Online banking

Customised services for small businesses

Time was, not so very long ago, when it was almost impossible to order so much as a cheque book from your bank on the internet. Then along came a new breed of online bank with kooky names such as Smile, Cahoot and Egg and the floodgates were opened.

Now every major bank and a host of smaller ones, not to mention assorted building societies, supermarkets and other new money players, are in a headlong rush to expand their banking services online.

Computer-based banking services aren't new. The US bank Wells Fargo offered a PC-based service as far back as 1990. In the UK, banks experimented with computer banking in the early 90's while both Nationwide and the Royal Bank of Scotland launched the first web-based banks in mid-1997.

What is new is the expanding range of services being offered via an ever-increasing number of electronic channels including the web, digital TV and mobiles devices such as WAP phones.

And, with the popularity of personal online banking apparently soaring by the day, banks are now looking to expand their services to businesses online.

But what's it all about, who's offering what and how do you choose the best online bank for your needs? Here are some answers;

What's the Difference Between PC Banking and Internet Banking?

PC banking can be faster - some banking websites are still far too slow - but it requires special software which you install on your PC and change every time the bank upgrades its service. You can also only access the account from your own PC (which is connected directly to the bank's intranet via a modem and a telephone line). Internet banking offers 24-hour, 7-day-a-week access from virtually anywhere in the world where there is an internet terminal. And, because of the intense competition for customers online, there are some very good deals to be had if you shop around.

What Banking Services Can I Get Online?

This is a fast-changing and growing business, so keep an eye out for new services. Best developed are personal banking services but offerings tailored for businesses are beginning to emerge. Depending on the bank, core services let you...

These online services might be augmented by a raft of other offerings ranging from free financial planning tools to import/export facilities.

What About Services for Small Businesses?

Not all banks offer business services online but some are starting to target small businesses.

Talk to your bank and find out what's on offer. Check that the services are tailored to your needs and what additional features and channels (WAP, telephone banking etc) are available. Check also that the interest rates and bank charges are competitive, the website is easy to use and that customer support is readily available (some charge a premium for telephone help).

There's a useful guide to who's doing what in internet banking at MoneyExtra.

Are There Any Advantages to Using Internet Only Banks?

Internet banks which operate only online such as Smile, Egg, Cahoot and Marbles concentrate on personal banking but compete by offering incentives such as very competitive interest rates on savings and loans. Other incentives might include free overdrafts and no bank charges. While you might not find it convenient to move your business account to a new bank, you might want to switch some of your personal banking to a pure-play internet bank offering top dollar on your savings account or keen interest rates and loyalty points on your credit card.

But you will also need to check out how easy it to access your cash. With internet-only banks you can generally transfer money to a nominated account at another bank - then you wait three business days before you can pocket it. You can accelerate the process by using CHAPS (the Clearing House Automated Payment System) but there will be an extra charge. You can also use their credit cards and debit cards to withdraw cash from machines, but check out the charges. Smile offers paying-in and cash withdrawals at Post Offices.

Are There Any Set-Up Charges?

Some banks such as Barclays (at time of writing) charge a set-up fee and even an annual per-user charge, others are free but may charge for added-value services. Competitive interest rates, low bank charges, user-friendly websites and a strong product portfolio are more significant considerations.

What About Security?

Although there have been a few highly publicised online security lapses, mainly caused by teething troubles, there's nobody more conscious of the need for plugging all the online security holes than the banks. Banks use the strongest encryption and multilevel passwords to protect personal data.

Your internet bank should be a member of the UK's Deposit Protection Scheme (or the national equivalent if your bank's parent company is not UK-based). The scheme protects your money if the bank runs into problems. But also check how long it takes to get funds back in the event of a security breach and what red tape you might have to negotiate.