts on low balances?

* Can you get a merchant or credit card processing account? Does the bank work within a national network of banks for deposits or ATM withdrawals?

* If you have employees, does the bank offer payroll services and W-2 statements?

* Does the bank provide revocable, PIN-protected account access to your accountant or bookkeeper?

* Does the bank provide more robust services, such as the ability to link business accounts with personal accounts? Can you interface online transactions with PC-based financial management software such as Intuit's QuickBooks (www.intuit. com) or Peachtree Software's Peachtree Accounting (www.peachtree.com)?

Be Your Own Accountant Besides offering convenience, banking online virtually eliminates the need for a number cruncher on staff, says Bonnie Wikert, vice president of e-commerce business development at PNC Bank in Pittsburgh. Since PNC's AccountLink online service debuted in June 1998, some 8,500 small-business customers have used it along with their software accounting packages to handle bookkeeping, including managing receivables, and pay bills.