Virtual Banking

Customers are becoming more comfortable with on-line banking despite security and y2k concerns

variety of loans.

"Compared to the conventional process, LendingTree wanted a minimum of information. It only took me 20 minutes to fill out the form, and I got a response almost immediately," Louie says. Within two days, he had a proposal from Pittsburgh PNC Bank. The bank verified his and his wife’s employment over the phone, did a "drive-by appraisal" of his house, then sent his home equity loan check to him overnight.

"I got a rate three-quarters of a point lower than anyone else in my physical area was offering, and the whole thing took about 15 to 20 calendar days."

Although LendingTree is just three years old, in August there were over 70,000 loan applications worth $75 million, according to Reginald Bowser, the firm’s vice president of marketing. That’s up substantially from 7,000 actual loan applications for approximately $28 million over the same period a year ago.

Bowser asserts that using LendingTree is a win-win situation for lenders and borrowers alike for one main reason: lower costs. "You come to our site, fill out one qualification form and through the use of Internet technology you can send it simultaneously to different lenders on our network," he says. "It’s good for both sides of the equation. You’ll go to lenders who are more likely to approve you for a loan, and lenders see only those borrowers who they are more likely to approve. It cuts down on their marketing and origination costs, and allows lenders to actually make loans at lower rates than more traditional channels."

LendingTree currently has 75 lenders on its network, along with an affiliate network with more than 8,000 members.

Another virtual bank, Net.B@nk (www.netbank .com), an Atlanta-based institution chartered in July 1997, already has over 45,000 accounts and about $817 million in assets. D.R. Grimes, Net.B@nk’s CEO, says the firm’s business model makes it about half as expensive to run as a traditional bank because it hasn’t had to build and staff branches and has been able to share those savings with customers.

"We pay 3% interest on our checking accounts, while the national average is under 1%," says Grimes. "We have no service charges for our checking accounts, while the national average is more than $9 a month. With Net.B@nk, you get unlimited online access, an ATM or debit card, a Visa card and we buy your checks."

But some computer users are still wary of online banking. James Harney, a Brooklyn-based writer, says he worries that some mistake will happen in cyberspace and there won’t be a flesh-and-blood teller around to fix it. "I hate not being able to actually see the money move around. What if I make a deposit at 10 p.m.? How do I know when it will actually be there?" says Harney. "If there’s a problem, and I’ve deposited my money at the branch, at least there’s someone I can look in the eye and ask, ‘Where’s my money?’"

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