Your Friendly Banker, The Web

Erik Schneider hated to contend with the mountain of bills he kept returning to after his frequent business trips. So last spring when the Princeton (N.J.) sales and marketing consultant learned about Security First Network Bank, which claims to be the first bank on the World Wide Web to allow customers to pay bills, shuffle funds between accounts, and handle other banking chores, he was thrilled. "I have my computer with me all the time," he says. "So it's not going to get any more convenient."

Or cheaper. Basic SFNB checking accounts carry no monthly fees or minimum balance requirements, and since the bank, with only one physical branch--in Atlanta--carries lower overhead costs than its more established competitors, consumers are able to reap the benefits. For instance, Schneider opened a money market account at 3.5%, well above the national average of 2.6%. SFNB hopes to add insurance products and brokerage capabilities. Of course, in some ways, Schneider still banks the old-fashioned way. He uses an SFNB ATM card, writes the odd paper check, and phones a customer service representative, available toll-free at any time.

HYPE, NOT HELP. SFNB is tiny relative to most of its competitors. But most major banks, and scores of smaller institutions and credit unions, soon will be letting customers "bank by browser" as well. The bulk of current banking-related Web sites serve up little more than glorified online brochures. Until now, most consumers who have wanted true home banking have generally punched commands into a touch-tone phone or connected with a bank using a personal finance software program such as Intuit's Quicken or Microsoft Money. Or they used proprietary software that connects with a bank's private network.

Chase Manhattan customers have been able to transfer money, pay bills, and monitor account activity using Money or Quicken, at a cost (deducted from your account) of $2.95 per month and 50 cents per transaction. In April, however, Chase (800 242-7324) introduced a proprietary program that lets consumers handle these same capabilities for free. Later this year, customers will be able to do the tasks on the Web, also without extra fees being charged.

Chase will be joining a still relatively small roster of institutions, including Bank of America, First Union, Huntington Web Bank, Royal Bank of Canada, and Wells Fargo, that allow customers to make transactions at their Web sites. But Jupiter Communications, a market research firm, predicts that the number of online banking households will reach 4.5 million by the end of 1997, up from 2.5 million in 1996. By yearend, online transactions will grow from 155 million to 286 million, Jupiter figures. And by 2002, more than 18 million households will make some 1.4 billion transactions.

Meanwhile, a number of banks hope to broaden their online fare, offering rapid approval on mortgages, auto loans, insurance products, securities trading, and so on--that is already available elsewhere on the Web. For example, consumers who access the Quicken Financial Network (either directly from Quicken software or from their browsers) can get stock and mutual-fund data, real-time insurance quotes, and the Bank Rate Monitor to find surveys on CD rates and home equity lines of credit.

Microsoft's Investor Web site lets people track portfolios, read business news, and trade via Web links to E.Schwab, Fidelity's Web Xpress, E*TRADE, and PC Financial Network. Meanwhile, Block Financial's Conductor Web site (www.con, is a financial supermarket where consumers can pay bills, pore through stock data, and get free insurance quotes.

Some important behind-the-scenes developments also will simplify online banking. In January, CheckFree, Intuit, and Microsoft agreed to a standard called Open Financial Exchange to make it simpler for banks to more seamlessly swap data over the Net with consumers via desktop and Web-based software. Products adhering to OFX should appear this fall. Quicken or Money users, for instance, will be able to view the same up-to-the-second balance and transaction information that is available at an ATM.

SHOP AROUND. With everything a mere mouse click away, it may not much matter if your bank is located across the street or the country. Consider: About 30% of Bank of America's home banking checking customers reside outside the 11 states in which the bank has a retail presence. Says David Weisman, director of money and strategies at Forrester Research: "You no longer have to settle for whatever the local bank offers."

Of course, if you're happy with your Main Street thrift, ask them what their cyberplans are. When will the bank offer bill-paying and other account capabilities over the Net? Do they expect to provide a full range of financial planning and brokerage services? Then examine the bank's current Web site. Does it offer easy navigation? If it doesn't meet your expectations, check out the home pages of other well-known banks or consult FiTech Inc.'s MyBank Directory page (, which provides hyperlinks to more than 600 U.S. and foreign banks' Web sites.

What's more, Internet transactions cost banks far less than do those in traditional branches. According to Booz, Allen & Hamilton, a transaction in a full-service branch costs $1.07. By contrast, the average telephone transaction costs banks 54 cents; ATM machines, 27 cents; and PC banking, about 1.5 cents. A Web transaction costs just a penny. In time, consumers should expect savings to be passed along to them.

Some banks are already shedding online fees, though you'll still typically fork over between $3 and $7 per month for electronic bill paying. Then again, if you write more than 20 checks each month, you'll save on 32 cents stamps. Meanwhile, many companies are working on "bill presentment" systems, so when your utility bill comes due, say, a message will pop up asking if you want to pay it.

Many of the consumers who have resisted cyberbanking thus far are worried about security. But banks, which employ top-notch encryption techniques, are trying to assuage these fears. Wells Fargo, for example, guarantees your losses if funds vanish from your accounts. And with increasingly secure browsers and the advent of "smart cards"--a chip embedded in a credit-card- like piece of plastic--Internet accounts should become even safer. Indeed, Wells Fargo plans to use a Mondex smart card that, along with passwords, will enable consumers to digitally identify themselves.

ELECTRONIC MOOLA. Smart cards may also eventually be used to help turn PCs into ATMs. No, your computer won't be able to spit out cold currency. But in the future, smart cards may digitally store the electronic equivalent of cash, downloaded via your PC. Westport (Conn.)-based Home Financial Network has an alliance with Fischer International, which makes a $60 smart-card reader that fits into a personal computer's 3.5-inch disk drive slot.

However, it may be years before smart cards are widely accepted in the U.S. Minus smart cards, HFN presently sells its banking software to Barnett Banks, First Union, and other institutions.

The next generation of financial management offerings over the Internet should also incorporate the "push" model popularized by PointCast, a Webcaster of news and other services. The idea is to dispatch custom-selected information directly to consumers, thereby sparing them the bother of searching the Web for it. MECA Software now peddles its Managing Your Money program directly to banks. The banks, in turn, are passing the program on to customers, usually at no cost. MECA cut a deal with Marimba, a software company, to test a concept in which each morning, people will be able to peek at account balances, check out company news related to their stock holdings, and get the local paper--all without having to log onto the Net.

Through its One On One Banking service, Vertigo Development Group is working on a similar idea. Intelligent software agents will let consumers receive such personalized messages as "your six-month CD is coming due next month. Click here to explore investment options."

Several other behind-the-scenes ventures will make life easier for those who want to bank over the Internet. Who knows? Before long, it may be simpler to get cash from your computer than your piggy bank.

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