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Online Banking: The e-Perks Arrive

To attract small-business customers, community banks are unveiling an array of new online services: direct deposit for payroll, detailed balance reporting, wire transfers. Over the next three years, 74% of community banks plan to offer such products, compared with just 27% today, says Grant Thornton International.

Just one problem: Small-biz owners have little appetite for Internet banking. In the second quarter, just 15% of small businesses used their primary bank's Web site for transactions-- and that's down from 19% in the first quarter, says Barlow Research Associates Inc.

Why the reluctance? Entrepreneurs still tend to choose their banks based on old-fashioned customer service, not technology. "I can call my banker at home on a Saturday," says Eddie Herbert, president of You Oughta Be In Pictures Inc., a three-person photo studio in Maurice, La. who's not inclined to use cyberbanking. "If I apply for a loan, I want to hear why I didn't get it."

Still, some banks have proven they can make it work. At American Business Bank in Los Angeles, 20% of clients use the Web to monitor transactions, transfer funds, stop payments on checks, and pay bills. But that's because customers still get plenty of personal attention, says founder Donald P. Johnson.

Take Roxanne Medina, chief financial officer at Howard Building Corp., a 75-person construction company in Glendale, Calif. Medina logs onto American Business Bank's home page to transfer money and monitor interest rates on the company's accounts. For trickier transactions, she says: "I can pick up the phone and they will hand-carry you through the system." That's what you expect from a community bank. If the bankers won't provide it, they'll end up with a bunch of costly toys and no one to play with. By Naween A. Mangi

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