ATMs deposit a real problem
on the doorsteps of virtual banks
By Holden Lewis • Bankrate.com

Online-only banks have a bit of a customer-service problem.

Customers of online banks generally can't make deposits at automated teller machines. This seems to be creating a serious roadblock for the virtuals.

I have corresponded with people who avoid online-only banks because of this limitation. Others deal with this shortcoming variously. Some abandon online banks out of frustration, seeking refuge in traditional institutions.

Joshua Jobe belongs to the latter group. He's dropping his online-only bank, partly because of the inability to deposit through an ATM. Heed his comments if you're considering opening an account at an online-only bank.

"There is no real way to circumvent the need for a network of branches and ATMs that traditional banks have established," Jobe says. "They were established for a reason: to provide services to their depositors.

"Making deposits to my Net.B@nk account was the biggest inconvenience," he continues. "I had to mail them (postage-paid envelopes, albeit), and if I got cash from someone, I would have to deposit it into my local account and then write a check to myself in order to deposit it to my Net.B@nk account."

Jobe's conclusion: "It's almost impossible to maintain an account at an Internet bank without also maintaining one at a local bank branch."

Never liked the things
That's true for Jobe, but not for everyone. I live in Florida and don't have a local account. I have accounts with a credit union in Ohio and an online bank in California, and I find this setup convenient (and, above all, inexpensive).

Why don't online banks have ATMs? Because they don't have branches where they can place the machines. The online banks belong to ATM networks such as Cirrus and Plus, which allow customers to make withdrawals and transfer money among accounts. But the banks that own the machines generally don't handle other banks' deposits.

For many people, that means using traditional mail and pondering the irony of relying on the U.S. Postal Service to deliver checks to virtual banks in this electronic age.

Could snail mail fail?
O the inefficiency -- nay, the humiliation! -- of relying on wheels and legs to move money!

"In my opinion, not being able to make deposits through an ATM is the main deterrent to branchless banking," says Richard Heavy, who has online accounts with a pair of banks: Security First Network Bank and USABancshares.com.

He mails endorsed checks with trepidation.

"Once it's put in the mail, I am no longer confident of its arrival," Heavy says, enumerating what can go wrong: Someone could steal it from his mailbox, a postal worker or a junkie could swipe it, it could get lost in transit, the bank could misplace it or commit some other goof.

He has more faith in the guy who services the ATM than in the post office.

Not me. Twenty years ago, half my trips to ATMs ended in frustration. If the network wasn't down, the ATM was out of money. I still run across these problems occasionally. So I've never made a deposit at an ATM.

All online banks encourage account holders to use direct deposit for their paychecks. And for times when account holders need to deposit checks, some banks provide postage-paid, self-addressed envelopes in which to mail them. Everbank's deposit envelope is a distinctive bright yellow, and the back flap doubles as a deposit slip with space for comments.

"We're working on all sorts of ways for people to get money in to us," says Everbank's chief, Frank Trotter. ATMs might be a way, and the online bank will pursue partnerships with retailers, he says.

From brick bank to click bank
Judging by the e-mail I get from readers, most customers of online banks have other accounts at local institutions. X.com, which boasts that it has more accounts than any other online-only bank at 221,000, recognizes this reality. It's easy to fund an X account by transferring money electronically from another account.

"Certainly there's a convenience element to making an ATM deposit," founder Elon Musk says. "We haven't ruled out an ATM strategy ourselves. However, in a world of electronic payments, it becomes less and less an issue."

Musk says the cost of ATM convenience has to be weighed against the advantages of online-only banks, with their favorable interest rates, low fees and features such as online bill-paying and funds transfers.

But Jobe says "bricks and clicks" banks -- those with a strong online presence, such as Wells Fargo -- will win the competition over Internet-only institutions.

"It's just worth it to me to sacrifice those high interest rates for good service that's there when I need it," he says.

-- Posted: Feb. 25, 2000