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Banking from Home
Benefits for Banks
Consumers Paying Increasing Fees
Links Relating to the Story

Banking from Home

When Marquette Banks launched the first consumer PC banking service in the Twin Cities last year, Jim Reinhardt was among the first in line. Because he got in early, he doesn't have to pay the ten dollar monthly fee for banking and bill paying services, and he likes PC banking a lot.

I probably write 100 to 150 checks, or probably 100 to 150 transactions a month, and it takes about half the time, if that, to do my balancing.

Reinhardt and his wife Nadine live in a tidy suburban Twin Cities home with their six kids. Six children age eight and under don't leave the Reinhardts with a lot of time or money to spare. Nadine Reinhardt says PC banking means Jim doesn't have to go to the bank, and that frees up time for both of them.

To me fifteen minutes is fifteen minutes. You know, so the extra time that I do have is magnified, more than maybe the average.

(SFX: Modem tones.)

Now it's sending some of the information to me. It automatically downloads all my transactions, so when I go on line, it cuts down data entry. It basically puts it all in for me and all I do is verify the fact that on that date, yes indeed, that was $10.

The convenience of banking from home is the big selling point for consumers. Banks are interested because PC banking appears to help them capture more of an individual's financial business ... or "wallet share" as it's called in the industry.

Bankers don't like to talk about another potential benefit to PC banking, but Mark Chapman does. Chapman runs a company called CFI Pro Services¹ that sells a PC banking system to banks.

They're gonna save themselves a ton of money by virtue of getting the customer, in essence, to do the work.

But the study does not account for the costs of installing PC banking systems, and that can exceed one hundred million dollars.

Dan Herbeck, head of Marquette's PC banking program³ says banks don't save money until the number of users reaches a critical mass..

At this point in time, I don't think it's saving quite the amount of money that people would think for banks, because we're still relatively new in this, and we still need to maintain all of our paper-based systems.

But I think over time PC banking probably will at least break even and may even be a profit center for some banks, but more importantly it will allow banks to reduce their costs, principally in their bank branches. And I think that's the ultimate goal of PC banking.

The single biggest thing that retarded the growth of home banking is the focus of the commercial banking industry on this as a way to get fees.

But the experience of banking behemoth Citibank⁵ offers powerful evidence fees take a heavy toll on public interest in banking online. Citibank has offered the service for ten years, and charged a fee until last year. Spokeswoman Susan Weeks says dropping the fee cost Citibank about ten million dollars. But the number of customers using the service grew sixfold.

The result was better than we expected. We knew that price had become a barrier to people trying personal computer banking, but we didn't realize the floodgate that would open when we lifted the price entirely off everything.

Citibank's decision flies in the face of a longstanding trend in banking. Since deregulation in the early 1980's, banks have steadily increased the fees they charge customers ... some even have charged for using tellers.

According to government data⁶, for every dollar on deposit, commercial bank customers are paying more than double the fees they paid in 1980 for ATM use, bounced checks and other service charges. It's not possible to do the same analysis with the data available for S&L's.

The American Bankers Association⁷ says the increase reflects the expense of providing a growing array of banking services and higher costs, including interest payments on checking accounts.

But Mark Chapman of CFI Pro Services says when it comes to PC banking, the industry saw an opportunity to CUT costs AND RAISE revenues. Chapman says it could be called a strategy to charge customers for the privilege of saving banks some money.

The fact of the matter is that the financial institution is saving money by virtue of these transactions, and really shouldn't be charging incremental fees to the people who cost them less. I mean it's 180 degrees off from the reward structure you'd want to have for your consumers.

I ended up having some fees, you know, like I had insufficient funds because there were some checks that were outstanding, and I had already taken everything out, and I thought they were all cleared, that sort of thing, so that was a hassle.

For Minnesota Public Radio, I'm Bill Catlin.

Links Relating to the Story

Please note: Links are provided for reference purposes only. Minnesota Public Radio has not evaluated the information provided on these sites, and their appearance here does not constitute any endorsement.

1. CFI Pro Services homepage.

2. Homepage for Gemini Consulting, a "global management consulting firm"

3. Marquette Banks' page about its online banking service, Marquette Direct.

4. Regional Financial Associates homepage, includes access to economic indicator information.

5. Citibank's homepage.

6. Federal Deposit Insurance Corporation gopher provides access to tables of banking information

7. The American Bankers Association Web site includes "information about ABA, its subsidiaries and affiliates, and items of interest to consumers."