Rise and Fall of Internet Banking

Would you trust your money with an electronic banking system? If you had a million dollars to move from one account into another account would you trust the click of a button or would you prefer to go into your bank and personally interface with a client service representative?

These are some of the questions that people consider when their bank begins to advertise internet banking services.

Although the ability to transact business and perform transactions with your bank online has been around as far back as 1998 the general public is not as enthusiastic as most bankers would like them to be. Even savvy technology consumers are cautious when it comes to the dollar and moving it "virtually" rather than seeing a physical paper transaction.

I did a quick survey of my co workers, all 25 of them to find out what was their take on the phenomenon of internet banking. Some were not knowledgeable about the service whilst those who knew it existed were pure skeptics in the system and were content with queuing at the bank rather than trusting their hard earned cash to some electronic marvel that could possibly misplace their monies. I also extended my questioning to online transactions such as purchasing clothes, movies, books and music discs and found that most people were unwilling to unleash their credit card data on a website.

Although my small survey was unscientific it gives me a good feel for what the average Joe thinks of this electronic labyrinth we have entered into.

Internet banking as the name suggests is a form of banking that utilizes the internet and World Wide Web services. Internet banking technology utilizes secure means of transferring data or instructions from the account holder's personal computer into the bank's mainframe computer system. Typical transactions would include bill payments, transferring of funds between accounts and making applications. The transactions are real time and most transactions occur as soon as the user performs the command. Apart from transactional data, users in some systems are allowed to run reports, retrieve historic records, stop payments, check balances and so on. Within recent times the range of services has expanded to ensure competitiveness but more importantly to lure the skeptic account holder into using the service. Wells Fargo, a leader in web based banking recently added the ability of account holders to change their address online, request a statement, order travelers cheques and foreign currency for next day delivery. Another unique concept was introduced by an Internet pioneer, Security First Network Bank of Canada. Their users are able to see both the front and back images of a cancelled cheque online.

All of this sounds quite nice but what is the true story behind utilization? How many banks are seeing volumes of new users and high network traffic on their websites? The general trend is an upward climb in the number of subscribers each year. Gomez Advisors Inc., a Massachusetts based internet research company conducted a 1999 survey to see how catchy internet banking really was. They concluded that 17% of the online adult population subscribed to some sort of online banking service. "But out of that group, 2.15% had signed up but never used it, and 1.89% had signed up, used it, and then stopped," says Chris Musto, director of financial services at Gomez. Further research indicates that the non-users and drop-offs are people who don't make much use of the Internet for other transactions either, whether buying books from Amazon.com or trading stocks.

So what is causing such high drop out rates and further, what is preventing the subscriber population from growing to upwards of 50% of the online adult community? Although two aspects are mentioned factors responsible for both are closely interrelated.

It is clear that although there is much publicity, Internet banking has not latched on to consumers as fast as expected. As a typical consumer product, internet banking must possess the qualities of ease of use backed by excellent customer support.

The crux of the problem here lies with system integration. It is more a technology issue than anything else. Many banks have trouble fully integrating their Internet banking platform with the rest of their operations. The internet banking piece to the information technology infrastructure is usually an add on which is tacked on to existing technology systems that are dedicated to separate business line, leading to a disjointed experience for a customer who navigates from a deposit account to credit cards to a mortgage. When the mortgage Web page looks entirely different from a checking account Web page, the customer gets confused and turned off by the experience.

A standard interface needs to be present for the website to be easy to navigate. Such seamless integration however does not come without expense. It is clear that the cost of setting up a fantastic but successful internet banking system is tremendous but banks need to see the bigger picture, they need to regard this expenditure as strategic in that they are strengthening their customer relationships rather than cutting costs.

The other attraction for the would-be internet consumer is strong customer service support. Banks need to make sure their sites offer help either through e-mail or phone number and some banks even have a call back service where a live operator will call you back within ten minutes. As the customer experiences the Web site, he should have access to facilities that allows him to send e-mail or a phone number. To support its site, Cleveland based KeyCorp has a customer service call center dedicated to Internet banking. It receives on average 800 to