Getting comfortable with online banking

Online banking has come a long way since that day in 1995 when Wells Fargo became the first bank to let customers see their checking account statements online.

Now customers can transfer money between accounts, view check images and pay bills -- a world of services beyond simply reconciling balances.

But while technology gallops ahead, a sizeable chunk of the human part of the equation can be counted on to lag behind when it comes to pointing and clicking on their bank accounts.

"The biggest thing holding back any new financial service is people's comfort. Is this a smart thing to do with my money? Is it secure? All these things go through your head when it has something to do with your money," says Jim Bruene, founder and senior analyst at the Seattle-based Online Banking Report.

Bruene says it usually takes three to five years for something such as online banking to gain acceptance with the general population. Just as millions of Americans have shed their fear of using credit cards online to buy from Amazon.com and a host of other retailers, millions are migrating to the convenience of online banking.

Bruene estimates that 600,000 American households ventured online to do their banking in 1995; by 2003 that number had ballooned to 33 million. That's nearly one-third of the nation's households. Sure, there's a long way to go before online banking is the mode of choice, but it seems clear that financial technophobes of all ages are becoming less squeamish about logging on to do their banking.

"Now you open an account and a lot of customers, especially younger ones, expect online banking and a debit card. There's a pretty significant portion of the population that would not do business with a bank that didn't have online banking."

What's holding back the people who don't do online banking? Some are no doubt concerned about security, but industry analysts say inertia plays a big role.

"They just haven't gotten around to it," according to Christopher Musto, vice president of research at Watchfire's GomezPro Benchmarking and Website Assessment Services.

"Inertia is a big force in financial management. People get in habits in how they manage their finances and pay their bills. Even when shown how they can manage their finances more efficiently, they still haven't gotten around to it.

"Also, there are some people who don't use the Internet enough that it would be convenient to do online banking. If you just want to check your balance, why start your computer? It's easier to call."

The most important aspect in getting customers to try online banking -- and getting them to stay with it -- is making the site easy to use. That's something a lot of banks haven't mastered, says Steve Ellis, founder of Change Sciences Inc., which analyzed 12 major online banking sites.

Ellis and his colleagues evaluated areas such as logging into and out of the site, checking recent transactions, adding a payee, making a one-time payment, making a recurring payment and checking on the status of a payment.

"The bank calls it online banking, the consumer thinks he's doing online banking because he's on the bank's Web site. The bank is asking the consumer to click on something called "online banking" and he's saying, 'Why click? I'm already in online banking, aren't I?'

"Some sites assume too much knowledge. A classic design error that developers and banks make is assuming consumers know the meaning of financial terms such as 'payee.' Let's make it clear what adding a payee is. Am I the payee or the payor? It's not like on a check where it says something intuitive like 'pay to the order of.'"

Ellis says consumers shouldn't feel dumb if they have trouble navigating a site.