small business adviser
by gary wilcutt

Chances are you wouldn’t choose a bank based solely on its Internet banking package. If you are one of the growing number of businesses using the Internet, however, your bank’s package may have a significant impact on the cost and effectiveness of your day-to-day treasury management activities. A recent survey by the Association of Financial Professionals of 1,000 CFOs, treasurers and cash managers revealed that 92 percent used the Internet to obtain information and almost two-thirds used it to conduct business.

According to Ernst & Young’s annual Cash Management Services Survey, the number of banks offering cash management transactions via the Internet ballooned from 5 percent in 1997 to more than 70 percent in 2001. The advantages of using the Internet for cash management generally include lower cost, immediate access, elimination of special set-up and programming, seamless upgrading and enhanced customer service.

Utilizing a standard Internet browser, clients have access to services that include wire transfer, direct deposit, tax payments, Automated Clearing House (ACH) collection and payment origination, stop payments, balance and transaction reporting, account statements, reconciliation data, image delivery and positive pay. When comparing Internet banking systems, give careful consideration to the following elements:

Internet Banking System Features
Most systems offer the basic services including balance and transaction reporting, wire transfer, ACH origination and stop payments. Advanced Systems not only offer additional features, but may enhance the basic services. For example, some systems allow you to view and make copies of paid checks, pre-arrange transfers between accounts at future dates, and provide real-time access to view activity posted today (including incoming wires and ACH items).

For smaller businesses that lack IT resources, a careful examination of the ACH and file transmission functions is critical. Pre-formatted file layout from the National Automated Clearing House Association for ACH transmission eliminates the need to build these formats in-house. Some financial providers offer paid-check files that can be downloaded directly into Quick Books, Microsoft Money, Quicken or other applications for automated statement reconciliation.

Service Charges
The price of an Internet banking package may vary widely within a market and, unlike other services, most bankers are reluctant to discount their Internet delivered services. Balance and information reporting are usually offered to new clients at no charge; however, many banks continue to charge clients that were transitioned to Internet services from older, proprietary delivery systems.

Internet banking packages are typically divided into “modules” with each designed to perform specialized functions such as stop payments, wire transfers, etc. Service charges for modules typically include a fixed monthly maintenance fee and a charge for each transaction originated. Such fees should be examined closely as they may vary significantly from provider to provider.

Internet Security
When selecting a financial provider you should understand how your sensitive information is secured.

• Does your bank use two-factor authentication, a recommended security practice to ensure that only authorized individuals access your information? An example of two-factor authentication is an ID/password and a digital certificate.
• Does the bank use encrypted databases to protect your data from its employees?
• Does the bank’s system allow you to restrict your users to certain types of activities or place dollar limits on the transactions originated?
• Is there an approval process available that requires a second user to authorize a transaction?

Ask your banker to prepare a summary of Internet banking features and the associated charges. Use these as a basis for comparison. Many banks have test sites set up on their Web page that allow you to preview services. These “test drives” can aid in formulating questions and identifying concerns. Choose your Internet banking partner carefully and enjoy the benefits of electronic banking.

Gary Wilcutt is senior vice president and director of cash management services for Enterprise Banking in Kansas City and St. Louis. He can be reached at 913.663.5525.