Written by David Tebbutt, Director 04/96 - scanned

Managing your money may soon be a lot easier. Banks are now testing software that will bring online banking to personal account holders and small businesses. David Tebbutt reports.

Up until now, online banking has been the preserve of medium to large organisations which have used it to deal with everything from payments to foreign exchange. That looks set to change.

Barclays is now testing out a pilot PC banking service for 2,500 of its personal customers. Using software developed in conjunction with Visa Interactive, it allows individuals to pay bills, transfer funds, create standing orders, check their balances and examine interim statements. During the pilot phase, the accounts will be updated once a day. Although the scheme is pitched purely at the individual, there's no reason why it shouldn't be extended to suit small business users, too.

At the moment, personal banking transactions are prepared off-line, then users connect for just long enough for requests to be sent and responses to be received, typically around 30 seconds. Once account information is received, the user can browse the details without incurring any further expense. Security across the communications link is ensured through the use of an encryption mechanism. The rest of the system is inherently secure because the banks control every aspect from the mainframes.

The next step is for publishers of accounting and personal finance software to integrate their packages with the banks' software and the downloaded information. Companies such as Microsoft and accounting software supplier Sage are already looking at ways of bringing online banking to a wider audience. They are trying to persuade banks to store information on the desktop in a common format that users can understand at a glance.

Sage is targeting its efforts at small to medium-sized enterprises - which are its main clients - by encouraging banks to offer special deals to Sage customers. It has already persuaded Midland Bank, which provides a discount on its Hexagon online service. Microsoft sees huge opportunities in joint branding of its "Money" personal finance-management program. By integrating Money with the banks' own desktop software, it would be possible to create "Barclays Money", "Lloyds Money" and so on. Users could buy this badged software from their bank or from their regular software supplier.

Giving customers online access is a mixed blessing for banks. They hope it will boost customer loyalty, but it will cost a great deal of money - and payback is not guaranteed. At the high end, the idea of paying for access to range of online financial services goes unquestioned. At the low end, customers may baulk at paying "too much" for such services the banks will discover exactly what constitutes too much through the trial programmes.

For the customer, benefits vary. The self-employed and small business sectors will welcome the ability to deal with the banks 24 hours a day, 365 days a year. And integrating accounting or personal finance-management software should make banking a lot easier.