Online Banking
Small business owners who have made the switch say it's simplified their lives

Walter Church lives by a code inherent to most successful business people: He doesn’t like to waste time or money. But in today’s technology-driven world, that’s what he felt he was doing. As the owner of two small businesses in Valdese — CFG, a tax consulting company, and Table Rock Springwater — Church knew he was spending too many hours making bank transactions, either over the phone or at a local branch.

So late last spring he starting doing most of his business banking on the Internet, using software offered by Branch Banking & Trust. Called Web Connect, it allows Church to transfer funds between accounts at the click of a mouse.

“I use it as a cash management tool to move money between accounts,” he says. “It gives me up-to-the-minute details. I can transfer money at 4:30 in the afternoon and it will show up in there that night.

“You don’t have to get on the phone, and you don’t have to wait for somebody. It’s been efficient and reliable for me.”

It’s also been both of those things for Gayle Tuttle, who owns Perigee Creden-tialing Inc., a healthcare quality improvement firm in Garner. She’s been doing her business banking via the Internet for nearly two years, a move she made after test-driving web banking for her personal accounts.

“Initially, I used it mainly to see automatic debits,” she says. “Then I added it to the business, and it’s really enhanced the experience. Moving money is critical, and this way I am able to keep funds in interest-bearing accounts until the very last minute.”

Accessibility — “real time” in computer speak — is a tremendous plus. “There is rapid response,” Tuttle says, “and everything’s right in front of you. Every account is up there by number, all on one screen.

“As a small business person, I am often up in the wee hours doing my books. It’s perfect for that.”

Neither Church nor Tuttle pay their company’s bills online just yet. But they say they expect to soon, and they’re expected to have plenty of company.

Tony Plath, an associate professor of finance in the Belk College of Business at the University of North Carolina at Charlotte, says the number of businesses that utilize Internet banking services will soar in 2001. Why? Because banks of all sizes are beefing up the online services they offer to commercial customers with better features and even some non-banking services.

“Two years ago, most banks simply used the Internet as an alternative method of providing prospective customers with a brochure,” says Plath. “Banks started by offering a wide range of Internet banking services to their retail customers. Now a handful of banks are really beginning to offer an incredibly useful portfolio of web-based services to their big business customers. Those services are already trickling down to small businesses.”

For proof, there’s Aladdin Travel & Meeting Planners in Winston-Salem. The company gave itself an early Christmas present when it had its hometown-based giant, Wachovia, install what the bank calls its “financial browser program” last month.

“We’re expecting it to give us easy and quick access to monitoring our accounts and transactions on a daily basis,” says Elizabeth Hensley, Aladdin’s accounting manager. “We’ll be able to check our credit and debit activity and our balance history.”

Hensley says Aladdin had been looking at banking online for months before making the commitment. “We wanted to wait and see if it would be advantageous for us. We’ve acquired a couple of agencies that have prompted our growth. That increased the need to monitor our activity more on a daily basis.”

Wachovia, like most of the state’s largest banks, remains on the cutting edge. In mid-November it announced the pilot launch of an electronic marketplace for commercial customers called WorkWares. It’s an online procurement solution providing customers with the capability to search for goods and services across numerous categories and gain access to competitive pricing and purchasing across multiple suppliers from a single web site.

Wachovia initially offered WorkWares to several beta customers. The product represents the bank’s first step in delivering a web-enabled trading hub that should maximize efficiency and enhance buyer control.

“We recognize that companies want a single site to improve the entire procurement, payment settlement, and reconciliation process, and we are developing WorkWares with that goal in mind,” says Douglas G. Hartsema, executive vice president of Wachovia Corporate Financial Services and head of Wachovia’s Treasury Services Group. “WorkWares will complement and extend our existing offerings in the treasury management arena by adding deeper supply chain-related capabilities.”

WorkWares has secured four suppliers — Boise Cascade Office Products, Comark, Lanier Worldwide and MarkMaster — that offer a wide-range of office supplies, technology products and document management solutions.

Initially, WorkWares will offer features to help streamline, monitor and manage the purchasing process for commercial customers of all services. Online activity reporting lets users track orders through approvals, acceptance, back orders and shipping. Customers can simplify re-ordering by keeping the information about frequently purchased items easily accessible, thus eliminating the need to enter shipping, payment and accounting data on each visit.

Wachovia officials say WorkWares will evolve based on customer usage and acceptance during the beta, or testing, phase. The bank’s goal is to continue expanding product, service, vendor and financial settlement choices. In the pilot phase, customers use credit cards to settle purchases.

It’s no surprise to Plath that North Carolina’s banks are beginning to offer these wide ranging services to its customers.

“They want to get their customers to go online as much as possible,” Plath says. “That’s particularly true in their treasury management applications where they feel they can be the most useful. They also want to feel like they are players in the e-business marketplace.”

  North Carolina’s other big banks also are leading the way with their big R&D budgets. According to Plath, Charlotte-based Bank of America and First Union, along with Wachovia, have all made multi-million-dollar investments in Internet banking for their commercial customers. They also made a big push toward offering some non-traditional products.

“Bank of America’s Business Connect online platform is really a revolutionary product,” claims Bank of America spokesman Linda Muller. “It offers a lot more than just Internet banking. The service actually becomes the company intranet.”

Through the Business Center, a small business owner can organize and check on company finances, shop for business insurance, check out employee benefit packages as well as eyeball travel, shipping and discount card programs.

There’s also information about taxes, medical savings accounts, financing, legal matters, training, growing the business, communication and marketing. In addition, the small business owner can manage personnel and payrol right on the desktop — even buy postage.

“It will enable our small business customers to save time and money, and to obtain the tools they need to grow their businesses,” says Mark Argosh, Consumer/Small Business e-Commerce executive for Bank of America.

Once they’ve been assigned their password on the Business Center, employees can participate in the program by filling out timesheets online, signing up for meetings, completing travel expense forms, purchasing office equipment and supplies, checking out relevant news, and a wealth of other tasks.

“Although there are intellectual law issues involved, other banks will take a look at this type of initiative and find ways to emulate it,” Plath predicts.

Perhaps the most current of First Union’s online services and the most germane to small business is the Market Place First site that the bank says promotes e-commerce opportunities for businesses to “exchange products and services in a vibrant, safe community.”

The site is primarily divided into services for sellers and services for buyers. For the buyer, the benefits First Union hopes to provide include affordable and timely procurement, easy product sourcing, plus access to local and national merchants. For the seller, First Union hopes that the product will help customers attract new buyers, acquire new customers at low costs, serve current customers more effectively and provide services through new sales channels.

First Union also offers an electronic bill payment and procurement service that the company says can save 40 percentto 65 percent — an average of 90 cents per bill sent and paid electronically.

Jeff Ward is First Citizens Bank and Trust’s group vice president for First Citizens Direct, its online service. “I’m from the side of banking where customer contact is paramount,” he says. “One of the goals of my team is to help small businesses make the most of the services we offer through our online banking portfolio.”

First Citizens teamed with Magnet Software to add some sizzle to its online offerings. But more importantly, according to Ward, it also teamed with its customers.

“Our niche is serving small businesses and so when we provide new products through our web site, we always seek input from our customers,” says Ward.

First Citizens moved away from a dial-up system and included services like wiring money that seemed particularly important. “The Internet provides us with another way to deliver the First Citizens brand to our customers,” he says. “And the First Citizens brand is different from a Bank of America or First Union brand.”

Kemper W. Brown favors the First Citizens brand. He’s the president and CEO of The Electronic Office Inc., a 20-year-old Asheville-based systems integration company with 33 employees serving commercial and industrial clients primarily in western North Carolina.

“We’re a relatively new user,” Brown says. “But it’s already proving to be very useful. My staff particularly likes it when they are trying to complete the end-of-month reconciliation. Plus we always know where we are financially. There’s no more darkness and much less reliance on bank statements and other more traditional means of divining the company’s financial health.”

Brown and his staff initially attended a seminar held by First Citizens to introduce its commercial online services.  “We’re still working our way into using all the services,” said Brown. “But I want my CFO and his people to have all the most up-to-date financial tools.”

Of course, banks of all shapes and sizes have taken to the Internet. Greg Pierce is a senior vice president and operations manager for Paragon Commercial Bank in Raleigh, a small commercial institution that opened its doors in 1999. While most banks use new branches as a way to grow, Paragon hopes to use its commercial Internet banking presence to expand its customer base.

“We want to create a portal for our online customers,” Pierce says. “That’s why we’ve installed certain links to service providers and publications that may be useful to our customers. We’re even looking at a deal with a direct mail company that helps small businesses.”

Lee Jackson is the type of business man that Pierce hopes to entice. As one of four partners in the Smithfield CPA firm of Dees, Jackson, Watson & Associates, PA, Jackson sees Internet banking in his company’s future.

“We may go online with our commercial accounts in the next few months,” he says. “It does allow you to track your daily cash flow position.”

According to Plath’s figures, the cost to banks for online transactions now measures in fractions of pennies.

“It depends who you ask, but most online transactions cost the banks between a tenth of a penny and a full penny,” he says. “Compare that to about 80 cents for a telephone transaction and between $1.25 and $1.40 for a teller transaction.”

Church weighed dollars and cents before committing his two companies to Internet banking. “I still think it’s a bit pricey — I think it’s $18.95 a month, and I wrestled with that a little bit. But my guess is if you figured it all out, you’re probably coming out ahead.”

Six months ago, Plath believed that the bricks and mortar branches might be going the way of the horse and buggy.

“Back in Spring 2000, I would have sworn that Internet-only banks would rule,” he says. “But that’s not turned out to be the case. However, ask me six months from now and everything might have changed again. Things are changing so quickly.”

Plath estimates that large U.S. banks are spending $25 million to $50 million on Internet services for retail and commercial customers.

Plath believes that the proliteration in web usage will generate more and more Internet traffic for the commercial side of the bank.

“It’s more retail than commercial right now,” he says. “But as B2B (business to business) becomes more of a factor in the commercial marketplace, it’s really important for banks of all sizes to make sure they offer a strong variety of excellent services online for their commercial customers.”

Plath estimates that there are approximately four to five million households in the United States that take advantage of Internet banking. Businesses are likely to follow.

“There’s just some explosive growth about to happen,” he says, “and that will really benefit small businesses.”

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Getting 
Started

What to look for 
when choosing an 
Internet banking service

Experts say small business owners should expect more from Internet banking than just checking balances and paying bills. Additional services now available or in the pipeline include:

Self-service tools to help employees manage tasks and projects, get messages and reminders, complete and submit expense reports and invoices, plus update personal profiles;

A customized intranet with company information, announcements, contacts, organization charts, policies and procedures, and a centralized calendar of events;

Human resources tools for adding new employees, updating personnel records, and managing benefits and payroll information;

An online marketplace offering enhanced purchasing power for a variety of products — from pencils to servers and software.

Financial products and services, including a wide range of checking, savings and investment accounts, credit options and other specialized services designed specifically for small businesses;

Online sales and marketing tools, plus access to other resources such as legal, tax and business management advice, market research and online travel services.


Even small banks
can offer big-time
web financial services

If you think only the big banks are Internet-savvy enough to allow you to manage your small business finances online, think again. Many smaller banks in the state also have grabbed the commercial Internet banking bull by the mouse.

An example is the Bank of Granite in Granite Falls, one of the most admired small banks in the United States. With approximately $640 million in assets, Bank of Granite maintains a huge reputation. Forbes magazine and American Banker magazine both rate it among the nation’s most profitable and best-run banks.

Operating branches and offices in the foothills of North Carolina, Bank of Granite is big on personal contact with customers. Investors, analysts and banking media have heaped praise on the bank.

“We’re a high-touch bank,” says Kirby A. Tyndall, Bank of Granite’s senior vice president and CFO.

“High-touch” is all well and good, but what about “high-tech?” After all, it’s 2001. “We’re pretty good in that arena too,” says Tyndall. “Our retail Internet banking program is going well and our new commercial services have been well-received by our customers. We started testing those services in October 1999 and by February 2000, we were fully online. The feedback has been very positive.”

Even though no one will confuse Bank of America’s Internet presence with Bank of Granite’s Internet presence, Bank of Granite proves that a smaller bank can look larger through its web site. The bank’s site is clean and efficient and clearly details its personal and commercial e-banking services.

“One of the features we have that’s a little unique for a bank of our size is check-imaging and viewing through the Internet,” says Tyndall.

The bank plans to update its commercial online services continuously. Does that mean the end of “high touch?”

“The web site is simply an alternative channel for the delivery of service,” says Tyndall. “It’s the same as an ATM. We’re encouraging use of our online services for people who want to make use of its convenience. But our goal is to remain a hands-on financial institution.”

Tyndall says about 3 percent of Bank of Granite’s retail customers are doing business with the bank online. The bank’s goal is 5 percent. It currently boasts 278 online commercial customers, which represents a solid 8.6 percent of its business banking client base.

Lexington-based Lexington State Bank is the largest community bank based in the Triad, and is publicly traded on NASDAQ.

LSB, aware that its personal-touch approach has been a benchmark for its development, didn’t rush to implement online services for commercial customers.  But when the launch came last summer, it was well received. Services include full account information, funds transfers, bill payment, and stop payment options, and, according to Jacques Youngblood, LSB’s vice president of information technology, the bank has 62 commercial customers online and is adding about six a month.

“Our commercial customers really like it,” says Youngblood. “All of our customers who signed up are still using the service. That’s somewhat unique in the industry.

“We started the commercial online service in part because of competition,” she adds. “But it will also make life easier for our customers and reduce the costs from our toll-free dial-up operation. So it’s win-win.”

It’s also win-win at First National Bank & Trust of Asheboro, says Michael Miller, its president, chairman and CEO. Like other community banks, FNB looks at its online business services as complementary. “Do we think that they replace the bank branch? Absolutely not, no more than the ATM replaced the bank teller.”

Still, Miller says his bank’s Internet offerings have been an unquestionable hit. “We sort of did a soft start about a year ago,” he says. “Our initial focus was on retail, because we wanted to make sure all of the processes worked. Commercial customers tend to move around larger dollars, so we wanted to go slowly.”