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ARLINGTON, Va. -Online banking continues a steady trend upward for Americans using the Internet. According to the most recent survey (taken November 2004 and released last month) conducted by the Pew Internet & American Life Project, some 53 million individuals, representing 44% of Internet users and one-quarter of all adults in this country, have now used online banking. This figure represents a 47% jump from those who had indicated they had used online banking back in March 2002 and a 370% leap from the 14 million Americans who indicated similarly in 2000. According to NCUA 5300 data, 18 million federally insured credit union members have done online banking through their credit unions’ transactional Web site. We thought it was pretty important,” said MIT FCU President/CEO Brian Ducharme in reference to the $175 million, 20,000 member credit union adopting online banking capabilities six years ago. “Eighty percent of [MIT] students use e-branch technology; it is part of their [financial] life.” According to Brian Siegel, VP of marketing & communications for the $2.9 billion Pasadena-based Wescom Credit Union. “Fifty percent of members (it has 240,000) indicated [in 2003] they use eBranch on a daily basis.” Siegel added, that “more than one-third of Wescom’s online banking users have stopped receiving paper statements and receive eStatements instead.” The United Nations Federal Credit Union ($2.1 billion, 69,000 members) introduced Internet account access in 1997. “The service currently has a 51% adoption rate, as of January 2005,” according to Debra P. Innocent, UNFCU’s vice president of marketing. Since 2000, there has been a 40% jump in credit unions establishing a Web presence. At yearend 2004, NCUA reported that 5,297 of them-or nearly 60% of all federally insured credit unions-had Web sites. NCUA breaks down credit union Web sites into three categories: * Informational – it displays general information such as the credit union’s history, loan/share rates, printable forms and other information on contacting the credit union; * Interactive – the credit unions’ members can complete such tasks as membership and loan applications or make requests for information such as share balances, loan balances, account statements, disclosure statements; and * Transactional – where members can initiate or perform transactions such as paying bills, making loan payments, transferring money between accounts or between the credit union and a third party. Keynote Systems Inc., released a study in January that reported that 92% of online banking customers use the service to check transaction history. That percentage is “about right,” said Ducharme. “Most people want to see if their checks have cleared, [also] everyone at MIT is on direct deposit.” Keynote also found that 51% use the service for checking/printing their monthly statement and 43% use online bill payment services. Additionally, approximately 21% online banking customers download their transactions to a software application such as Quicken. All the credit union representatives interviewed for this story have transactional Web sites and they firmly believe their members have been receptive to online banking and that this technology has offered distinct advantages to each credit union. Wescom CU has seen 28.5% of active online banking members use its online BillPayer at least once a month and 15.7% of members with share draft accounts use the online BillPayer. At UNFCU, the credit union introduced eStatements, a password protected, free Internet service that allows members to view 13 months of past statements. Since the credit union brought it online three years ago, 10,000, or 14%, of its members take advantage of this service. UNFCU also launched BillPay, which allows its members to pay bills and other U.S. financial obligations through the computer or by telephone. Currently, over 8% of those members using Internet Account Access use BillPay. “Different channels of remote access may not work for every single person,” said Ducharme, but online banking is “very adaptive” to members’ personal needs. While there are significant challenges (junk mail clogging up and annoying members, fraud, security, ID Theft including phising) facing any financial institution that is providing services over the Internet, the Federal Reserve (U.S. Consumers and Electronic Banking, 1999-2003, Fed Bulletin, winter 2004) found that consumers’ perceptions of e-banking has improved. The three general areas that the Fed found a more positive outlook were: convenience, familiarity and ease of use, and security and privacy. In the larger context, online banking, as an activity for those going online comes in seventh among 18 activities tracked by Pew in its Trends 2005 report on the Internet. Ahead of online banking is sending/ receiving e-mail, getting news, checking weather, doing job-related research, watching video clips or listening to audio. And just after online banking comes instant messaging, followed by playing games. The “killer app” remains e-mail, then information searching, then entertainment and finally e-commerce. As summarized in Pew’s Trends 2005, “even as the Internet has grown exponentially, the hierarchy of metaphors that describe it has remained constant: The Internet is most of all a mail pigeon, then a library, then an amusement park, then a shopping center.” However, one significant change to the Internet that directly affects online banking is the rapid switch over from dial-up access to high-speed broadband connections. According to the Pew Internet & American Life Project, the “spread of online banking has coincided with the spread of high speed broadband connections and the increasing maturation of the Internet population.” Some 63% of those who indicate they have a broadband connection have also tried online banking, compared to 32% for dial-up connections. Additionally, 51% of those who have more than six years of experience clicking around the World Wide Web have tried online banking compared to 27% for those with less than three years of surfing. As broadband usage spreads and American consumers rack up more time on the Internet, credit unions that have not developed a Web site may feel pressure from their own members to do so. “The Web has created a level playing field. It does not matter what size you are,” said Ducharme, noting online banking allows you to “compete with larger financial institutions.” However, the MIT CEO also admits that can be a “two-edge sword” because smaller financial institutions are now able to compete with you through an online presence. In the end, the most important factor for a credit unions’ adoption or upgrade of an online banking platform may be member loyalty. “I do believe that a good online banking program, and particularly online bill payment, can help in building and keeping relationships with members,” observed Wescom CU’s Siegel. -

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