Internet banking on the increase

TALLINN - Internet banking was up 60 percent in the first half of this year, according to the leading Estonian business newspaper Aripaev. Hansapank and Uhispank are leading the way.

Bank spokespersons credit the lower cost of computers and Internet connection fees and convenience for the increase in usage.

At Hansapank more than 10 percent of active clients - 71,000 of 700,000 customers - complete transactions on-line. Raul Pa-rusk, director of Internet banking at Hansapank, is optimistic that the number of cyber-bankers will continue to rise.

"We see it as our main channel into the future," Parusk said. "It is the banking trend so far."

Of Uhispank's 334,248 clients, 26,000, or 7.7 percent, participate in on-line banking. At Optiva Pank, Esto-nia's third largest bank, 16 percent of customers, or 5,700 of a total of 34,150, are logged-on.

Electronic banking, which includes in addition to Internet banking, telephone and fax banking and automatic teller machine transactions, accounts for roughly 85 percent of all Hansapank and Uhispank customer transactions. The share of electronic banking at Optiva Pank is 62 percent.

In order to increase the use of the Internet by its clients, Parusk said the bank must first improve accessibility to the Internet. In that effort, Hansapank plans to put Internet-ready computer kiosks in some of its branches within the next month.

Uhispank has already placed computers in several of its branches around the country, said Andres Aarma, vice-chairman of public affairs at Uhispank.

Currently, connected customers can make payments, balance inquiries, deposits and money transfers on-line. In the future, the banks plan on offering new services such as buying insurance and applying for loans to attract more clients.

Optiva Pank will also pool more of its resources into making the Internet more popular among its account holders but will not put computers in branches.

Ranno Pajuri, Optiva Pank's marketing communications director, said that for a bank of Optiva's size, it is too expensive to put Internet-ready computers in the branches. The point of Internet banking, he said, is to keep people out of the bank.

"It seems like it is not very efficient right now," he said. "People tend to appreciate their privacy. Why go out and find a branch?"

Optiva recently launched a new telephone banking service that allows customers to access their accounts using a cellular telephone's short message service. The client sends a message to the bank, Pajuri explained, and receives an answer in 10 seconds. Pajuri said he cannot estimate the service's popularity yet, but he is confident that increased accessibility to the bank is important to Op-tiva's customers.

"This is an interesting product. We are available on the Internet, fax and fixed-line phone. This makes us more available to our clients who are very mobile," Pajuri said.

Optiva's mobile phone service was launched in cooperation with Estonian Mobile Telephone, the leading cellular telephone network operator in Estonia.

All electronic banking is free for account holders, whereas a fee is levied for completing a transaction in person at the banks. Also, there is no periodical service fee or joining fee for electronic banking services. Parusk says that is likely to change in the future.

"At one point in time we will charge a price for Internet banking. But, it will definitely not be the highest price. We want people to use the service," he said.

On-line banking is more economical for the bank too. Executives admit that initial costs are high, but once a virtual bank is set-up, overhead costs are low. Parusk estimates that the cost of a virtual transaction is 10 times less than an in-person branch one.

"It is cheaper for the bank. It diminishes the number of clients who have to come to the offices, so we don't have to build so many branches, hire so many people. A virtual bank office is a one time expense," Pajuri said.

Nine and a half percent of Estonians between the ages of 15 and 74 use the Internet weekly and 15 percent have logged-on within a six month period, according to a National Readership Survey last spring. Estonia is among the top 15 European countries for per capita use of the Internet, according to a survey by Baltic Media Facts.