1. The Future of Internet Banking By Michael Skiscim

2. Introduction Since the late 1990s, banks have increasingly offered internet banking services Currently there exist two types of internet banking: –transactional internet banking: e.g. access accounts and transfer funds (what you have at BOA, Wachovia, Wells Fargo, etc.) –Internet-primary banking: true internet banks, only accessible via the internet; are not affiliated with a brick-and-mortar bank. Majority of internet banking offered via large banks

3. Consumer v. Business Many people use internet banking offered by their bank, but overall consumers account for very little Business benefits from efficiency and speed Banks make more money from the volume of products and services offered to business; volume of transactions are higher

4. Privacy and Security Concerns Data is digitized and easily transferable if accessed Threats are from hackers and disgruntled, dishonest, and poorly trained employees Loss or theft of data could result in severe financial losses for the bank; could spawn a general lack of trust in e-commerce Potential for identity theft

5. Regulation Gramm-Leach-Bliley Act of 1999 –Reverses remaining clauses of Glass-Steagall –Allows holding companies to offer commercial banking services, underwrite insurance, securities, municipal bonds, and affiliate with other banks. Fair Credit Reporting Act of 1992 (2001 Amended) –Requires the reporting of accurate information

6. Is Internet Banking Profitable for Banks? Not as of 2000; however, use is forecasted to steadily increase Not all banks offer internet banking because of the initial costs involved –Some are taking a wait and see posture They forfeit potential market share to early adopters Hope for advances in technology for easy entry in future at reduced cost –Early adopters (BOA, Wachovia, Wells Fargo, Bank One, & Citi) account for 35.8% of internet banking

7. Future of Internet Banking Market demands will continue the development of internet banks –More products and services will become available Future of internet-primary banks still uncertain

8. References Carlson, J., Furst, K., Lang, W., Nolle, D. (2001 Revised). Internet banking: Market Developments and Regulatory Issues. Presented to the Society of Government Economists Conference 2000. Washington, D.C.: Authors. Federal Reserve Bank of Chicago. (2000). Changing Financial Industry Structure and Regulation. Chicago Fed Letter, 157a