Another problematic area of the banking cycle that many online operations
failed to notice (and still fail to notice) is the relative availability of
secure, digital credit which businesses accept from customers. The
traditional form of credit necessity via checks, bank drafts, and cash
almost guarantee that the online banking business would be limited in its
scope. Banks often forget to do a complete "benefit analysis," attempting
to generate income from traditional sources (ATM's, Etc.) while competing
against their own interests.
Pratik
Pratik Patel
Managing Director
CUNY Assistive Technology Services
the City University of New York
(718) 997-3775
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-----Original Message-----
From: VICUG-L: Visually Impaired Computer Users' Group List
[mailto:[log in to unmask]] On Behalf Of Kelly Pierce
Sent: Wednesday, October 29, 2003 8:28 AM
To: [log in to unmask]
Subject: Despite Online-Banking Boom, Bank Branches Remain King
Unfortunately, as the articles suggest, many banks have fully not thought
through their web strategy. Also, how do you get cash or make a deposit
through a computer or on the telephone? It looks like the branch is here
to stay, particularly after Bank of America spent $47 billion on the idea
on Monday.
Kelly
The Wall Street Journal
October 29, 2003
Despite Online-Banking Boom, Bank Branches Remain King
By RICK BROOKS and CHARLES FORELLE
Staff Reporters of THE WALL STREET JOURNAL
Ellen Tanowitz, a 33-year-old lawyer in Newton, Mass., pays her
mortgage, electricity, gas and phone bills every month out of a free
account at NetBank Inc., an Atlanta bank that does business only on the
Internet.
But she can't imagine living without the convenience offered by her
local bank, where she keeps a separate account and stops about once a
week to withdraw cash.
"It would be hard to have just an online bank as your only bank if
you need things like certified checks," she said. "Each sort of serves
its own purpose."
That isn't the way online banking was supposed to work out. In the
heat of Internet hype a few years ago, conventional wisdom held that
once customers such as Ms. Tanowitz had gotten their arms around online
banking they would abandon old fashioned brick-and-mortar branches. No
more looking for a parking space. No more waiting in line. The branch,
with its surly clerks and drive-through squawk boxes, was toast.
Instead, even many customers who like the convenience of online
banking still want face-to-face contact with their banks. That reality
is underscored by Bank of America Corp.'s $43 billion deal to buy
FleetBoston Financial Corp. that was announced Monday. Bank of America
has the most heavily used online-banking system in the country, with 8.8
million customers. But it nonetheless is aggressively expanding its
physical reach, aiming to open 550 new branches by the end of 2005. The
purchase of FleetBoston will add 1,460 additional branches, 3,500
automated-teller machines and more than three million Internet banking
customers.
Analysts expect Bank of America to convert Fleet customers to the
Charlotte, N.C., company's online system. Fleet typically charges $4.50
a month for online payment of bills such as those from utility
companies. In contrast, Bank of America last year abandoned fees for
paying bills online. It concluded that any lost revenue would be more
than offset by larger account balances and fewer customer defections. A
Bank of America spokeswoman said it's "too early to talk about the
impact" of the takeover on the combined bank's online services.
Analysts believe some version of the Bank of America approach likely
will be the model for how online banking works in the U.S., at least for
the foreseeable future. "The branch is still the dominant channel," said
Raj Dhinsa, a senior analyst at market-watcher Jupiter Research. "The
ATM, phone and Web are all critical elements of the multichannel
experience."
Already, Bank One Corp., Fifth Third Bancorp and a growing number of
smaller banks are joining Bank of America in reducing or eliminating
extra fees charged to bank online.
Jupiter projects that 29.6 million U.S. households will use online
banking services by the end of this year, up from 3.8 million in 1998.
That number still is dwarfed by the number of users and transactions in
traditional banking, and other analysts say the number of households
that do substantial amounts of their banking online is even smaller.
[Cyber Accounts]
Richard Bell, a research manager at Financial Insights, a unit of
market-researcher International Data Corp., said that only about 8% of
the approximately 100 million U.S. households that have a bank account
use online services in a meaningful way, which he defines as significant
activity such as a bill payment or an account transfer in a primary
account within 30 to 45 days.
"The numbers have been creeping up gradually over the past three or
four years," Mr. Bell said. But "the overall consumer-penetration rate
in the United States remains rather modest." Banks haven't had much luck
moving people to the Internet in part because banking isn't something
most consumers get excited enough about to care how it happens, he said.
"It's about as fun as doing the laundry and probably better than going
to the dentist, but not by a whole lot," Mr. Bell said. "As a
consequence, people are very slow to change their habits."
Instead of supplanting banks, the online services have replaced
certain services. "What you see is transaction migration," said Avivah
Litan, a vice president at research firm Gartner Inc. Customers begin
checking balances online, for instance, but continue to do other
services at banking offices.
All of that helps explain a series of high-profile flops for
Internet banking. Bank One killed its heavily advertised
WingspanBank.com Internet-only bank in 2001 after it drew barely a third
as many customers as Bank One's namesake online bank. Citigroup Inc.
pulled the plug on its Citi f/i online bank because customers chafed at
not being able to visit branches. Royal Bank of Canada folded its
Security First Network Bank unit, which billed itself as "the world's
first Internet bank," into the parent company's regular operations.
Many banks made decisions that have kept online banking from
catching on as quickly as anticipated. Some still make online customers
choose whether to get their monthly statements either by mail or online,
but won't give them statements both ways. Some don't offer electronic
statements at all, or make it difficult for customers to change
passwords and user names.
"Lots of little things all add up," said Linda Garner, a senior vice
president at U.S. Bancorp, which recently simplified access to bank
statements and balance transfers for its 1.8 million online customers.
The bank also pays $5 if an Internet banking customer's e-mail to
customer service isn't answered within 24 hours.
Douglas Freeman, a former Bank of America executive who now is chief
executive of NetBank, said the traditional banks' dependence on branches
means that hard-core online customers always will be forced to help pay
for branches they don't use. "You have to charge your entire customer
base to cover the costs of bricks and mortar," he said.
But even sophisticated online users often still care most about more
basic banking issues. Brett Moss uses Fleet's Internet banking for "just
about everything" -- from paying bills to checking balances to managing
multiple accounts, including a brokerage account with Quick & Reilly, a
Fleet subsidiary. But while stopping by a Fleet machine in downtown
Boston during lunch Tuesday, Mr. Moss said what he really wants out of
the merger with Bank of America is more cash machines.
"I'm still frustrated with that $1.25 fee" charged for most
withdrawals at non-Fleet ATMs, said Mr. Moss, an account manager at
Savvis Communications Inc., a network-services provider.
Write to Rick Brooks at
[log in to unmask] and Charles Forelle at
[log in to unmask]
Updated October 29, 2003
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