The price of Internet banking

The impact on bankers and vendors of different Internet banking pricing plans was discussed by Bazile Lanneau, Jr., president and chief executive officer of Sumx Inc., an in-house electronic banking solutions provider, during his presentation, "Future of Community Banks - Electronic Commerce and Banking,' delivered to Federal Reserve System examiners attending the Forum for Community Bank Examiners last month in Dallas.

According to Lanneau, one of the biggest electronic commerce issues facing bankers today is unfavorable pricing. "I believe that many current pricing scenarios are not banker-friendly," said Lanneau. "As customer penetration rates rise, the cost of 'per user fee' Internet banking pricing plans could easily exceed that of a core banking system over a five-year term. Rapidly escalating costs are contrary to bankers' interests in maximizing customer usage and acceptance of Internet banking.

"`License and maintenance' fee pricing models and more moderate `per user and transaction' fees allow bankers to better manage variable costs,' Lanneau continued. "Whether bankers are making money or controlling expense, the relative economic impact is what counts. Bankers should seek to distinguish the method of service delivery, whether out-sourced or on-site, from the pricing models being applied. The last thing bankers need is a bad taste in their mouth over new technology which is vital to their long-term survival.

"This forum is important because it provides an opportunity to share with examiners issues that are impacting bankers and insights into why they do the things they do," said Lanneau. "Bankers are stuck between a rock and a hard place right now in terms of doing business online. They need to get up to speed with new technology and figure out how best to utilize it while maintaining safe, sound banking operations.

"Examiners are equally challenged in implementing new examining procedures to insure that bankers adopt and maintain good business practices while avoiding an excessive chilling effect on bankers' business activities in a rapidly evolving Internet economy. Hopefully, bankers and examiners will continue to work together to develop the best strategy in regard to electronic banking, and I believe that participating in forums like this one is a step in that direction," he said.

Lanneau has more than 20 years of experience in the community banking industry and his company's Internet banking system, SumxNet, has been in use at community banks in the United States since 1996. He has been featured in leading technology periodicals such as PC WEEK and has lectured on financial institution technology, the Internet, and electronic banking at numerous programs for bankers and trade associations.