# O **NEWS RELEASE**

+-------------------------------------+--------------------------------+
| ## Comptroller of the Currency      | ##### NR 2000-51               |
|                                     |                                |
| Administrator of National Banks     |                                |
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FOR IMMEDIATE RELEASE Contact: Dean DeBuck

July 6, 2000 (202) 874-5770

### **New OCC Study Finds Banks Offering Internet Services**

### **Differ in Significant Ways from Other Institutions**

### 

WASHINGTON \-- A study completed by a team of economists at the Office
of the Comptroller of the Currency found that banks offering Internet
services are typically more profitable than those that do not, with the
exception of the smallest institutions.

"Our research suggests that in general, banks that offer Internet
services are more profitable than banks that rely on more traditional
delivery modes\", said Jonathan L. Fiechter, Senior Deputy Comptroller
for Economic Policy and International Affairs. "While it is too early
for Internet services to have much of an effect on bank performance
measures, it does appear that banks that were early adopters of Internet
banking have adopted a more aggressive business strategy, including an
emphasis on fee-generating activities.\"

The study draws on detailed information about the Internet banking
activities of national banks, provided by OCC examiners in August and
September 1999, as part of the OCC's ongoing efforts to stay abreast of
significant technological changes affecting the banking industry. An
article based on the study, "Who Offers Internet Banking?" by the OCC\'s
Karen Furst, William W. Lang and Daniel E. Nolle will appear in an
upcoming issue of the OCC\'s *Quarterly Journal*.

Although the availability of Internet banking services for consumers is
growing rapidly, the study found that the number of households banking
online remains relatively small. But while relatively few households
have found a compelling reason to switch to online banking, the Internet
holds much greater potential for providing banking services to
businesses. Businesses of all sizes are looking for cost savings by
moving to electronic banking and payments services, and some banks are
beginning to respond to this demand, according to the OCC study.

The study also found:

-   Among newly established banks, those offering Internet banking were
    significantly less profitable and less efficient than new
    non-Internet banks, probably because smaller institutions find it
    more difficult to absorb the high startup costs associated with
    electronic banking.

> -more-

-   Twenty percent of national banks offered transactional Internet
    banking \-- the ability for customers to access their accounts and
    transact banking business via the Internet \-- in the

third quarter of 1999. However, these banks accounted for 90 percent of
national bank assets

> and 84 percent of all consumer deposit accounts. This represents
> significant growth from June 1998, when OCC research showed that 6
> percent of national banks offered transactional Internet banking.

-   Every national bank with assets of more than \$10 billion offered
    Internet banking, as compared to only 7 percent of the smallest
    banks \-- those with less than \$100 million in assets.

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-   Smaller banks offered fewer Internet banking services compared to
    large banks, both for consumer and business customers. Large banks
    have more aggressive plans to offer business Internet banking
    services.

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-   The OCC projects 45 percent of national banks will offer
    transactional Internet banking services by 2001, based on
    information provided by examiners. Most of the growth in Internet
    banking will occur with small banks coming on-line. However, almost
    half of small national banks had no plans to offer transactional
    Internet banking services.

-   Customer use of Internet banking is disproportionately concentrated
    among a few large banks, with the top five banks accounting for more
    than one-third of all Internet banking users.

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  The OCC charters, regulates and examines approximately 2,400 national
  banks and 58 federal branches of foreign banks in the U.S., accounting
  for more than 57 percent of the nation's banking assets. Its mission is
  to ensure a safe and sound and competitive national banking system that
  supports the citizens, communities and economy of the United States.
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