The Disparity Between Large And Small Bank Internet Offerings Grows

A widening gap exists between the interactive services offered by large and small banks.

While large banks have been adding features and functions to their "full service" Internet banking sites, community banks are not keeping up, according to Microbanker, a Lake George, N.Y., research firm.

"Large banks have two advantages over smaller financial institutions," said Nancy Davis, president and senior analyst at Microbanker. "One, they have the resources to develop their own systems in-house, so they can be more creative with their online offerings than smaller FIs that are dependent on third-party providers. Two, they can partner with ASPs who private-label sites for them, sites that broaden the functionality of their Internet banking offerings with robust services the bank might not want to, or be able to offer themselves."

The top scoring large banks were Bank Of America, Wells Fargo, First Union, J.P. Morgan Chase, Commerce Bank and Citicorp. The top scoring community banks were Salem Five Cents Savings Bank, Digital Employees Federal CU, Franklin National Bank, Net.B@Nk and USAccess Bank.

Bank of America offers 15 more online services than the top scoring community bank, Salem Five Cents Savings Bank. In fact, Bank of America offers 34% more online functionality than its next highest scoring competitor, Wells Fargo Bank. Most of Bank of America's e-banking functions are provided through partnerships with third party ASPs. But for users, the services appear to be from Bank of America, or Banc of America Securities, giving them an extra measure of comfort that they're working with a trusted source.

Internet banking is maturing. After almost a decade since the first Internet banking sites appeared, the functionality of online banking transactions has increased tremendously. Customers can apply for loans, buy insurance, view their trust accounts, buy stocks, and of course, pay their bills.

But if they bank with a large bank, they're more likely to be able to do these things and more, according to Microbanker. They can wire funds, initiate letters of credit, trade foreign currencies, view checks from the day's lockbox deposit, even buy goods and services online, all through one portal-their bank.

In its annual survey of Internet banking sites, Microbanker analyzed 51 sites for 45 potential services, up from 27 last year, all of which provide interactive banking functions-services that customers can use instead of going into a branch, picking up the telephone, sending a fax, or dialing direct into a private network. Most of the new services are for corporate customers.

There is a growing dichotomy between the consumer/small business services offered by large and small banks, Microbanker found. The gap is widening among basic services, such as stop payments, balance and transaction history on non-deposit accounts, investment trading services, and especially, small business banking services. These are services all commercial banks and many thrifts can potentially offer to consumers and small businesses. Some of these services are easier to deliver online by partnering with a company that is just a click away.

By failing to be a "full service" bank online, smaller institutions risk losing tech-savvy customers to other full service institutions, Microbanker said.

Microbanker scored the sites based on objective data, namely the number of interactive functions the site offers, either through its own services or in conjunction with a co-branded partner. The most points a site could earn is 45. The highest scoring site, Bank of America, earned 39 points.

In addition to typical Internet banking functions, the survey examined sites for small business services, such as ACH origination, wire transfers, tax payments and payroll. New to the survey this year are treasury and trade services, such as lockbox reporting, letters of credit, foreign exchange trading, positive pay, and account concentration. None of the financial institutions listed under the top 100 banks offers treasury and trade services online.

Other extraordinary features examined were bill presentment (21% of the large banks, 6% of the smaller banks), marketplace/mall (37% of the large banks, 9% of the small), portal function (26% of the large banks, 22% of the small), and wireless access (16% of the large banks, 22% of the small), which is the only function where small banks outscored the large.

Of the 51 financial institutions scored, 19 were among the top 100 banks in the U.S., five are Internet-only banks.

Alphabetically, the companies are: Aliant National Corp; Amarillo National Bank; Arvest Bank; Bank Direct; Bank Of America; Bank Of Cleveland; Bank Of Edwardsville; Bank Of New York; Bank One; Boeing Witchita CU; Britton & Koontz First National Bank; Citicorp; City State Bank; Commerce Bank; Community Bank Of Elmhurst; Digital Employees Federal CU; Direct Federal CU; E*Trade Bank (Telebank); EDS Employees CU; Evergreen Bank; Fifth Third Bank; First Fidelity Bank; First National Bank Of Anson; First National Bank Of Hudson; First Navy Bank; First Union; Firstar Bank-Milwaukee; Fleet Boston; Franklin National Bank; Golden 1 Credit Union; Hale County State Bank; Hibernia National Bank; Humboldt Bank; Huntington National Bank; Iowa Savings Bank; J.P. Morgan Chase; Keybank NA; M&I Bank; Mellon Bank; Michigan National Bank (ABN AMRO); National Bank & Trust; Net.B@Nk, Inc.; PNC Bank NA; River City Bank; Salem Five Cents Savings Bank; Sandy Spring National Bank-Md.; SCE Federal Credit Union; Security First Network Bank (RBC); Suntrust Bank; USAccess Bank; and Wells Fargo Bank.