Time for a Throwback... Way back. - WBA staff dusted off our past publications and found some gems for your enjoyment:
No longer is brick-and-mortar the stereotypical look for financial institutions.
Cyberspace is making its entrance as the FDIC states that more than 3,000 financial institutions have a website and 525 of them are transactional. In less than four years, 30 million households are projected to be utilizing Internet banking, versus zero only a few years ago.
The introduction of inexpensive Internet technology allows the smallest institutions to compete with the largest institutions in the world. Consumers can't really tell the difference between a community bank and a mega-bank from a well-designed web site.
The benefits of a good web site are never-ending, with the most obvious being:
- lower cost per transaction
- increased return on investments
- increased customer satisfaction
Who Uses the Internet and for What?
It is not just the younger market that wants quick and easy services, like the ability to pay bills online. Baby Boomers, senior citizens and business owners are adapting to Internet use as well. Thomas Farin, president of Madison-based Farin & Associates, Inc., suggests the five biggest target audiences for a site: car buyers, homebuyers, business customers, parents with young children and seniors.
Customers are already regarding the Internet as a preferred place to shop for mortgage rates. Online mortgage lending allows lenders to simplify the application process for customers. A streamlined, electronic application process combined with a back-end approval system is the key for a small bank to expand its geographic reach.
What Can Banks Offer Their Customers?
The web site for a financial institution needs to be more than simply a big brochure of services. An Internet presence that combines home banking with an array of products and a procedure for handling inquiries and comments needs to be in place from the beginning.
Integrated e-commerce is one emerging trend that small banks cannot afford to treat passively. Many institutions offer specific online features targeted to businesses by allowing them to pay taxes, pay employees with direct deposits and receive payments from customers.
Here are some ideas for a customer-friendly web site:
- Product, service and rate information that is presented on a site will increase consumer comfort levels and encourage them to purchase.
- The presentation of Decision Support Tools, such as a loan payment calculator, add to a site's value.
- Branch locations and hours, maps, directions and a bank history can inspire confidence in the institution.
- Brief community information can encourage consumers to use the site as a community resource.
- Featuring local weather and stock quotes may encourage users to make your site their launching point for the Internet every time they log on.
How can the Customer and Bank Connect?
Typically, electronic bank accounts come in two varieties: the consumer has personal finance software on their computer (i.e. Quicken or MicrosoftMoney) and connects to the bank's Internet address, or, without any special banking software on their home computer, they simply connect to the bank using whatever means they're already using to log on to the Internet.
While many banks are offering a free trial period for Internet banking software, costs to the consumer vary. Flat-rate fees are often the case, with amounts reduced for premium account holders. An average rate for online banking is around $5 per month. If a customer normally sends out 20 bills each month, they're saving over $6 in postage immediately. Sometimes free account inquiries are offered, while online bill paying, which is a potentially expensive action for a bank, is only available for a fee.
What About the Privacy Issue?
Online security is—and probably should be—the top concern of consumers. Accordingly, most online banks will have a portion of their website devoted to explaining the measures that they employ to protect the security of consumer transactions. Many online banking systems employ the direct-modem connection, so those transactions are not even transmitted over the Internet. If consumers are making banking transactions on your site that do take place over the Internet, make sure that your bank is using high-end encryption-a process developed to scramble data so that only the intended receiver can use it. Additionally, online banking services often feature passwords and personal identification numbers that the consumer selects.
Online banking will not only strengthen existing customer relationships but also provide a means of acquiring new customers who cannot get the service elsewhere. Since the recent enactment of the Gramm-Leach-Bliley Act, the financial industry will experience significant change now more than ever. Internet banking will become a major tool for banks to keep up with that change.
Originally published in the June/July 2000 edition of the Wisconsin Banking Digest.