Feature Stories - June 2000

Banking on Technology

Nevada’s Financial Institutions Invest in e-commerce

by Tony Illia

The new millennium will undoubtedly come to be regarded as the technology era. Computers, fax machines, cell-phones and palm pilots have already greatly affected our lives, altering the way we recreate, communicate and conduct business. Today, most kids would rather cyber-surf than attend Little League, while professionals e-mail one another instead of picking-up the phone.

Electronics have also quickened the pace of industry. People can now accomplish more within an hour than ever before, and with the advent of the Internet, global business can be conducted 24-hours a day, seven days a week. Banking is no exception to this burgeoning trend.

"The Internet allows anyone that wants to do their banking online, all of those services right over their computer," said Ted Wehking, executive director of the Nevada Bankers’ Association. "If you have a non-cash transaction, you can do just about anything over the Internet. It is a major convenience to the customers."

Started in Reno in 1908, the Nevada Bankers’ Association began as a united front against bank robbers. Of course, this was when the bad guys carried six-shooters and escape by horseback. In the modern age. however, criminals simply hack their way into a bank’s mainframe computer.

"The security behind an Internet transaction is extremely strong," claims Wehking. "You can imagine what would happen if a bank had a breech of security. They utilize encryption and all sorts of high-tech secure electronic transactions. Online banking is probably more reliable than going to a restaurant and paying for your meal with a credit card."

Yet despite the rise of Internet-based banking, Wehking believes there is always going to be a segment of the population reluctant to do business online. In fact, he notes a substantial increase in Nevada banks based primarily on the emergence of new community banks. "Nevada’s population growth fuels the fire for banking operations, which, in turn, mirrors the economy," said Wehking. Making Internet banking services available is necessary in order keep a bank competitive, but a lot of times, it’s a question of acquiring the manpower to set it up."

For U.S. Bank, the third largest bank in the state with 51 branches, the Internet is a must. In fact, the bank has an internal department named the "The Digital Group," dedicated to e-commerce. In addition, U.S. Bank was one of the first banks in the country to offer online banking services. "We have a large investment in 24-hour banking centers and we route people to them. Either online or through a telephone customer-service representative, it has provided more choices for how people can contact us," said Dotti Loader, public relations manager for U.S. Bank. "We are trying to provide enough alternatives to meet everyone’s need. In Nevada, U.S. Bank has doubled its banking officer staff since the beginning of the year. Essentially, it means we are providing more resources."

With corporate assets of $83 billion and 1,000 branches in 16 states, U.S. Bank has led the way in technology-driven, e-commerce solutions. For instance, the bank offers a unique check imaging service to its customers It actually allows U S Bank clients to view their cashed check on-line, the day after it’s paid. This service enables quick verification of paid checks and the opportunity to detect fraud Traditionally a three day turnaround is required for photocopied cancelled checks

Another U S Bank technology is an electronic freight payment service called powertrack It eliminates all the paper work automatically billing shippers and paying carriers within 24 hours The paper system of doing that transaction can take as long as 90 days Loader said One of U S Bank s biggest customers for powertrack is the U S Department of Defense

Technological advancements in the workplace over the years have provided business owners with savings and conve nience Just using fax machines alone saves a tremendous amount time," said Loader. "For smaller businesses, [online banking technology] means being able to work and manage your banking at your own pace."

According to Loader, some of the common things U.S. Bank customers do online include reviewing account activities, managing cash flow, paying bills and transfer-ring funds. "The large majority of our business customers utilize some type of electronic banking," she said. "Consequently, it enables us to maximize our resources, providing additional services and value:’ For some banks, the Internet isn’t necessarily a priority. "You have to make a distinction between a big bank or a small bank," believes Tod Little, chairman of Silver State Bank. "The most important thing we can do to be successful is provide a high quality of customer service. There are small businesses and individual investors who don’t want to call a ‘1-800’ number or go online. As long as we treat our customers the way they want to be treated, they’ll be there in the long run."

Indeed, although only four years old, Silver State Bank has six branches (all in Clark County) and $210 million in total assets. It is one of several new community banks emerging to service a niche market. "I think Clark County is probably one of the top two markets in the U.S., relative to growth and opportunity. You have to be in the right place at the right time, and the outlook here is very bright," Little said. "Economically, I don’t see an end to the existing pattern of growth [in Southern Nevada]. The only thing that would dampen it — is if interest rates climb much higher, and that would primarily affect the housing market."

Little believes big banks, which are driven by consumer products such as car loans and mortgages, need to stay at the forefront with Internet access. "Technology is going to make things more and more competitive. It will provide a lot of different options to consumers, enabling them to shop for rates," he said. "It has forced a lot of banks to merge, knowing that a significant investment in technology would be necessary?’

Also, there are certain functions that simply can’t be processed perfunctorily. For example, loans require human analysis and judgment. "We can’t ignore [the Internet]," Little said. "But we focus our energies on small businesses and individuals who want a higher level of customer service, I don’t believe technology will impact that segment of the market?’ Regardless, Silver State Bank is in the process of implementing an interactive banking Web-site. The bank expects to launch its online service later this summer.

"We are anticipating the Internet will become a bigger and bigger component for customers," said John Gehdry, presdent of Business Bank of Nevada. In its fifth year with $145 million in total assets, Business Bank of Nevada deals primarily with small businesses. "We will deliver an Internet-based banking product to our customers this summer. One of the ways to compete with bigger banks is through technology. The first step is to use the Internet to gather and disseminate information and then, at the next level, making it interactive. To a certain degree, technology levels the playing field."

Gehdry admits that security is one of the greatest areas of concern to his customers. "Processing or transferring data previously meant using security access codes. But pass codes can be stolen or picked-up," he said. "The next generation of technology will be digital certification. Potentially, there would not only be pass code restrictions, but PC restrictions as well?’

When implemented, digital certification will allow the bank’s file server to recognize the terminal being used to access an account through a chip identification process. And the technology is getting even better for certification. The next level of security to be used entails fingerprint identification on the user’s computer mouse.

High-tech security innovations notwithstanding, Gehdry says people still want the reassurance of being able to pick up the phone and talk to someone if there is a problem. Furthermore, he believes there has been a bit of a technology backiash. "If anything, customer service is going to become even more important. I think people have used technology for their own convenience, but when they want to talk to somebody it is frustrating. There is a comfort knowing somebody is there."

"Good service comes in several forms, one of them occurs in a branch environment with one-on-one friendliness and responsiveness, and for many people that describes their expectations of great service. For others, in a rapidly growing segment, good service is defined by electronic. For these clients, having the ability to access their accounts or perform transactions anytime of day equates to good service," said William Martin, president of Nevada State Bank. Chartered in 1959, Nevada State Bank has 59 branches with assets over $2.2 billion.

"Paying bills online is a very big item. Many firms accept Internet credits. From the business side, payroll can be done online, as well as sending wires and conducting daily account balances. With ‘cash management,’ people have a longer duration to keep their money invested before transferring it to pay bills. In this way, they can earn money on the float."

Martin believes some people will never use the Internet. "We conducted a 400 household survey in January of 1999, asking people why they banked where they do. Fifty-one percent said convenience. The more branches you have, the better chance you have of servicing those people. For that second group, they want access to ATMs or home banking."

Today, banks routinely e-mail blank forms, accepting signatures via fax on loan documents. And according to Martin, AT&T and Zions National Bank utilize digital signatures to certify identities. "Eventually, the technology could be made available for every application imaginable, from renewing drivers’ licenses to transferring titles."

While Nevada State Bank carefully balances technology with human interaction, Martin recognizes that e-trade banks could pose a serious threat to small community banks. "E-banks have a lower operating overhead that enables them to be cheaper. The Internet eliminates the need for a tremendous amount of overhead in the form of bank branches and similar assets. E-trade will attract some but, at this point, people still like personal service?’

While the opinions vary regarding the benefits or detriments of the technology of online banking, love it or hate it, the Internet is an undeniable facet of contemporary life. Certainly, Nevada’s financial institutions recognize its significance and importance. And if the Internet’s powerful potential is frightening for some, it is exhilarating for others. Yet at present, depending upon the scope and scale of the financial institution in question, the Internet plays either a major or minor role. Regardless, online technology has undoubtedly become a vital part of the banking industry’s customer service repertoire, and it is a trend that looks to grow only more prominent in the future.

Tony Illia
Tony Illia is a freelance writer based in Southern Nevada.