JOURNAL ARTICLE:
The world of online banking: Christy Heady Bankrate.com
Online banking is taking off among consumers.
According to this article:
The number one reason people resist online banking is Lack of privacy. "It's the reality-perception thing," explains Tom Dittrich, VP-marketing for the Home Financial Network.
Bar the door
In this section the author has explained to consumers that online banking industry is sensitive to the consumers fears. Banks and solution providers are stacking up firewalls, encryptions, pin codes and passwords against hackers like sandbags against the flood. The stakes are high, with the rising trend toward full Internet access to your entire range of accounts, from checking and savings to CDs, car loans and mortgage, all in one bank. Lucky the bank that becomes your one stop shopping place
Smart banking
Even a self-proclaimed small community bank like ANB is close on the heels of the big guys, both with security measures and services. Take Citibank, for example, which has locations in 56 countries, and is currently offering online banking in eight. An upgraded online version of their dialup home bank system is now available worldwide. Customers are using it to do everything but get cash at home. "And we're working on that one," claims Susan Weeks of Citibank. "We have a smart card pilot under way in upper Manhattan. There are devices you can hook into your computer and download cash into your card."
While smart cards are still struggling to be accepted in the United States, analysts like Cliff Condon of Forrester see them as the trend more for security safeguards when encoded with digital certificates. "Digital certificates are like your signature on the PC," he explains. "It's what authorizes you as you, almost like your driver's license. It's just another layer of security."
The race is on
One look at the number of more-better-faster home banking delivery systems unveiled in December 1997 at the Retail Banking Services Conference in New Orleans proves the major interest by powerful companies.
Bill Gates announced in a satellite linkup to bankers at the conference that Microsoft is developing software to allow banks to use their old computer systems to offer electronic bill paying. Apparently the new Windows program enables incompatible computer systems and data files to share information. This has been a roadblock to widespread use of Internet banking.
On Dec. 4, 1997, Wells Fargo and Key Bank announced that they would pilot an electronic bill presentation and payment service designed by Microsoft and First Data Corp. What does it do? All your bills can be collected on one Web site. You simply point, click and pay in a fraction of the time it would take to write a check, record it in the checkbook and dig up a stamp.
Bill presentation is not exactly new. Atlanta Internet Bank has offered the service since October 1996 and called it a significant advancement in bill payment, according to D.R. Grimes, AIB CEO. But it is gaining momentum. Anything to make online banking as seamless as possible.
Ask your banker
Some banks offer both Internet and dialup access. And their fees for account transactions and investments vary between banks as much as the services they offer. For example, most banks with an online site will let you view account balances and transfer funds between accounts for free, but paying bills can generate another monthly charge.
If you are considering banking online, here's a list of questions you should ask the customer service representative at your bank:
Find out if your financial institution offers or plans to offer an online banking service. You will want to find out all the charges and fees involved and what types of transactions you can and cannot do online.
When you sign up for online banking, ask your banker how long it takes for each transaction to take place. Does a funds transfer take place immediately? If you pay your mortgage on a Monday, will the payment be debited from your account and credited to the recipient on time?
Suppose you pay your electric bill electronically on Tuesday; however, once your financial institution's processing department receives your "electronic request," many financial institutions may still have to print out a check and mail the payment to the electric company. The result? Your electronic bill payment might not get paid until five business days later. Find out the details from your financial institution. (Note: For BankNOW banks, money is debited on the day the check clears.)
Ask your banker about the security of online banking. Typically, the types of encryption used in online banking allows only you and the bank to see your account information. Ask your banker to explain the details in layperson's terms just how it works.
Online banking has been around for ten years, yet that does not mean mistakes can't happen. In the event of a technical problem or duplicated transaction, ask your banker what steps you will need to take to rectify any situation -- be it your error or not. If you inadvertently duplicate a transaction or send money to the wrong creditor, you need to know how to correct the error and not pay substantial bank fees in the process.
Online banking -- how did it happen and where is it going?
While home banking has been discussed for years, 1996 was when many banks made all those predictions happen. By midyear, 38 percent of the top 150 banks in the United States offered PC-based home banking services and most of the remainder plan to offer services within the next two years. And virtually all have some sort of telephone-based banking service already.
Furthermore, those banks that have had PC-based home banking -- whether they've offered the service for a year or ten years -- started to see a critical mass of dedicated users in 1996. Industry leader New York-based Citibank, which has been plugging along on home banking for 20 years, is believed to have signed on about 250,000 consumers for its online banking program, and at least three-fourths of those have signed on since 1995, when Citibank eliminated its fee for home banking services.
It's easy to do online banking. Sit down, boot up your computer and dial in to AOL's Banking Center. You can balance your checkbook, invest in certificates of deposit, pay your mortgage and more, all from home. You can even pay your credit cards right online! No need to jump in the car and fight traffic to get to the bank before it closes. Plus, you can do your banking whenever you want. You are not limited to lobby hours.
Banking on the future
Is online banking the wave of futuristic money management? It's possible.
Major players are getting in on the online action. Intuit, Inc., the maker of the Quicken home finance software, offers its product BankNOW through America Online where users can check account balances, transfer funds between accounts and schedule bills to be paid, while the software automatically calculates the impact of transactions that haven't cleared the bank. Some banking customers on AOL can even complete loan applications using a personal computer linked by modem to their bank. And on May 20, 1998, BankNOW was made available to Internet users to download, too.
Security, of course, is always a concern by many consumers. Typical online banking services available are protected with a PIN that members use to authenticate each banking transaction. Security measures also feature 1024-bit master RSA key encryption for session key exchange and 128-bit triple DES encryption for data encryption.
Using 128-bit encryption means that it is virtually impossible for anyone using current technology to steal information. Simply put, it is like sending your mail inside a steel safe. Of course, restrictions apply: The 128-bit encryption is only available to members in the United States and Canada and federal regulations only allow U.S. and Canadian customers to download the 128-bit encrypted software.
Driving forces
It's no secret that online banking is going full-steam ahead. Customer demand is hot for flexibility and responsive services, and intense financial services competition is requiring commercial banks to investigate alternate customer delivery channels. The result? Online banking.
Here's more proof. Personal computers are outselling televisions. But, many consumers continue asking, what about security? For one, Hewlett Packard says its explosive online system is easy-to-use, and its electronic commerce security is defined and improved.
At the one-stop cyberbank, customers can set up various accounts, pay bills, monitor credit card balances and brokerage accounts, and shop for the best insurance rates.
Customers may first be leery about electronic bill payment, but usually feel confident about using the service after about six months. Online banking also saves the customer time, notes Mahan, and has been identified as one of the most sought-after commodities today. The average time spent setting up new accounts at a traditional branch bank is more than five hours, while online accounts can be set up in a little over an hour.
Interestingly, the majority of online bank users -- 44 percent -- perform their transactions using their bank's own computer network. Twenty-seven percent of the users polled use the Internet, while 21 percent transact their banking needs through an online service, such as America Online. Survey results also report that 18.2 percent of those polled are happy with their current home banking service while a slim percentage of online banking users -- 5.5 percent -- aren't happy with their service.
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