Internet banking continues growth, focuses on small-business owners

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Put away the bricks and mortar, the growth of the banking industry is coming through the Internet.|ret||ret||tab|

More than 22 million U.S. households about 20 percent of the country use online banking, according to John Hall, a spokesman for the American Bankers Association based in Washington, D.C. That number is projected to grow to 35 million by 2005, according to Online Banking Report, a trade newsletter based in Seattle.|ret||ret||tab|

"More than half of all banks offer Web-based services banking," Hall said. "They all probably have Web sites, but not all offer the home-banking option. More community banks are doing this (because) it is much more affordable. Turn-key technology is available. A service provider can set up an online banking presence for a community bank in a simple and easy way."|ret||ret||tab|

Online banking services for individuals vary by bank, but they can provide customers the ability to check balances, transfer funds, order stop payments, order checks, pay bills, view current activity on accounts and enter a change of address.|ret||ret||tab|

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Local impact|ret||ret||tab|

Liberty Bank has seen a steady growth in online customers since it started the service three years ago. Ron McDowell, senior vice president at Liberty Bank, estimated 25 percent of the bank's customer base makes use of its online services. The bank adds about 100 accounts to the online customer line-up each month, he said.|ret||ret||tab|

"I think we can attribute this to ease of use," he said. "They can see everything they've done online, and they receive e-mail confirmation of every transaction."|ret||ret||tab|

Citizen's National Bank began its online services in May 2001. Dave McBeath, executive vice president of Citizens National Bank, estimated 10 percent to 15 percent of the bank's customer base use online banking to some degree.|ret||ret||tab|

Although Citizen's had hoped for more participation, McBeath said a recent trade publication indicated 15 percent penetration after the first year can be expected, so the bank is on target.|ret||ret||tab|

Empire Bank is slightly below its goal of having 7 percent of its accounts signed up for online banking, said bank President Mike Williamson.|ret||ret||tab|

"It takes people a little while to decide to sign up. Some people do it a little more readily if they're using the Internet for other things," Williamson said. "Sometimes you have to talk to them a couple of times and help them understand the benefit of the service.|ret||ret||tab|

"But you can't make generalizations about what's right for everyone. As long as its right for some people."|ret||ret||tab|

The addition of Internet-based banking is just one more tool in a bank's toolbox of services.|ret||ret||tab|

"Actually, the number one thing people look for when selecting a financial relationship is convenience," Hall said. |ret||ret||tab|

"How that person defines convenience varies widely. They like the convenience to see if a check cleared at 2 a.m. But they also like to go the branch and talk to a customer service rep about a new line of credit. It really depends for what you want."|ret||ret||tab|

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Business customers|ret||ret||tab|

In addition to servicing individual customers, banks are eyeing growth in the small-business segment.|ret||ret||tab|

"Small-business people wear many hats and do banking at nonbusiness hours," Hall said. "So accessing their accounts from a bank site is important. Small business can do everything from cash management to bill payment. Cash flow is extremely important to a small business, so they can set up a cash-flow function on the Internet account."|ret||ret||tab|

Empire Bank has a sophisticated Business Link program which is designed for small businesses.|ret||ret||tab|

"If gives them better access to their accounts, and they can more readily get information," Williamson said. "It's a good service, not just because its ours. It's a benefit to customers who are using computers, and most of them are anymore."|ret||ret||tab|

The program helps business owners with cash flow and gives them the ability to make better business decisions, Williamson said.|ret||ret||tab|

"They can find out what their balances are if they're investing; they can see which checks have cleared and if they have questions," Williamson said. "Whether it's ours or anyone else's service, I think businesses are finding that to be a convenience for them."|ret||ret||tab|

McDowell cites the advantage one business client found by using Liberty's business program.|ret||ret||tab|

"He has several businesses in outlying cities and states, and he uses our online banking product to do a cash concentration from those outlying banks into Liberty Bank," McDowell said. "So instead of having to write checks and taking the money from all the banks, he goes onto our Web site, creates online transfers and brings the money electronically into his account at Liberty."|ret||ret||tab|

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Security issues|ret||ret||tab|

While some people may still have distrust of entering sensitive information on an Internet site, people accustomed to using the Web are not too concerned about a breach, said Mary Friend, customer service representative for Empire Bank.|ret||ret||tab|

Friend said Empire has 132-bit encryption on its system.|ret||ret||tab|

McBeath and McDowell said the same customer confidence has been evident at their facilities. |ret||ret||tab|

Much of the fear some people have is because the Internet is still fairly new, McDowell said.|ret||ret||tab|

"A few years ago people worried about using ATMs. Now they've become a standard. That's the way Internet banking is going," he said.|ret||ret||tab|

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