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Why Banks Want You To Stay Home
If the customer uses an ATM, however, it only costs the bank 40 cents. A phone transaction runs 30 cents. But a transaction done by a customer on a personal computer is just 20 cents, according to the Federal Reserve.
That explains why big Florida banks have begun a serious push to sell customers on banking by home computer - particularly the ATM generation already weaned away from visiting branches and dealing with human tellers.
"PC banking is in the forefront as one avenue that will help satisfy customers and reduce banks' costs," says Adelaide (Alex) Sink, NationsBank's Tampa-based president for Florida operations.
To learn what a customer can do online, we tested PC banking software at offices of NationsBank, Barnett Banks and SunTrust Banks (see box). Here's what we found: The software that's involved will generally run on any recent generation PC or Macintosh. In some cases, the bank has a proprietary program that it provides at minimal or no cost. Others involve the Internet and/or a financial software package such as Quicken, which the customer must purchase. It should take about an hour to read the instructions, install the software and fill in your account information. Banks claim that passwords and other codes guarantee security.
Within a minute or so after the customer logs on, a menu of options appears. One can transfer money among accounts, call up a statement with start-of-day information, or keep tabs on loan or credit card balances.
Some bank programs automatically pay fixed-amount bills (such as a mortgage) on a specific day of each month. They also offer formats in which customers fill in the amounts on pre-addressed forms to pay utility and credit card bills by electronic transfer. One-time bills - to the local travel agent or tire store, for example - can be paid by filling out a "check.''
Most banks let customers apply for loans or credit cards via computer. Some charge monthly fees to help cover their costs, which include arranging the transmission of electronic payments to payees like phone companies and utility companies that are not part of their online systems. Some charge additional fees based on how many times each month the customer uses the service.
PC banking has advantages for the consumer as well as the bank. The programs aren't difficult to use, particularly for those accustomed to using ATMs or working with computers.
Using the PC banking software takes less time and often is less expensive than writing out and mailing checks each month.
The Barnett and NationsBank small business programs appear useful for businesses that have several loans with a bank and/or complex cash flow. That profile fits a lot of Florida businesses - including retailers, restaurants and exporters. Ray Leon, a partner in Boca Raton restaurant Meson Madrid, says availability of account statements on a daily basis, rather than monthly, is among the most attractive features of NationsBank's Business Express. Most users of that program pay a monthly fee of $39.95. Gonzalo de Quesada Jr., NationsBank vice president of business banking in Miami, says it's a sound investment if you just consider that "instead of taking two hours for bookkeeping, you can reconcile things in one minute."
The programs do have limitations. Customers can't check personal credit card balances on cards that aren't issued by the bank, for example. And most banks' programs do not provide access to mutual funds and other non-FDIC-insured products sold by the banks' own securities subsidiaries.
Banks will have to add those bells and whistles to effectively market their other financial products - insurance, brokerage accounts and credit cards - and to capitalize on the busy consumer's desire for one-stop financial shopping. Sink sees it this way: "It is clear that if somebody gets acclimated to PC banking, it will make it easier for them to purchase additional products from the bank." So far, banks have just scratched the surface in developing the base of users for their PC banking programs. While Barnett's Desktop Banking program has been around for three years, just under 1% of Barnett's retail customers are using it, says Catherine Corby, the bank's director of electronic delivery strategy. Bob Landers, NationsBank's computer banking executive for Florida, says most current users of his bank's consumer banking program are "profitable relationships" who have several accounts at the bank.
That mirrors the experiences of banks in New York that are several years ahead of Florida in computer banking, according to Bill Burnham, an associate at financial services consultant Booz, Allen & Hamilton in New York. PC banking "will not become profitable by itself, but what will become profitable is the customer base," he says. "It is straight demographics. The people who can afford and use computers are primarily young, affluent consumers who use a tremendous number of bank products." Burnham's firm estimates that in the year 2000 about 16% of U.S. households will conduct at least some bank transactions via personal computer.
"By the year 2000, our objective is that 10% of our customers will be doing some computer banking at home," Corby says. Barnett is stepping up its marketing beyond its current statement stuffers and messages on ATMs.
In July, NationsBank introduced PC Banking, a consumer program it has been marketing with TV ads in the Miami-Fort Lauderdale and Tampa Bay markets. It has offered a similar program to Florida businesses since 1994.
Between mid August and mid September, NationsBank distributed 23,000 start-up packages to Florida consumers, a number that Sink says is higher than the bank's projections. She says NationsBank projects that "20 to 25% of customers signing up for PC Banking will be new to the bank."
SunTrust launched its PC Banking program in October 1995, and John McGuire, executive vice president for marketing, says the number of users "has exceeded our projection by a very good margin."
First Union Corp., which has Florida's second largest deposit base, will introduce a PC program for consumers this fall.
In May, AmSouth Bank launched a PC program for consumers, while Fort Lauderdale-based BankAtlantic introduced both consumer and business programs. Alan B. Levan, chairman of $2.5-billion-asset BankAtlantic, says those products have become "an absolute necessity" for banks that want to keep pace with customers' evolving needs.
SouthTrust Corp. plans to launch consumer and business programs during next year's first quarter. Great Western Bank intends to introduce a consumer banking program by mid-1997.
Citicorp has provided computer banking to its New York-area customers since the mid-1980s. Florida offices of its Citibank FSB subsidiary began offering the company's business program in 1994 and its consumer program in 1995. Meanwhile, smaller banks are getting in on the PC banking action as well. First Guaranty Bank and Trust Co. of Jacksonville, with $170 million in assets, offers computer banking programs with bill-paying features to consumers and businesses. Citing such developments, Burnham expects that "at least 50 small banks in Florida will be offering PC banking by 2000."
But PC banking isn't for everyone. Burnham says, "If you just have a CD or a savings account, there's probably no reason to go through the hassle of setting it up." And Sink adds that banks will have to be careful not to alienate some parts of their customer bases as they push for more PC banking. She is among bankers who say the growth of high-tech banking won't lead to higher fees or cuts in services for customers, such as retirees, who never use ATMs or computers for banking services. Instead, bankers say they are planning more products that offer reduced fees for customers who never use tellers.
"Our senior citizen customers are very important," Sink says. "We will continue to provide plenty of access opportunities for people who like to deal with tellers, as well as providing access by other methods."
Business Beat - Week of May 3rd
