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The Pros and Cons of E-Banking.

View account balances, transfer funds, pay bills, apply for a loan [ldots] all are among options for customers in Alaska who bank online. And all are as fast and easy as a smooth click of the mouse.

It wasn't always that way. Internet banking integrated itself into households and business offices with fits and starts--not all of them yet resolved. First came the dial-up account, then later the more popular Internet-based processes of today. In many aspects, the world of electronic banking has taken flight quickly, sometimes faster than the industry (and even the client base) could adjust.

On the customer end, growing legions of users see e-banking as an efficient method to free, up time and energy for more fulfilling life events. Yet many banking clients are leery to manage their money from a computer screen--preferring instead the feel of paper and exchange with a live teller, physical evidence of their financial rewards and savings.

Concerns regarding e-banking resounded through the walls of Congress last year when a congressional investigation suggested that Internet banking is inherently riskier than conventional methods. The survey determined that 44 percent of the nation's financial institutions "had not taken all the steps deemed necessary to limit those risks," according to an August USA Today analysis of the 1999 report.

The General Accounting Office reviewed reports of 81 financial institutions examined by banking regulators. Of that cross-section, 35 fell below the standard of risk-limiting measures. Rep. Spencer Bachus suggested that the industry's challenge is to ensure the "rush to technology does not outpace that proven ability" by the nation's financial institutions to provide secure and private service.

Some analysts suggest that attention until recently was concentrated on the high-profile Millennium Bug situation, with concerns about Internet banking following a step behind.

Despite the GAO report that noted deficiencies by some banks in developing strategic plans regarding Internet procedures, the review was acknowledged as too small a sampling to adequately reflect the status industry-wide.

The struggle between the banking and technology industries to control the way banks, customers and vendors communicate is another key point in the development of financial services online. While many operators believe a standardized specification is needed to provide consistent banking services across-the-board, there is ongoing argument as to which system to use.

Still, despite those fits and starts on all ends of the e-banking spectrum, industry forecasters project nothing but growth for Internet-based financial services. Estimates are that some 10 million households could be managing finances online by next year.
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Publication:Alaska Business Monthly
Article Type:Brief Article
Geographic Code:1USA
Date:May 1, 2000
Previous Article:OnLine Banking (part 2).

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