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E-Banking Boost? Microsoft Cuts Banks Fees for Online Use

It%squots not clear yet whether lower costs for banks will mean lower prices for electronic banking customers.

By Paul Heltzel, PCWorld   

Microsoft announced today that it will no longer charge banks that use its Microsoft Money software for online banking and bill payment. The move is meant to encourage more financial institutions to adopt online banking--and, ostensibly, could reduce consumer prices by increasing competition. Analysts emphasized, however, that this boon for banks may result in few savings for online customers.

%dquotThe move helps consumers if more banks sign up and online banking becomes more competitive,%dquot said Stuart Gibbel, marketing and communications manager at Find/SVP, a research and advisory firm. %dquotBut users are more concerned about whether banking online is secure. They are less worried about whether a few dollars more a month is too much.%dquot

Microsoft maintains that lowering the fees that institutions pay to connect users through the Money software will make them likelier to offer free online banking. But analysts wonder aloud why banks would cut themselves out of monthly user fees, which range from a few dollars to as much as $15 per month.

The announcement came during the Microsoft Internet Banking and Brokerage Conference and goes into effect immediately. Find/SVP released a report today that takes financial institutions to task for not marketing online banking more aggressively. According to the report, more than 46 percent of PC owners and potential buyers say they would be willing to pay for electronic financial services, including online banking.

The market research firm reports that 2.1 million households are banking online today, and it projects that 16.1 million people will be doing so by the end of 2001. Of those, about 17 percent dial up using the Internet or an online service; the remainder use a private network to connect directly to the bank%squots proprietary service.