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While much attention has been focused on online retailing and business-to-business e-commerce, it's becoming clear that Internet banking will deliver the next big wave of commercial growth on the Internet.
Customers are demanding online banking, which goes beyond banking with electronic loan and credit card applications, bill paying, insurance and stock trading.
Internet banking is not your father's bank.
"We envision most every type of banking transaction being done online, short of cashing a third-party check," said Bill Veeneman, vice president of online services for Minneapolisbased U.S. Bancorp, which is planning to enhance its online banking services. "You'll also see new services that do not exist today and services will be widely reconfigured."
About one-third of American homes are linked to the Internet today. Of those people, 61 percent do their banking, investing or other financial activity online, according to MSN MoneyCentral. The typical online customer tends to be a young, wealthy and well educated male.
The Internet is becoming increasingly necessary if banks want to remain competitive in the financial services market, where the lines between banking, investing and buying insurance and other products are becoming increasing blurred. By offering a wider array of financial services, banks will be able to address Web customers worldwide.
The market has heated up lately with New Yorkbased American Express Co. announcing last month that it will launch a virtual bank on the Internet. Also recently, Columbus, Ohio-based Bank One Corp. launched WingspanBank.com as its Internet bank and online broker ETrade bought Telebanc Financial to enter the online banking market. Just this year, the number of financial institutions offering Internet banking has tripled. Most large banks, such as Wells Fargo & Co. (Norwest Corp.), Bank of America and Citibank, offer their customers online banking from account transactions to stock trading to online loans. And there are a growing number of Internet only banks, such as Atlanta-based Net.Bank.
Still, some small and mid-sized banks based in the Twin Cities don't offer any or many services on the Internet. Several, such as Richfield Bank & Trust and Minneapolis-based Riverside Bank, plan to launch online banking next year.
Bill Doyle, director of online financial services for Forrester Research Inc., a Cambridge, Mass.based research firm, points out: "Banks will be distinguished...