CHECKING BANK ACCOUNT ON LINE : ADDITIONAL ACCESS COSTS MORE, BUT CAN SAVE TIME WITH BILLS, CHECKBOOK.

Byline: Yardena Arar Daily News Staff Writer

I can still remember when ATMs came into use. For my money, the automated teller was the single most time-saving innovation of the 1980s, eliminating countless lunch hours standing in line at my local bank branch.

The next banking milestone was the 24-hour customer service hot line, allowing me to balance my checkbook any time of day or night by dispensing up-to-date information about my account. Between the automated phone information and Intuit's Quicken, the popular personal finance program that eliminated my math errors and printed out checks, I figured banking couldn't become much easier.

So when I was asked to try out on-line banking, I welcomed the opportunity with a healthy dose of skepticism. What could the bank possibly do for me on line?

Lots of things, it turned out. On-line banking makes paying bills and tracking account activity as easy as a few mouse clicks. At a minimum, it makes balancing your checkbook a snap, and for the organized bookkeeper, it means never having to sign and mail a check from home.

At most banks, all this convenience does carry a cost - from $5 to $10 in addition to existing banking fees. But the convenience is very seductive, and - spurred in no small part by the integration of on-line banking into the latest releases of Money and Quicken - more and more consumers appear to be taking advantage of the service.

Jupiter Communications, a New York consulting firm, predicts that nearly 2 million U.S. households will be banking on line by the end of 1996; in 2000 that figure is projected to reach 12.98 million.

``Big banks have really been involved with on-line banking for over 10 years, with proprietary dial-up services that they developed in the 1980s,'' said Jupiter Communications analyst Phoebe Simpson.

But for institutions smaller than Wells Fargo, Bank of America, Citibank and others who pioneered the field, the start-up costs for on-line banking put it out of reach. What Money and Quicken have done is allow these small institutions to contract for the technology, Simpson said.

Microsoft's 57 banking partners and Quicken's 37 banking partners all use Intuit Services Corp. to handle the back end of their on-line service. ISC gets a setup fee from the banks plus a per-transaction fee.

Intuit spokeswoman Sheryl Ross declined to say what the banks have to pay, but she said the standard cost of consumer bill-paying services such as CheckFree is $5.95 for up to 20 payments - less than the cost of postage for people who actually take advantage of the limit. ``We do better than that for the banks,'' Ross said.

Ross added that Intuit already has raised its projections for the number of Quicken users taking advantage of the program's on-line banking features.

``When we launched the service, the numbers we gave the street were 100,000 to 300,000 customers within a year,'' she said. ``The new numbers are 200,000-400,000 by the end of our fiscal year, which is in July. We're doing a lot better than we thought we would do.''

Simpson said the integration of on-line banking into Quicken and Money has been a big boost to on-line banking.

``It's accelerating it because these company base their business on marketing. They have a closer relationship with consumers than banks,'' she said.

At the same time, Ross said, ``customers really want to pay their bills through their bank. We worked with CheckFree for six years, and in the six months since we began working with banks, we more than doubled the number of customers.''

Ross said that Intuit was encouraging banks to look at on-line banking as a means of increasing market share, which seems to be happening with Intuit's partners.

``Twenty percent of the customers using on-line banking are new to the bank,'' Ross said.

New York-based Citibank is pursuing the market-share strategy aggressively. After offering on-line banking with fees for years, Citibank dropped its fees June 1 and saw its user base shoot up by more than 200 percent.

More importantly, 20 percent of the 125,000 customers who signed on for on-line banking between June 1 and Dec. 31 were new customers, said Citibank's Ed Dixon.

Union Bank of California is also experimenting with no-fee on-line banking for one year, and spokeswoman Michelle Mapel said the bank was very pleased with the results.

In an even more cutting-edge experiment, Security First Network Bank of Pineville, Ky. went on line as an Internet-only bank in October and has since signed up 2,000 retail customers in 50 states. The bank's only brick-and-mortar building is in Pineville; customers can make cash withdrawals at ATMs across the country and deposits are either by wire transfer (direct deposit) or mail.

Clients pay no fees at all for basic banking and bill-paying services; minimum balance is $100. The bank recently began offering money market accounts, certificates of deposit and joint checking accounts; it is seeking regulatory approval for brokerage and insurance services.

``I did an informal check, and I can't find any other bank in the country that has retail clients in all 50 states,'' said spokesman Ken Hoskins.

Free on-line service remains the exception, but Simpson believes this may change.

``The Citibank experience is really going to lead the way for on-line banking,'' she said. ``I believe costs are going to come down, at least initially. The banks can't afford to scare away customers with high fees.''

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Photo: (Color) On-line banking is the most recent venture u ndertaken by financial institutions to better customer service.