PC Banking Booms in ’98

According to recent survey figures from INTECO Corp., PC banking households blossomed from 3.8 million in the third quarter of 1997 to 7 million by the end of 1998. The most recent findings were based on 16,500 interviews conducted in December 1998 with a sample representative of all US adults.

The findings come as a surprise to some, because there seemed to be no compelling motivator for online banking. With most banking applications such as reviewing accounts, transferring funds, and even paying bills readily available by telephone, industry observers had anticipated consumers would embrace online banking at a leisurely rate, much as they did with ATM machines in the 1970s and 1980s.

“Prior to 1998, there had been concern over the slow rate at which consumers were adopting PC banking, so the burst of activity in the past year has surprised most industry observers,” according to George Barto, Senior Financial Services Analysts for INTECO.

Two factors are responsible for driving the explosive growth in online banking, Barto said. One is the 68 percent rise in the number of US households with access to the Internet (22 million in Q3 1997 to 37 million by the end of 1998). The second is the “build it and they will come” approach taken by financial institutions.

“It’s not so much that financial institutions provided major motivators for consumers to adopt online banking, it’s just that they removed so many barriers,” Barto said. “Customers need take no action to formally open an online account: they simply activate the online banking functions through the institution’s Web banking site. Customers can use their existing account numbers and PINs. They can even pay bills if they had previously been doing that function via a touchtone telephone. And they can do it from home, from work or even from the road — wherever they have Internet access.”

An upscale market segment dominates online banking, according to the research. Two out of three online banking households are made up of married couples with household income in excess of $50,000. Forty-four percent are dual-income households with mean income more than 50 percent higher than the national average.

The Pacific region has the highest percentage of online banking households, while the industrial regions around the Great Lakes have relatively low penetration rates.

Now that online banking is reaching a critical mass, consumers are beginning to demand an “access anywhere” capability via the Internet as a natural complement to traditional banking channels.

“Banks will see greatly increased competition from other organizations such as portal services seeking to provide financials services in ways that are even more convenient to the consumer,” he said.

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