Home Banking - the Future Wave?

By Newkirk, Kristine M. | Independent Banker, April 1996 | Go to article overview

Home Banking - the Future Wave?


Newkirk, Kristine M., Independent Banker


For surgeon Bill Gibbs of Searcy, Arkansas, the world of online banking with a personal computer opened up in January with an attention-getting letter from his community bank.

Although far more adept in the operating room than on a computer keyboard, Gibbs, 45, was technologically savvy enough to know that PC banking would save him time on paperwork and reduce worries about late payments. So the following week, Gibbs visited his bank, First Security Bank in Searcy, Arkansas, to inquire about their newest service--home banking.

Within a few weeks, Gibbs, an important First Security customer, had eliminated his regular bill payment ritual. "I used to sit for an hour twice a month. And there would be times when I needed to pay bills, but I didn't have the time, so a payment would be late," he says.

With PC banking, however, his bills get paid when it's convenient for him, not when it's necessary. "Now I can sit down whenever the computer is on and either pay the bill

as it arrives

or schedule the bill to be paid later."

With the advent of this latest community banking service, Gibbs is convinced that his days of entering a bank branch are limited "I have very little need to go to the bank. And if I could do it all electronically, I certainly would."

GROWING DEMAND

Gibbs is part of a growing wave of consumers using home banking products. These consumers want convenience--to do their banking when they want and where they want. Already, over half of banking transactions take place outside bank branches, according to First Manhattan Consulting Group.

Moreover, many industry experts agree that the people taking advantage of a wide range of available electronic banking services--from telephone-response systems to online computer networks--tend to make the most profitable depositors. Studies continue to find that customers attracted to electronic banking alternatives usually maintain more higher value accounts than those who adhere to more traditional delivery routes.

This is especially true of current PC banking enthusiasts, who are usually computer-literate professionals. William M. Bluestein, director at Forrester Research Inc. in Cambridge, Massachusetts, estimates that 40 percent of American households will have computers within four years. And most of those households will be concentrated in the middle- and upper-income brackets, a market which tends to be financially astute and open to personal finance products.

Electronic tools, from the telephone to the home computer, will change the face of banking irrevocably. These tools have created an intense public interest. Newly aware and curious, bank customers are now queuing for a chance to try out the latest electronic wizardry. This, in turn, has captivated the imaginations of many marketing departments in banks and nonbanks.

TELEPHONE BANKING

Many bankers expect the number of home banking consumers to surge. Telephone banking is already serving millions of bank customers.

Telephone banking, where financial transactions are performed over the telephone, takes place in approximately one-third of the country's homes, reports Payments Systems Inc. (PSI), a financial consulting firm based in Tampa, Florida.

Account balance inquiries and cash transfers are common telephone banking features easily accessed by telephone 24 hours a day. For a monthly fee, some telephone-based systems offer limited bill payment service.

Farmers State Bank in Marion, Iowa, offers customers the option of receiving account, loan status and transaction history information over the telephone. The bank's system also helps customers with stop payments, check orders and reprints of account statements.

"Our customers like the service because it is convenient," says Steve Godar, Farmers State Bank's systems administrator. "It is not convenient for a lot of customers to call when the bank is open, so now with telephone banking they can call anytime--day or night--to find out what their balance is.

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