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.