Online Banking is Evolution--Not Revolution

by Tom Mathis

During the mid-1990s, many predicted that online banking would revolutionize how consumers and businesses conducted their financial affairs. Bank branches were expected to become obsolete as customers migrated to the Web for everything from viewing their checking account balance to obtaining a mortgage loan. In hindsight, online banking may not have been a revolution, but it certainly hastened the evolution of how customers interact with the bank. People still transact business at brick and mortar locations more often than they do on the Web, but the nature of those interactions is changing.

Online banking today is fast, accurate and secure. It has given customers the flexibility to manage their day-to-day banking activities whenever and wherever it is convenient for them. What started as a useful way to view balances and account activity has migrated to include transaction services such as funds transfers, bill payment and the ability to view online check images.

Online banking usage continues to grow at a rapid rate--20 to 30 percent of bank customers are online bankers, up from 10 to 15 percent just two years ago. The popularity of online banking is fueled by the growth in Internet usage overall, with Internet users hitting 152.8 million in 2002 according to eMarketer Report. In addition, there is an increased availability of the service from both small and large institutions. A recent research report by Pew Internet & American Life Project, a U.S. based nonprofit research group, found that:

• Online banking is the fastest-growing service among Internet users;
• Convenience is still the top factor cited by online banking users;
• Online banking users are equally represented between men and women, but Internet users 65 years or older are half as likely to bank online as 18-29 year-old Internet users;
• On a typical business day, online banking rivals instant messaging, with 10 percent of Internet users conducting banking activities online versus 11 percent using instant messaging.

Online banking is fast becoming the channel of choice for daily banking tasks. However, the complexity of financial services has increased dramatically at the same time. The Internet serves as a great initial source for information, but when it comes to complicated financial transactions and services people still want to discuss options face-to-face with a trusted advisor. While most banks offers the convenience and safety of self-service channels such as online banking, ATMs and telephone banking, we integrate those offerings with the in-person services customers call upon for their more complex financial needs.

As technology becomes more pervasive, so too will online banking as consumers and businesses better understand how it can save them time and money. Technology is advancing at a rapid rate--sometimes outpacing the ability of the market to realize what services hold the most value. Electronic bill presentment and wireless banking are two examples of technology that will bring added value to the marketplace but are seeing lower- than-expected adoption rates.

Some day, financial institutions might monitor your balance for you, move excess money into higher interest bearing accounts and notify you by secure e-mail to your personal computer, personal digital assistant (PDA), or cellular phone--whichever you prefer at whatever time of day you select. Your statements may be available electronically and stored centrally for retrieval at your convenience. Instead of giving cash gifts, you may give a cash value card that can be used anywhere. Instead of going to the ATM, you might be able to download money into your personal cash card using your computer, PDA, or cellular phone. And yes, there may even be a checkless and cashless society . . . someday.