Crain's Chicago Business


Online banking popularity grows

By Kelly Quigley

December 04, 2002

The popularity of online banking  continues to grow with about 37 million
Americans, or 32% of U.S.  Internet users, now performing routine banking
tasks over the Internet,  according to results of a new survey from the
Pew Internet & American  Life Project.

That's up a whopping 164% from the 14 million Americans who said they
used online banking in 2000, according to the study released late last
month.

The trend holds true for Chicago-area banks, which are reporting a surge
in online banking. The number of customers using the Internet to check
balances, transfer funds or pay bills has mushroomed in the last two
years, driven by a lack of time, a desire for convenience and an
increasing number of fees charged for interacting with bank tellers.

"People are feeling more comfortable with online services in general,"
such as ordering items from auction sites like eBay Inc. or books from
Amazon.com, says Tom Kelly, a spokesman for Chicago-based Bank One N.A.

Bank One has gradually expanded its online capabilities since launching
the service in 1994. As of Sept. 30, the bank had 1.3 million registered
online banking customers-up 58% from 2000, Mr. Kelly said.

He could not say how many of those customers transfer balances or use the
banks online bill pay service, which costs $4.95 per month.

Rolling Meadows-based Fifth Third Bank, which launched its Internet
services in 1999, says its online user base has more than doubled since
2000, to nearly 1 million from about 300,000. Fifth Third's defines its
online banking customers as registered users who have made transactions
on the Web, but also could not provide a breakdown of how many customers
use its Web site simply to view statements versus conduct transactions.

The bank's online base "has been growing quite rapidly," said Ron Senci,
executive vice-president of retail banking for Fifth Third. "We find that
once we show the customer the process and they learn to use it, they're
apt to stay with it."

A spokesman said Fifth Third's online bill-pay services, which costs 30
cents per paid bill, also is growing, but the bank would not disclose its
membership base.

Rapid growth rate

The Pew Internet project-a Washington, D.C.-based nonprofit group that
studies the Internet's impact on society-defines online banking as using
the Internet to view account balances, transfer funds, pay bills or
conduct any other business typically performed at a bank branch.

The organization says more Americans use the Internet to buy products
online-73 million-or to book travel reservations-59 million-but those
activities are growing at a slower rate than is online banking.

In a poll of 2,092 adults Pew surveyed this fall, the majority cited
convenience and time saved as the top reasons for banking online. More
than half, or 52%, said they feel online banking gives them better
control over their finances, while 41% like the privacy of banking at
home and 36% said there is more information available to them online.

Internet users 18 to 29 years old were most likely to use online banking
services, while those over 65 were least likely, Pew found. The older age
group, however, was most likely to track investments online.

The study also found that college-educated and affluent Internet users
were more likely to bank online.

That rings true for Chicago-based Northern Trust Co., which caters to the
well-heeled market. Peter Ruegsegger, who heads Northern Trust's online
banking unit, said the number of customers who use Northern Trust's
online offerings has grown at least 40% each year since 1999. He declined
to provide specific numbers.

Northern Trust's wealthy customers go online to view trust and investment
information, conduct general banking transactions such as transferring
funds and to use a new Web site function that aggregates financial
information from outside institutions, Mr. Ruegsegger said.

He expects the number of online users to grow over the next year, as more
customers learn about the site's functions or turn to the Internet for
convenience.

As the popularity of Internet banking grows, banks are making
enhancements to attract and retain even more customers. Bank One, for
example, recently added a free feature that allows customers to view
scanned images of their cancelled checks.

Fifth Third is giving its Web site a makeover and adding new
money-managing software. The bank hopes the changes will help generate
new users for its online bill-paying service.

"We're trying to make things as easy as possible," Mr. Senci said.


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