Getting comfortable with online banking -- Page 2

"Bill payment is a great example. Last year, before we revised the site, it used to take six screens to pay a bill. If you wanted to pay multiple bills before, we didn't have a single screen that would pull up all of your payees."

Most of us who do online banking still haven't taken advantage of the full range of services. We check balances, see if a check has been paid and maybe transfer money from checking to savings; but only about one-third of the folks who do online banking pay bills online.

Banks know that people who pay bills online stick with their bank longer and carry larger balances, so they're trying to sweeten the pot and get more people to sign up for bill payment. A significant number of banks are doing that by dropping the usual $4 to $6 monthly fee that's charged for the service.

It's a strategy that works, says Michelle Barquero, online banking channel manager at Hibernia National Bank in New Orleans.

"Within two months of offering bill payment for free, we doubled our bill payment customers. It's amazing that $4.95 was such a road block. Customers said, 'This other bank offers bill payment for free -- why should I pay for it?' That's what started it off."

Christopher Musto says the trend toward free bill payment will be a major force in getting people to try the service.

"It's not a come-on gimmick from some upstart Internet bank. Bank of America, Bank One, Citibank, National City -- a long list of banks are offering it for free. It's getting difficult to hold onto that $5 or $6 charge the banks are levying. (Free bill payment) really does cost (banks) money, but it has that wonderful effect on the balance the customer holds, the number of accounts they have and how long they stay with the bank."

In an age of computer viruses, spyware, site-spoofing and phishing (phony e-mail that claims to be from your bank and asks for confidential information such as your Social Security number), it's understandable if consumers are concerned about online banking security. Some banks, such as National City and Bank of America, make it clear on their sites that customers have zero liability if fraud has been used to take money from their account.

"One of the things we track," says Musto, "is whether the bank makes explicit online guarantees about protecting your account against fraud. Some banks do these amazing verbal somersaults to make it sound like they're serious about combating fraud but they never mention that you're protected.

"If there's fraud and you're not responsible, the bank has to make you whole. Some banks tell you and that's a good thing. It gives you confidence to use the online channel. We tell banks to get out there and tell your customers you're going to protect them. You have to do it anyway so you may as well make a virtue out of it."

So, what's ahead for online banking? Two things that Musto says will become commonplace in online banking are inter-FI transfers, the ability to transfer money from your account at one bank to your account at another bank or brokerage, and e-mail alerts, which will enable customers to get relevant information about their accounts. That way you don't have to log-on time after time to see if a bill was paid.