Will We Ever Bank Online?

Recently I saw the inside of my local bank for the first time in years.

The first thing I noticed was a long counter with individual booths containing PCs. A sign overhead beseeched me to "Try Online Banking First."

Unfortunately, I had an unusual situation that day that required a real live human. There are eight teller windows at my bank, but I noticed only two tellers on duty. There were 12 people ahead of me. I stood in line for about 15 minutes, only to be told I would have to see a bank officer or submit an e-mail explanation of my problem.

For all of this aggravation, I will cheerfully be charged US$2. That is my bank's standard charge for teller service.

Something tells me that the proliferation of computers at the bank entrance, the absence of tellers at most of the windows, and the fee that is charged for the privilege of speaking to a teller are all designed to coerce me into banking online.

But try as they might, banks are having a tough time convincing the public of the convenience, safety and ease of online banking.

A Tough Sell

In a study released several weeks ago by Tower Group, 39 percent of respondents said their bank offers online financial services, but only 13 percent had used them within the month prior to the study. Only 18 percent had ever used them. On the other hand, among that 18 percent, 85 percent of respondents had used their brick-and-mortar bank within that month.

For banking institutions keen on curtailing service costs, the outlook would not seem bright. Recent research from Cyber Dialogue indicates that so far, online banking has not significantly reduced banks' cost of doing business.

The technology is in place, the business plans have been drawn up and the marketing efforts are flashy and inviting, but U.S. banking customers are still giving online banking a thumbs down.

Forging Ahead

Nevertheless, high profile corporations are moving aggressively ahead in their effort to persuade banking customers to do their business online.

This month, Sony debuted its new online banking services in Japan. Sony Bank hopes its reputation and international identity will encourage users to bank via the Internet. The company predicts profitability within three years.

Unfortunately, like so many other over-anxious e-commerce companies, Sony was evidently not quite up to the task, since an unexplained glitch at the outset caused the service to be either inaccessible to most users or extremely slow. Still, in its first hour, the bank had more than 13,000 hits and gained 340 new customers.

Milk and Mortgages

Meanwhile, venerable convenience store chain 7-Eleven expanded its own financial services with the installation of NCR-equipped kiosks that enable users to buy money orders, transfer funds, pay bills, cash checks and conduct routine ATM transactions.

7-Eleven appears to be gearing up to be the general store of the new world, with plans to eventually enable the kiosks to send telegrams, purchase travel tickets, register vehicles, obtain credit reports, apply for loans, buy insurance and even get directions.

But it is the banking aspect that industry observers have their eye on. Will America make its house payment when it runs to the 7-Eleven for Pampers? Stay tuned.

Change Comes Slowly

If there is one thing e-commerce proponents have learned, it is "slow and steady wins the race." Although technology evolves at breakneck speed, humans do not. We need some hand-holding and some heavy convincing.

Still, last year, the online banking industry was worth $1.5 trillion, according to Jupiter Media Metrix. This year, that figure should grow to just over $2 trillion, and by 2005 to $5.4 trillion. By that time, Jupiter predicts 59 percent of all households with online connections will use Internet banking.

Until then, however, banks would be wise to go into their heaviest marketing mode, with an effort to convince customers their money is just as safe when managed online, and that they are perfectly capable of using Internet banking services.

The best place to convince skeptics? In their pocketbooks. Garnet Financial Services reports a teller transaction in the U.S. generally costs $1 to $1.50, while an Internet transaction costs less than five cents.

What do you think? Let's talk about it.