Home banking will explode this year - even for community bankers - a credit union executive told the Independent Bankers Association of America convention here last week.
Warren Marshall, president of Stanford Federal Credit Union, Palo Alto, Calif., is a pioneer at using the Internet to enhance customer service. He said 85% of transactions at his institution are made electronically through the World Wide Web, audio response systems, or the automated clearing house.
Though Internet banking is often considered the domain of large institutions, Mr. Marshall and others said home banking could be an equalizer, letting community banks compete better.
In his speech, Mr. Marshall cited an obvious financial benefit of electronic banking: significantly less cost than for call center or branch- based transactions.
Given this fact, he urged his audience to establish an Internet presence that features on-line financial services and information.
To help community bankers get started on this road, the convention tutored them on Web sites (which contain pages of text, pictures, sound, and graphics); home pages (which serve as a table of contents for site material); and so-called FAQs (frequently asked questions).
The tutorial could not have come at a better time. To date, 175 U.S. banks have established Web sites, according to Joyce Hlava, president of RJE Communications Inc., Sunnyvale, Calif.
By her count, 39 of the top 100 U.S. financial institutions, including savings and loans and credit unions, have a presence on the Internet. These include 13 of the 15 largest U.S. banks.
In addition, the number of Internet users - whom many consider prime candidates for on-line electronic banking - is projected to jump to 100 million in four years, from the current 20 million, Ms. Hlava said. Five million consumers will be using home banking services by the turn of the century, she predicted.
These consumers "will expect to do business with you on-line," she told IBAA members.
RJE Communications was recently selected by the IBAA to offer discounted home page and other Web-related site services to member banks and affiliated state associations. Users of RJE's services include County Bank of Merced, Calif. and Valley Independent Bank, El Centro, Calif.
Ms. Hlava said rising consumer demand for Internet services means community banks should give immediate thought to securing an Internet address, "even if you aren't ready to put up a Web site."
Those that are unprepared to offer sophisticated financial transactions on the Internet initially can use it for other applications, such as electronic mail. Because E-mail lets a bank easily reach lists of users, it can be a useful marketing tool, Ms. Hlava said.
An on-line link lets banks promote products and services, post loan and savings rates, present annual reports and news releases, and run audio clips for prospects, customers, and shareholders, she said.
"It's the least expensive advertising - cheaper than local cable TV," she said.
Not all Internet attractions are aimed at current or imminently prospective bank patrons. Ms. Hlava said Norwest Corp.'s site includes a "homework helper" that aims to develop relationships and foster brand recognition in young potential customers.
The cost of hosting Web sites may be a bit steep for some community banks. The service usually requires the attention of at least one full-time employee and typically costs $60,000 to $100,000 to set up.
In addition, most community banks would need to add a high-speed telephone line at a cost of about $1,000 per month; monthly bills from Internet providers should run around $500.
Henry Deible, president of Community First Bank, Reynoldsville, Pa., called such prices "prohibitive at this time," given the bank's rural account base of about 4,000. However, he said, he hopes "it's something to look at down the road, perhaps by year 2000."
Ms. Hlava said Internet-related costs can be cut "by having someone else host your site." Her company does just that as part of a package that includes Web page design, site maintenance, browser, and E-mail box.
As many community banks ponder whether they can afford to embrace the Internet, many credit unions have already done so, said Mr. Marshall, the credit union executive.
Though credit unions typically rely on electronic services more heavily than commercial banks with similar sized customer bases, Mr. Marshall said, community banks should still expect many consumers to go on the Internet in the next few years.
Mr. Morris is a freelance writer based in Las Vegas.
