July 12, 1999
Cover

Finance: Banking on a naked need for money

The Web lets investors do business anytime

BY WARREN CARAGATA

When people say it really isn't about money, it's about money. But when Brian Donovan closed his account at TD Bank's Green Line discount brokerage and moved his stock portfolio over to E*Trade Canada, it was about service and the convenience of online trading. Although Green Line Investor Services also offers trading over the Web, he preferred the range of research services at E*Trade. "Everything is right there," he says. Donovan, a Halifax sales representative, is no computer nerd -- but he has happily climbed on the bandwagon of electronic finance, not just for his investments but for banking as well. "I can bank naked," he says.

The attraction of banking in the buff is growing as Canadians make the easy leap from a predilection for automated tellers and debit cards to the Internet. More than 1.6 million customers now have online banking access with the Big Five banks; by the end of 1998, about 200,000 online trading accounts had been set up, according to estimates from E*Trade prepared by U.S.-based Forrester Research Inc. E*Trade (www.canada.etrade.com) now has more than 11,000 accounts, up about 140 per cent from a year earlier. "There's been a dramatic shift to the Web in terms of banking and brokerage," notes Chuck Wilson, vice-president of e-commerce at the Royal Bank of Canada (www.royalbank.com).

But the Internet will do more than make it possible to bank and trade stocks at any time of the day or night. An increasing array of financial services will be available on the Web, including what may be The Next Big Thing -- using the Internet instead of the mail to send out bills.

With people doing more of their routine banking by phone and on the Net, bank officials say they will be able to give more personal service to customers dealing with complex transactions. In the future, account managers plan to make a habit of visiting people applying for mortgages. Experts say brokers and bank branches will not disappear: "People still want face-to-face contact," says Wilson. But the Internet will likely change the way customers pay for services. Brokers may begin to charge for their advice instead of taking commissions on stock trades. Bank clients who insist on dealing with humans for routine transactions that could be handled more cheaply on the Internet could pay increasingly higher service charges. "Personal contact will be there," says Ross McKay, vice-president of business banking services at the Canadian Imperial Bank of Commerce (www.cibc.com). "We may price it differently in the future."

Canadian retailers may be slow to embrace Internet commerce, but observers say Canada's big banks, which dominate both banking and the brokerage industries, have moved aggressively to give themselves post position in what many are calling the New Economy. "In the United States, it's the retail industry that is driving e-commerce," says Wilson. "In Canada, it's the banks and the telcos [telephone companies]."

In the old world, customers did their business when it was convenient for their bankers and brokers. In the new world of e-commerce, people do what they want to do when they want to do it. Donovan likes to go over his portfolio in the evening, doing his research using a variety of online sources that offer information once available only to brokers. "I control my destiny seven days a week," he told Maclean's. E*Trade Canada president Colleen Moorehead says there are many like him: "There isn't an hour during the 24-hour cycle that we do not receive e-mails or orders." Bank officials say their systems are likewise busy at all hours.

While Canadians have had a few years to get used to online banking and stock trading, plans to start sending bills over the Internet may catch them by surprise. Two competing plans -- one from a consortium called e-route Inc. and the other led by Canada Post -- are well-advanced, with pilot programs set for this year and full-scale operations planned to start next year. Consumers will be able to choose whether they want to receive bills over the Internet or by mail. With e-route's system, customers logging onto a bank's site would see an alert that a bill has arrived. They could then schedule when to pay it.

As ever more financial services migrate online, cash could soon become about the only tangible left. Naturally, of course, the digital designers are working on eliminating that, too.