Dykema Leads Charge into Internet Banking

Dan Dykema was first in line to get Arkansas National Bank of Bentonville online.

The bank president says in 1996 he began to view the Internet as another potential delivery channel for service. By December 1997, he says, Arkansas National Bank was the state’s first institution to offer online banking services and among the first 30 banks to do so nationwide.

“I guess what I saw was that the Internet would wind up being like what ATMs were 20 years ago,” Dykema says. “Only the Internet has developed a lot faster than ATMs did. We at Arkansas National pride ourselves on being technically at the forefront, and we wanted to stay there.

“So we took an aggressive, offensive approach to develop a new product to offer that would help differentiate us from other banks in the area.”

It was also a defense mechanism. Arkansas National wanted to be able to compete with the national giants like NationsBank Corp. and Regions Bank that were beginning to move into the market. Two years later, Dykema’s vision has resulted in as much as 18 percent of Arkansas National’s client base conducting their banking online.

“Two visits per week for each customer using the system is probably common,” says Nat Bothwell, president of Arkansas National’s online division.

“Online we can accept credit card applications, open checking or CD money market accounts. You can do bill payments, and it’s only a matter of time before there will be enough demand for ‘smart cards,’ which contain computer chips and act basically like a cash card.”

Arkansas National is not the only institution cashing in on the Internet.

The Arvest Bank Group Inc. of Bentonville started its online banking services in January 1998. Dave DeMarea, manager of retail alternative delivery systems with Arvest Bank Operations Inc., says about 55 percent of his company’s 20,000 customers have used the service at least once.

“About 41 [percent] to 45 percent of those who use our online services use them on a regular basis,” DeMarea says. “We have about 1,530 sessions or hits per day, and the average sessions lasts about 33 seconds. The most active hours are between 9 a.m. and 9:59 a.m. Then about 5.5 percent of those users also pay their bills using our system.”

There’s a difference between online banking and having a web site. Many banks have web sites with pretty pictures promoting their products. But these two regional banks have been at the forefront of actual online banking transactions and both are planning major additions in that area.

DeMarea says his bank’s online success has been based on three basic principles. The service is simple, intuitive and free.

“We offer Internet banking free to all of our retail customers,” DeMarea says. “There’s no charge unless you use the service to pay bills. Then it’s a little more expensive than a stamp, but it’s very competitive.

“It comes down to what price do you put on your time, and paying your bills over the Internet saves trips to the post office.”

DeMarea says customers may use Arvest’s online banking system to pay any bill, from their babysitter or pool man to utilities and credit cards. Arvest uses Princeton Telecom as a third-party bill payment provider, and creditors will either receive paper draft or direct electronic link payments.

NationsBank, soon to become Bank of America, and Regions Bank both also offer online banking. And First National Bank of Springdale, owned by First Tennessee Bank of Memphis, utilizes MicroSoft Money 1997 for its customers to bank online. Jeff Thames, a senior vice-president and cashier with First National, says his company’s service will be further expanded by mid-summer.

“Right now most of the online business is on the retail side,” Thames says. “We probably have less than 1 percent of our client base banking online. But [First Tennessee] already has about 120,000 customers on their Internet banking.

When we go to a system called Prime Connection this summer, we feel like our interest will increase.”

Security improvements have done much over the last year to decrease fears concerning privacy and the possibility of Internet theft. Bothwell says most companies are using a layered approach, including firewalls, a Secure Socket Layer that includes encryption protocols with as many as 128 bits.

Only a couple of years ago the encryptions were 40 bits, a much easier lock to pick.

Christy Heady, editor at large for bankrate.com, says people should know the difference between online and PC banking.

“There is Internet banking with sites like the Atlanta Internet Bank, which is an institution that exists only on the Internet,” Heady says. “It has no bricks and mortar. Then there are physcial banks like Citibank that have proprietary software customers install to access a particular site. There are varying fees associated with both.”

Heady adds the best way to guard against online banking fraud is to know sites advertising for deposits are required to display the “Member FDIC” logo.