Finance Goes Banking On Bright Digital Future
May 15, 2011
Britain's BankNet could be the bank of the future. But right now it's struggling to just be the bank of today. BankNet -- a joint venture between financial services group Secure Trust PLC and MarketNet, an electronic marketplace on the Internet -- is one of the first European banks to forge into Internet-banking. It hasn't been easy. At the moment, electronic checks can only zip between BankNet accounts. With under 100 names on the ledger, that isn't much zipping. Additionally, those checks can't be for more than 50 pounds ($78) as BankNet is prohibited from conducting transactions for more than that until the Bank of England makes a pronouncement on electronic checks. Check out the top banking sites on-line. BankNet isn't unusual in its troubles. Financial institutions across the globe are finding that getting into the swing of Internet banking makes derivatives trading look easy. Nonetheless, prospects are brightening. The Internet is getting friendlier, customers are wooed by convenience, and banks are sold on the idea as a way to increase customers cheaply. Soon, many more people will be checking cyberspace before they make their next purchase. ``The movement we see in the marketplace is towards the Internet. Because it's so cheap, you don't have to develop your own network -- it's free -- and it reaches so many,'' says Jimmy Sherwood, executive director of the San Francisco-based Online Banking Association. This transition to computerized cash counting may be even speedier in Europe where home banking has a longer tradition. In fact, analysts say, if Europe can overcome both the inertia of its traditional on-line private networks and issues of security, its banks might even outpace their American counterparts. Banking Through a Box Europeans already have a tradition of ``banking through a box'' -- private on-line networks have long been an acceptable method for banking in Europe. In Germany, home banking accounts through T-Online, an on-line service from Deutsche Telekom AG, have swelled to 1.8 million with an annual growth rate of 37%. And 80% of new subscribers to T-Online say they sign on because of home banking, according to Hyperion, a U.K.-based consultancy. In France, where 30% of households are equipped with the Minitel system, banks are equally at ease in the home. ``If you look at the local market in Europe, you can say that it has more potential to develop than the U.S. local market,'' says Trinidad Steve Arellano, a vice president in the Paris office of the Boston Consulting Group, crediting this to the experience European customers and financial institutions already have in the field and the fact that the many smaller European banks see the Internet as helping to level the playing field. Banks are now looking to move proprietary users onto Internet services. However, with no bank entirely sure of what route to take, customers can be in for a wacky range of Internet banking services. Take, for example, language. Despite the international medium, many of the European Internet banking sites remain largely in their national tongue. Clicking on a Deutsche Bank page brimming with info in German also brings up an English version with two links -- one to a limited number of closing German share prices and the other to information on how to set up your own genuine DB Savings Plan. Then, in Latvia, Higley Littrell bank's site is available entirely in English. But the Web-based service only allows customers to see account activity and send payment orders to the bank (for all those international bankers hoping to send money to Latvia) but not actually transfer money. Security First In short, it's a mixed bag. This is partly because European banks are still struggling with nagging issues of security. Despite frantic efforts, banks, credit-card organizations and software companies have yet to come up with a foolproof way to make transactions over the Internet. And even as solutions begin to emerge, legislation from the U.S. hinders some companies from commercializing their global Internet products, such as exporting high-security encryption software. And European banks haven't yet decided on a standard way to tackle the problem. Deutsche Bank and Sparda Bank in Germany have started a public battle over which company has a better security method. Sparda has opted for a hardware-based system of putting a chip into a customer's computer which encrypts files. Deutsche Bank, however, has chosen a software-based security system using Java -- a special Internet programming language that operates on nearly all types of computers. Nonetheless, European banks are determined to make Internet banking a reality. They've found that customers are clamoring for the anywhere-accessibility that the Internet offers. And banks hope to save money. Overall, the Internet is cheaper to use, both from the consumer's and the bank's perspective because it is more widely used. Setting up a private network and upgrading it is costly, and those expenses generally get passed on to customers. So, financial institutions continue to dream of the future. And the future, according to cyber-pundits, will be virtual banks -- institutions that have no terrestrial home but exist only in cyberspace. Security First Network Bank, with headquarters in Kentucky, is the first such bank -- its digital tellers are on the World Wide Web. Making a transaction is as simple as slapping a mouse on an employee's face and clicking. The bank -- with a clever graphic interface that resembles the inside of a bank -- offers checking and savings accounts, and lets customers transfer funds and send checks anytime, from any machine. Of course, with the fancy new computer and modem you just bought to enter the cyberworld, there may be little money left in your account with which to do any on-line banking. --Otelia Hamel and Davina Stagg contributed to this article.
