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Online Banking Services Surge in Popularity

Karen Buell

Karen Buell says banks are being challenged to recognize what tech-savvy customers want, and then provide it.

When online banking was introduced about a decade ago, some people predicted the eventual death of physical branches, while others wondered if people would ever be comfortable transacting business on their home computer. Neither has proven to be true. In the past couple of years especially, Internet banking has taken off, and not just among the younger, tech-savvy crowd. Yet, bank administrators say it doesn’t threaten to close teller windows, as customers simply do more business than they used to through multiple channels. But online banking has created a new competitive challenge — one that area banks are excited to take on.

When it comes to banking, Karen Buell knows how the younger generation thinks. That’s because she’s one of them.
“I’m Generation Y, and I haven’t been to the bank in years — I work at one, but that doesn’t count, does it?” said Buell, Internet branch manager for PeoplesBank. So she regularly asks herself what features she’d like to see in an online banking platform.
“Really, my job is to make sure that anything we can do in our branches can be done online,” she told BusinessWest. “Anything that can be done in person, you should to be able to do at home, 24 hours a day. We know that convenience is the key.”
That convenience is becoming more of a priority for an increasingly tech-savvy consumer base at Peoples and other regional banks. And Buell — as well as others we spoke with — said it’s not just younger customers moving to the Internet to do much of their banking.
“If you asked me a year and a half ago, I’d have said it’s mostly the younger generation, but it’s across the board now,” said Kelly Ryan, vice president of Operations for Berkshire Bank. “I think it’s convenient; it’s 24/7 access, having the information right at your fingertips.”
Lynn Starr, vice president of Systems and Operations at Easthampton Savings Bank, is seeing the same trend — specifically, more banking customers of all ages switching to online banking.
“I also think people are becoming increasingly comfortable with online shopping, using the Internet to search for products, just more comfortable with the electronic world, so to speak,” she explained. “So we see a wide spectrum of customers, from 18 to 65 or 70, using our online platform. It just depends on how comfortable they are with technology and how much they’ve adopted it in other areas of their lives. We don’t see it happening only in the younger generation, but across all demographics.”
That means that online banking has become more than just an innovative offering used by a small number of customers; it’s now a competitive issue, a feature increasingly seen as necessary. And that has required a shift in what services banks offer and how they market themselves to an increasingly tech-savvy clientele.

Logging On
According to a survey sponsored by Fiserv and conducted by Harris Interactive, more than 80% of households with Internet access last year used it for online banking services: to access balances, check account history, transfer money between accounts, or pay bills at a bank Web site — and the number continues to grow rapidly. Among those surveyed, 41% of online banking users said they planned to pay more bills online at their financial institution’s Web site in the coming months.
The major reasons survey respondents said they prefer to pay bills online included speed (79%), ease of use (72%), cost savings on stamps (71%), and control over the timing of payments (71%). In addition, 49% of consumers who use online bill pay said they are less likely to switch banks due to their experience, up from 43% the previous year.
“We believe that consumers will continue to conduct more and more of their financial activities online,” said Geoff Knapp, vice president of Online Banking & Consumer Insights for Fiserv. “Online banking and bill payment is a free service, and a convenient and environmentally friendly way to bank. Consumers are actively becoming fans of the user-friendly, secure services financial institutions are implementing.”
Ryan called Berkshire Bank’s online channel “robust,” noting that, “on the personal side, you can pay bills, check account balances, transfer funds between checking and savings, and get images and copies of cleared checks. But our major project recently has been FinanceWorks, an online financial-management tool for personal Internet banking. We had no marketing on it at first, but close to 1,800 hits in the first 24 hours. The product just sold itself.”
FinanceWorks allows customers to manage all their accounts — even those from other banks — with a single login, create and monitor budgeting categories to show where money is being spent, monitor recurring transactions, and remind the customer when bills are due, among other features.
“My total goal is to look at the infrastructure we have internally, then look at the Internet banking platform and keep it robust,” Ryan said, echoing Buell’s priority of making sure customers have access to as many services online as those who visit the branch — and, in the case of features like the budgeting tool, even more. “We do it because we have to be competitive.”
Fedelina Madrid, vice president and senior marketing officer for Berkshire Bank, added that many banks have a similar structure to their basic online services — again, to stay competitive in an area customers have come to expect — but her institution also offers customers online access to all the bank’s financial services, including investment and wealth-management products.
“Customers expect online banking,” she said, “but when we add network services, we move more customers our way.”
FinanceWorks has also been a hit at PeoplesBank, where customers appreciate the way it aggregates all accounts in one place, so they can see balances and account histories, and are able to set budgets and track spending habits and savings goals, Buell said.
“So if you go to Dunkin Donuts, it’s automatically categorized as dining or coffee, and you can set up a budget for that expense. If you want to spend only $20 a month on coffee and no more, you can tell if you’re close to that goal or exceeding it. It’s a helpful tool for budgeting and tracking. If people see us as a resource to help them manage their money most effectively with the best options, hopefully they’ll choose us.”

Secure Transactions
At Easthampton Savings Bank, “online banking is certainly becoming a much more popular option,” Starr noted. “It’s becoming more widely accepted as people become more comfortable online. We’ve structured our program so that you can do online what you can do in the branch. You can even open up many types of deposit accounts, apply for consumer and mortgage loans, and receive e-statements.”
Those are popular, Starr continued, partly because they give customers instant access to recent activity every time they log in, so they’re not waiting for a mailed statement to discover potential problems, like fraudulent use of their account. Ryan added that eliminating mailed statements, an option many banks offer, also eliminates the risk of the information being stolen out of a mailbox, a factor in identity theft. It also cuts down on paper waste and was part of Berkshire Bank’s recent ‘going green’ push, Ryan said.
Still, when most people think of online banking, they think of convenience, Buell said. “Within our online banking channel, we offer bill payment, transfers, account history, check images, e-statements, things like that,” she noted. “We also offer Direct Connect to Quicken for personal accounts, which allows you to manage your money a little easier, because you don’t have to manually enter all the data.”
Buell was also proud of the next step in online banking — mobile banking, which can be conducted on a wireless device.
“It’s a scaled-down version of online banking, but it allows for one-time bill payment and transfers on the personal side,” she explained. “We’re finding that more and more people are doing things from their mobile device; they want to do things straight from their phone. So our mobile banking adoption has grown immensely; we launched an actual application for the iPhone earlier this year, and since then, our mobile banking option has advanced even further.
“It’s important that we provide all these options,” Buell continued. “We know the demand is there; we just have to bring products to market to meet the demand.”
She noted that it’s a challenge to be among the first to bring products to market, but at the same time, that’s how banks differentiate themselves from their competition — and the online world has certainly become ground zero for that sort of competition.
So, will online banking eventually mean the death of branches? Starr doesn’t think so.
“It’s just another channel,” she said. “When ATMs came out in the late ’70s and early ’80s, we heard that ATMs will be the death of branches, the death of the lobby. And when online banking appeared a decade ago, we heard the same thing, that branches would go away. But it’s just another channel by which customers can do business with us. Some use only the ATM, some use only branches, some use online banking, and some use all of them.”
Starr noted that, unlike the days before Internet banking and especially before ATMs, when people would do more business in each trip to the bank, customers tend make more transactions today and do a little business at a time. In that way, she said, branches will continue to thrive.
But that doesn’t make the virtual world any less intriguing, Buell said.
“It’s an exciting job,” Buell told BusinessWest, “especially in a world where technology is progressing so quickly. Every day brings new challenges and new success. It’s all about creating convenience for the customer. Sometimes I step back and say, ‘how would I want to do this?’”
Good question — especially coming from someone who never goes to the bank.

Joseph Bednar can be reached
at [email protected]

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