Small-business banking via personal computer will take off in the next few years, lenders and industry experts said.

The current level of penetration is a matter of dispute, but most observers agree that within the last year the number of small business using such services has grown rapidly from a small base.

The number will expand further as more banks offer and aggressively push easy-to-use products and as entrepreneurs grow more comfortable with computers, sources said.

"We're just at the beginning and it's gaining momentum," said Chris McLaughlin, a vice president at BankAmerica Corp., San Francisco, which offers two PC-based banking services for small businesses and plans to add a third later this year.

"It's going to explode," he said.

Barnett Banks Inc. has offered a PC-based service for three years and now 1,800 of its 140,000 small-business customers use it. Sam Northrop 3d, senior product manager for the Jacksonville, Fla.-based bank, wants to quadruple that number in three years.

"I think 5% penetration is reasonable," Mr. Northrop said. He added that some smaller-end business owners use PC-based services targeted at consumers instead of the products designed for entrepreneurs.

According to a just-finished study by Payment Systems Inc., PC access is the favored mode of banking for 0.7% of small businesses with between $500,000 and $10 million in annual sales.

But the study also found that 15.6% of the responding business owners have used a computer for some transactions.

"Not too many people use it as their primary means of banking, but quite a few use it occasionally," said Maria Erickson, a research director for Payment Systems. According to the Tampa, Fla., research firm, there are more than 2 million small businesses with between $500,000 and $10 million in annual sales, and 900 were interviewed for the study.

Payment Systems' penetration estimate is too high, said Dan Drechsel, general manager of EC Partners. Nevertheless, Mr. Drechsel said within four years about 20% of an estimated 8 million businesses with revenues of less than $30 million will be using the services.

Based in Norcross, Ga., EC Partners is a joint venture between Automatic Data Processing Inc. and Checkfree Corp. The company offers electronic banking and bill-paying services to tens of thousands of small businesses through 50 banking companies, including NationsBank Corp., Charlotte, N.C., and Minneapolis-based Norwest Corp.

Current penetration may be in dispute, but most bankers in the trenches agree that the small-business segment is a ripe market for PC-based banking services.

As many as 85% of small-business owners have a computer, and, importantly, they are more likely to use them than the average consumer, bankers said.

"Small businesses use their computers every day and they're looking for opportunities to use that equipment," Mr. McLaughlin said. "You don't have the same education issues you do on the consumer side."

PC banking might have more appeal to small-business owners than consumers, sources said. The reason: Business owners are constantly looking for ways save money and time.

Banking by PC can increase income, Mr. McLaughlin said.

"They can lower interest rate charges because they can pay down loans or lines faster" because they have immediate access to the data, Mr. McLaughlin said.

An alternative delivery system is important to small-business owners, who are frequently strapped for time during the day, bankers said.

"A lot of small businesses do their books at night and they want to get on the computer at 11 o'clock to balance their checkbook," said Donald Hance, business program manager for Union Bank of California, Los Angeles. About 2,000 entrepreneurs use the bank's business PC product, which now is being offered at a discount to encourage use.

Indeed, figures from Payment Systems suggest that, percentage wise, small businesses are more interested than consumers in using PC-based banking services. According to the firm, 27.7% of small businesses are receptive to using Windows-based applications, compared to 18% of consumers intrigued by banking via computer.

About 1 million households, or 1% of the market, use the consumer PC- based services, Payment Services said.

Banks point to small-business demand for increased convenience as their reason for offering the service.

"Accessing the bank via a PC saves them a trip to the bank or a phone call," said Jo Ann Mortenson, product manager for business banking for Norwest Corp.

Indeed, banks eventually might have to offer the services as a defensive measure, said Charles Wendel, president of New York-based Financial Institutions Consulting.

"There's no choice," Mr. Wendel said. Bankers will think "if I don't offer it, someone else will."

Fee income and other factors can make the service profitable, bankers said.

Mr. Northrop said fee income made Barnett's offering profitable within the past 18 months, once sales got over a hump.

"It took a while," he said.

The service also helps profitability by cutting down on the customers' branch visits, said Kelly O'Connell, a vice president for NationsBank.

"People cost more than computers," she said.

Banks that successfully market the product can profit by attracting more of their customers' deposits, said George Hart, a senior vice president at Harbinger Corp., Atlanta. Harbinger provides PC banking services to about 30,000 small businesses through 30 banking companies, including BankAmerica and Barnett.

Mr. Hart has been predicting widespread acceptance of the technology for the past 11 years. But - based on what bankers are telling him - this time he really believes a groundswell is around the corner.

"This area is poised for takeoff from stuff we hear in the marketplace," he said. "Does that mean it will ultimately work out? Hell, who knows? But people are convinced things are happening now."

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