Home banking and bill payment processor Online Resources and Communications Corp. has recently allied itself with two major state banking associations in an effort to build greater market share among smaller banks.

The McLean, Va.-based home banking services company has signed marketing agreements with the Maryland Bankers Association and the New York State Bankers Association to promote its services to their predominantly community bank membership.

Online Resources provides transaction processing, communications, bill- paying, and customer service to the banks that market remote banking services via telephone, or the increasingly popular souped-up version of this medium, the so-called screen phone. Online Resources officials said the company also intends to expand its array of services out to encompass PC-based banking by September.

Thus far, Online Resources has inked deals with a handful of banks, according to Robert Drennan, an executive vice president with Online Resources. He said three of them are large institutions in the regional and larger range, most notably NationsBank Corp.

But, through its new affiliations, Online Resources hopes to build up its customer base among smaller banks, an area where executives see the opportunity to make greater headway faster than it might with larger financial institutions.

"The community banks have a more immediate sense of urgency," Mr. Drennan said. "They know the bigger banks are going to do it eventually...They (small banks) can do it quicker to hold their ground."

Mr. Drennan said most often the larger banks become enmeshed in "noncommittal pilots." Whereas, their smaller, more nimble community bank counterparts have a greater tendency to jump in with both feet and ramp up their programs faster and with less red tape.

Aside from NationsBank, Online Resources' other two public customers are Mechanics Bank, a community bank on the West Coast, and Wilbur National Bank, a community-sized bank in New York State that the company enlisted through the New York State Bankers Association. Mechanics Bank is just rounding out the end of its first month piloting the service with some of its employees. Wilbur National, Mr. Drennan said, should be up and running by September.

By working through these umbrella organizations, the smaller banks can band together and boost the number of users and transaction volume, and thereby get a better deal on the cost of their services, Mr. Drennan said.

He said the pricing for Online's services goes down based on the number of bank customers using the services. Therefore, several small banks enlisting these services through one association could drop the cost by as much as $2 per customer per month, he added.

According to John B. Bowers Jr., the executive vice president of the Maryland Bankers Association, his group comprises 91 of the state's 95 banks. He said at least two-thirds of these are community banks with $1 billion or less in assets.

He agreed bank members of his association may be more apt to offer such services if the cost was drawn down by banding together.

"Community banks can't wait any longer for some of the technology to trickle down," Mr. Bowers said. "The thing that struck us is that the Online technology is available now and is something the banks can implement fairly easily and in a cost-effective manner."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.