What's All This About Online Banking?
By Gail Rickards
Only 7-8% of 50 million internet users in the U.S. bank
online. That translates to a surprisingly low number: roughly
4 million customers spread-out over 30 virtual (internet-only)
banks and more than 1,000 traditional banks and credit unions
with Web banking services. Online banking has yet to catch
on fire.
So Why Talk About Internet Banking?
It's about our future, where digital data eliminates paper
checks and deposit slips, bills in the mail and most of our
cash needs. Everything in our personal financial life will
be in one space, integrated, quickly accessible and securely
stored away when we're finished with it.
If today's progress seems relatively modest, it actually
constitutes a major step forward. Both virtual banks and
Web banking services provided by the brick-and-mortar institutions
we know so well offer us easy 24 hours-7 days a week access
to our accounts. Many offer much more, depending on their
size and partnerships with other financial service companies.
Using a basic online banking service, you can see balances
for all of your deposit and loan accounts and pull-up a
chronological list of activity on each one. You can print
a statement, send a stop payment request, transfer money
among accounts, and make a loan payment. With some services,
you can even send money to what's called a "foreign" account,
which is actually an account you have at a different bank
or at a brokerage firm.
Then there's bill pay. When you click on "Bill Pay," you
move to a separately secured part of most online banking
sites. Usually another service provider, one who specializes
in electronic funds transfers and payments, actually does
the work. You set-up the recurring and "one-time-only" bills
you want to pay, schedule when to pay them, authorize payment,
and receive confirmation.
Want to apply for a loan? Need to know how your brokerage
accounts are doing? With links to either their own loan
and investment service departments or those of business
partners, many online banking sites deliver this information,
too.
Why Aren't More Internet Users Banking Online?
According to a study by Cybercitizen Finance last year,
one third of all customers who opened online banking accounts
with virtual banks closed them. Poor customer service was
a primary issue (along with difficulty navigating the bank's
site). You can expect, therefore, to see action taken to
improve online banking customer service.
When things go wrong, customers want a fast, accurate,
knowledgeable response. Virtual banks, without offices where
customers get face-to-face answers, must rely on e-mails
and phone calls. It's a huge challenge that leaves many
users frustrated and dissatisfied.
How well do call centers work? Do customer care representatives
know enough about technology, banking and your account?
Is e-mail the right mode of communication?
There are other issues. If you need a cashier's check,
online banking may not be able to provide it. How do you
deposit checks you receive? How many ATMs accept your card,
and are they convenient to where you live?
Internet banking has definite appeal: it's easy, available
whenever you are, fast, smart, and the "new" thing. Beneath
the allure, however, lies the reality. It takes time to
set-up online banking and bill payment (although setting
up any kind of new account can be time consuming); quick
access to your accounts depends on your browser and the
speed of your computer modem (especially when downloading
information); and completing transactions depends on your
learning the system and on the site functioning correctly.
Now for the big online banking issue: security and privacy.
Straight talk and effective education about security helps.
For many, waiting to see how it all shakes out is even better.
What's the Bottom (On)Line?
The U.S. financial system is awash in paper transactions.
Electronic fund transfers can--and will--eliminate much
of the pile of paper processed every day. EFT is growing
because it's necessary and makes sense. Whether you embrace
online banking early, or find yourself gradually moving
into the digital financial space, it is our future.
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