Online banking growth benefits banks, as well as customers

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Published: November 11,2002

Online banking isn’t just a novelty anymore. At one prominent bank in the state, AmSouth Bank, the number of customers using online banking has increased 600% since the beginning of 2001. Currently about 46% of checking and savings account customers are signed up for online banking.

“It is been a focus of the bank to make online banking user friendly, accessible and utilized,” said John Noblin, marketing director for AmSouth Bank in Mississippi. “Reasons for the popularity of online banking range from the convenience of being able to do banking whenever you want to the cost savings of not having to buy stamps for bill paying. There are lots of reasons it has gotten more popular. And as people get more comfortable with the safety of doing financial transactions on the Internet, I think it will continue to grow.”

Online banking benefits the bank, as well as customers. Noblin said the bank benefits by providing a service that allows customers to do banking transactions faster, cheaper and easier because it makes the bank more valuable as a provider. Online transactions are also considerably cheaper than a face-to-face transaction with a teller.

“There is a cost savings to the bank for folks to do transactions over the Internet,” Noblin said. “A face-to-face branch transaction costs the bank $1.70. A telebanking transaction over the phone costs 54 cents. An ATM transaction costs 27 cents, and an Internet banking transaction costs the bank one cent.”

AmSouth also provides additional online banking services to business customers. The popularity of those offerings, which are helpful for managing payrolls and other business functions not needed for personal banking, has grown from 11,000 to 18,000 customers this year, Noblin said.

Chevis Swetman, president and CEO, The People’s Bank, Biloxi, also reports a dramatic increase in interest by customers in online banking. About seven years ago when The People’s Bank surveyed customers, most weren’t interested in online banking. But as a large number of people moved in from Nevada and Atlantic City to take jobs in the gaming industry, the bank started seeing much more demand for online banking.

“What we found out almost overnight is that these people wanted what they had at their previous job stations whether working in the casino industry or the military,” Swetman said. “All of the sudden we found out that, yes, people wanted debit cards and online banking. They wanted the bank available 24/7. They wanted banking information available when they wanted it on their time schedule.”

Many casino employees work evening and graveyard shifts, so may find it more convenient to balance the checkbook and pay bills during hours when the bank isn’t open. The service is also valuable to military personnel who may have duty assignments out of the area. With an Internet connection, they can do banking from anywhere in the world.

“The big thing is connectivity,” Swetman said. “Everybody wants to be able to have control over their financial future at their particular pace when they want it.”

Online banking is cutting down on the number of checks written. The Federal Reserve recently announced that the number of checks processed has decline from 49 billion per year to 45 billion per year.

“You are seeing a lot of people embracing online banking,” Swetman said. “The greatest thing is the bill payment. The second thing is people like to do the bank statements when they want to do them.”

Surprisingly, the greatest acceptance of Internet banking for the People’s Bank customers has been in rural areas. Jennifer Crane, assistant vice president of marketing for The People’s Bank, said the greatest acceptance of Internet banking has been in the Wiggins branch, which serves a large rural market.

“We see more bill pay customers from the PerkinstonWiggins market, and we see more customers over the age of 55, believe it or not,” Crane said. “We were very surprised to see that. We thought it would be more accepted among the late teen, early 20s customers.”

Crane said a lot of businesses are going to direct deposit of paychecks, and that also aids the growth of Internet banking. Employees can check at any time to see if the deposit has gone through, pay bills and reconcile their statement.

About 10% of customers at The People’s Bank use Internet banking, which compares to the national average of only about 5%.

At Hancock Bank, the penetration for online banking is at about 11% of checking accounts. The bank is seeing a monthly growth rate of about 5%.

“That is all without any advertising,” said Jeff Theiler, vice president of direct banking. “It is getting around by word of mouth. We have not actively promoted it although we plan to change that in the coming year. We’ll start promoting it in 2003.”

Theiler said anything electronic is less expensive for the bank so more electronic transactions are financially beneficial to the bank. It also allows the bank to keep their fees in line.

Hancock Bank recently rolled out an Internet cash management service for businesses that allows more than just typical online banking for needs such as wire transfers and handling payrolls.

Another bank seeing substantial gains in Internet banking is The People’s Bank & Trust Company, Tupelo.

“The advantage to the customer is convenience,” said Jim Gray, executive vice president, The People’s Bank & Trust Company. “They can do it 24 hours per day. The advantage for the bank is that it is less labor intensive. We don’t have to have a human involved in the transaction. Even though it costs us to provide online banking, it is worth it because it ends up saving us money on the other side. I liken it to the use of debit cards, which is really popular now. I think in the next few years you will see online banking accepted at the level that debit cards are currently accepted, particularly as more and more of our customers have PCs at their disposal.”

He also expects online bill paying to get better acceptance. Until recently most banks have been actually cutting checks for online bill paying. But now more and more vendors are accepting electronic payments.

“When you aren’t having a paper item cut you are getting more real time payment of those bills,” Gray said. “I think as that process becomes more electronic there will be more acceptance of online bill pay.”

Gray also reports a big increase in businesses using Internet banking to manage their finances. He said Internet banking saves businesses a lot of time, and gives them more control of their finances.

Contact MBJ contributing writer Becky Gillette at mullein@datasync.com or (228) 872-3457.

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