E-Banking 2001: Where Are We Headed?

'Tis the season for musing about where we are and where we're going. Not that anybody really knows for sure. But in this column ABABJ will set aside the usual requirement of objectivity and I'll venture some personal observations about the past and future of e-banking -defined as banking by internet, either exclusively or also banking at physical locations. So where does the e-banking art stand today? Two or three years ago, many predicted that by now the art would be in the majority phase of its marketing life cycle. We're definitely not there yet. Only about 10% of all banks offer e-banking and 90% of banking households are still choosing not to take advantage of handling their financial affairs over the internet. There are about 50 e-banks (e.g., internet-only). Most of them are unprofitable, and many are compromising their reason for being by opening physical branches. On the plus side, it's clear that the cost of running an e-bank must always, in principle, be lower than running a paper-based bank...or doing both simultaneously. Over time, that difference should make a difference in their chances of survival. I think that the slow growth of e-banking is mainly due to the fact that banks are slow to offer it. And when they do offer it, they usually don't promote it aggressively. Chalk that up to sound business caution, the rich life that most banks have been living lately, the preoccupation with Y2K, and a traditional reluctance to invest in the possibility of future profits. In sum, it seems to me that the late-adopting banks haven't lost as much ground as we and other Net evangelists thought they would. For one thing, consumer demand just isn't out there. Preference? Definitely, according to every survey. But why haven't consumers rushed to transfer their accounts from traditional to ebanking institutions? (Full disclosure: I've had an account with an internet-only bank since early 1996.) E-banking really does deliver on its advertised promises. It's 24x7 convenient, reliable, and, I'm sure, at least as secure as traditional banking. Online bill payment has immeasurably simplified the management of my finances, with a negligible number of glitches that were promptly resolved. I'm hooked and won't ever go back. However, even enthusiasts can see that the laggards in adopting e-banking have good reasons for holding back. Setting up and using an e-banking account isn't rocket science, but it's not a trivial task either. But the convenience and cost differences between writing paper checks and doing it with a few online clicks can be trivial for a family that has only a few regular bills to pay and doesn't have to itemize expenses in its tax return. And there are a growing number of ways to pay regular bills electronically--chiefly, by authorizing regular funds transfers. Similarly, being able to call up our account balance anytime we want to is a significant convenience. …