Community banks marketing a personal touch may soon find themselves in a
quandary: having to choose between investing in expensive Web technology
or losing customers to national institutions which let anyone bank from
afar.
Vilasinee Bunnag, a digital commerce analyst for Jupiter Communications
in New York City, said the scenario is inevitable.
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“I think on-line banking has really raised the bar for competition just
because you have no more geographical boundaries,” Bunnag said. Banks in
clearly different leagues will end up competitors as a result, she said.
As the Web explodes with Internet banking services, institutions of all
sizes are having to weigh the benefits of on-line banking against the
“very great” start-up costs of technology, said Bunnag, whose
international firm studies how the Internet and other technologies are
changing traditional consumer trends.
For now, only one thing is clear. In terms of day-to-day operations,
“there’s no doubt that Internet banking saves money,” Bunnag said.
Financial institutions offering virtual banking can charge user or
transaction fees; use the medium to promote other services and products,
from credit cards to certificates of deposit; and reduce operating costs
by eliminating the paperwork of in-person transactions, as well as the
processing of statements for accounts, credit cards and bills, Bunnag
said. And the technology itself is cheaper, once it’s up and running.
A recent study by Jupiter showed that telephone transactions cost banks
an average of 50 cents; ATM transactions cost an average of 25 cents;
and Internet transactions cost about a penny.
Community banks like national players are capable of reaping those same
benefits — but there must be enough business to make it worth while,
Bunnag said.
“I think you have to kind of make the cost savings worth your spending.
I think you only realize that with volume and I don’t know that
community banks are going to have that,” she said.
Robert Pare, president and chief executive officer of Centreville
Savings Bank in West Warwick, doesn’t know either. That’s why he’s
holding off on virtual banking, even while he prepares to launch an
informational Web site early next year.
“I think that that’s a natural next step that will happen. But we
usually take it one step at a time,” Pare said.
Customers of Centreville’s four branches have yet to request on-line
banking like they did telephone banking, Pare said.
“I think the reason is it (Internet banking) is in its infancy,” he
said. “As it grows, people will probably start approaching us about it.”
Even if Centreville decides to offer the service some day, Pare said he
doesn’t expect tellers to become obsolete.
“I think that for the most part our business as a community bank is one-
on-one,” he said. “When we’ve provided, things like ATMs and direct
deposit, it hasn’t reduced the service in our lobby. It’s the community
bank and people enjoy coming.”
Bank Rhode Island, with 13 branches throughout greater Providence and
Kent County a Web site, is a step ahead of Centerville.
Merrill Sherman, the bank’s president and chief executive officer, said
her company is “absolutely going to do it within the next year.”
However, she said her motivation isn’t saving money.
Telephone banking is “already saving what money there is to be saved,”
she said. Internet banking will be “another delivery channel” for many
of those same people.
“What we would like to do is reach a broad range of people who are
potentially great customers for Bank Rhode Island,” Sherman said. “That
includes people who want to bank on the Internet.”
Sherman, like Pare, doesn’t expect customers to flock to virtual
banking. “The appeal of it right now is to a very limited segment,” she
said. “Over time it will increase.”
Bunnag agreed but saw a dimmer future for community banks.
“We’re always going to have a group of people who are going to bank off
line,” Bunnag said. “But it is a threat. It’s an imminent threat, no
doubt.”
