J. Alex Sloan could not care less whether his bank has an office nearby. It does -- a Wells Fargo branch within blocks of his San Francisco apartment -- but the only reason he has his account there is that he likes the way the bank's online system works with his Quicken software.
"I don't know the last time I was in a branch," he said. "I have no need to go there."
Sloan, a 33-year-old venture-capital investor, represents one of some 17.8 million American households that do at least some of their banking online, according to IDC, a market research company. Put another way, one-third of homes with Internet access are using that access to bank.
"I don't want to overstate the case, but it's changed my life," Sloan said. "I have so much more control over my finances. I can see what's going on with my account almost in real time. My dad has to wait until the end of the month to figure it out."
To judge from the numbers, Sloan's father may soon be coming around. More than half of all banks offer online banking today, up from 12 percent only two years ago, according to IDC. JP Morgan Chase said that the number of customers using its online banking system had doubled since last year, though it would not provide specific figures.
"This growth is not simply due to an increase in online households, but is truly an increase in the popularity of online banking among Internet users," said Aaron McPherson, research manager at IDC.
The striking increase has come as traditional banks and a new crop of Internet-based banks -- along with credit unions, brokerage firms and other institutions -- have finally created reliable, easy-to-use online systems. For most of the 1980s and 1990s, online banking was limited to early technology adopters willing to put up with arcane software, proprietary networks, system glitches and security concerns.
Now traditional banks, big and small, are devoting the kind of attention to building and maintaining sophisticated online banking systems that they previously lavished on branch services.
"Customers are finding online banking one of the top picks for why they choose banks," said Yawar Shah, an executive vice president of JP Morgan Chase. But for consumers, there may be as many caveats as there are advantages to digital banking.
For the banks, getting customers online is important to the bottom line. It has diminished the importance of proximity: local banks can be national banks, too, drawing from an exponentially larger pool of potential customers. And as with automated teller machines, the cost of serving a customer is significantly lower than with human tellers -- at least in the long run.
Extra charges
But along with reducing their expenses, such institutions have turned online banking into a way extra money can be made. Depending on the customer's minimum balance, some banks charge additional monthly fees for their online services, including the ability to pay bills online or to use software like Quicken from Intuit or Microsoft Money with the bank's accounts.
For customers, the benefits of online banking are fairly clear. With automatic bill paying, there is no need to remember to pay the monthly utility bill and no stamps to lick; the system will ensure that the bill is paid on the appointed date. Users can get an instant look at a balance and a detailed summary of all recent transactions.
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