Guestwords: Don't Bank On Cyberbanking
The Internet is nothing if it is not about promise, and one promise that has received widespread attention is its potential for electronic banking. Wire fund transfers have been around for years, of course; big businesses, brokerage houses, and banks routinely shuttle billions of dollars across phone lines while half the world sleeps.
Now, the logic goes, this technology will trickle down to ordinary folks. Because some 40 million of us own PCs, we can bank from our keyboards.
Chase Manhattan, Citibank, Chem ical, and several other financial institutions are offering services that allow you to log on and pay creditors as diverse as your landlord and the dry cleaner. As with conventional bank cards, you have a PIN or password for security - supposedly, so nobody can forge "checks" even if they had access to your home PC.
The Big Pitch
You simply tell your computer whom to pay on the first of the month (or whenever the payment due is on your credit cards, for example), and the bank will debit your account. Not only do you get the extra float on your money, you no longer have to worry about the U.S. Postal Service slowing or misplacing a payment. Your electronic fund transfers can be made 24 hours a day, and they are "guaranteed."
The purveyors of all this advanced technology point to how much time and postage you'll save. In theory, home banking sounds wonderful to all of us who are fiscally challenged. When it comes to balancing a checkbook, plus or minus $100 is close enough for me.
When Chase Manhattan first introduced Spectrum in the early 1980s, it was a crashing failure. It attracted a scant 2,000 customers. Modems were slower, software was less sophisticated, and home PCs weren't as cheap, powerful, or ubiquitous as they are now.
More For Self-Serve
But that wasn't why it failed to gain a significant number of followers. What was wrong with the concept then is still what's wrong with checkless banking today. The banks want to shift the burden of labor to the customer, and then, under the guise of another "service," want the customer to pay for it.
The pitch is, put simply, "be your own teller for one low, low price." Imagine if you went to a service station that charged $19.95 for an oil change, or $24.95 if you want to do it yourself. That's what's happening with banking in cyberspace.
Banks have used the same marketing tactics with automated teller service. At A.T.M.s, however, you're getting tangible benefits. You can bank at any hour, get cash, the lines are generally shorter than they are inside the bank, and you never have to deal with surly or slow tellers who follow the the same rigid schedules as the machines. And most A.T.M. transactions are free or reasonably priced. It's a fair deal for both the bank and its customers. They save labor costs; we save time.
Does Not Compute
Banking in cyberspace, however, does not compute. I made an informal study of at least four large banks or financial services companies. The charges for home banking run somewhere between $9.95 a month up to $15 a month with certain restrictions (of course).
Intuit, which publishes the phenomenally popular Quicken money management software, charges between 35 cents and 50 cents a check, depending on volume. As with shopping for a loan, the gimmicks and free-month teasers made it difficult to discern which was the best deal. The banks will give you the software. At Citibank, bank personnel recently handed out applications and diskettes to people waiting on line.
Though the charges are hardly excessive, electronic banking seems to be attractive to households who pay a large number of bills each month. Depending on what service you use, it will cost roughly 50 cents a check for the typical household. Subtract the postage and you're still paying 18 cents a check.
Mythical Advantage
I've met one customer who swears by on-line banking (using Intuit's clearinghouse); he finds it well worth the monthly fee to pay his creditors exactly when he wants. But his advantage is mostly myth. He still needs a cash machine if he wants to buy a newspaper or get heels put on his shoes.
All he's doing is saving time stamping and licking envelopes. Electronic banking makes him au courant in today's techno-society. It makes him feel better.
The reality is this. In all but a few cases, keeping your money in a checking account until the last possible moment doesn't pay. How much can a person with a middle-class income save even with an interest-bearing checking account? We're talking pennies.
Inevitable Errors
Unless you're moving the kind of numbers around that American Express does every month, your savings on the float won't amount to anything. On-line banking is for high rollers only, and those folks don't type.
Then there's the last sticky matter of electronic security and disputes over bank errors. As you might expect, on-line banking applications have no shortage of fine print. If it hasn't happened already, sooner or later someone's direct-deposit paycheck will end up in someone else's checking account in Singapore. It will happen either by glitch or by greed.
If "Phiber Optik" and other 20-something hackers can explore NYNEX's mainframe computers or download credit card numbers, it won't take long before a budding Willy Sutton begins breaking into our checking accounts via a short jaunt on the Info Highway. (I can imagine what he'll say when he's indicted: "Because that's where the money is!")
Back To The Mattress
The red tape on a single mix-up will cancel out all the time you saved in a year of electronic banking. On two occasions, Chase automated tellers shortchanged me for $20. The first time, I complained, filled out a form, waited a month, and finally received a letter saying, in essence, the machine paid the money out and it was my loss.
The second time, I got so angry I swore I'd move to another bank if they didn't cover my loss. (They did.) Unless it's a matter of direct fraud or theft, the burden of proof for any losses incurred with cyberspace transactions will undoubtedly be on me and you.
If you don't believe this, read the receipt from an A.T.M. There is a reason they say "record" of your transaction and not "receipt."
On-line banking is an outstanding advance in technology. The idea of a "cashless society" is very appealing to many of us. But so far, it's not much of a deal. In fact, it almost makes one want to put his or her money in a mattress. It's still easier to extract a $20 bill hidden in a piece of foam than it is from a hard drive.
Doug Garr, a writer who divides his time between East Hampton and New York, has been using computers since the first Apple II was released. He is a frequent contributor to "Guestwords."