Rapid growth of Internet banking

The General Accounting Office , which functions as the investigative arm of Congress, said the number of US banks, thrifts, and credit unions that allow customers to perform transactions like paying bills and transferring funds online had grown from just one in December 1995 to 2,100 by June this year. It said projections suggested the number of households using Internet banking services would increase from 6.6 million at the end of 1998 to 32 million by 2003. "Regulators are just in the beginning stages of looking at Internet banking activities," GAO associate director Richard Hillman told a House banking subcommittee. Hillman said regulators had fallen behind partly as a result of their current close focus on the Year 2000 issue, as well as due to problems attracting information systems experts in the face of fierce competition from the private sector. In a report released by the subcommittee Tuesday, the GAO said some banks were also having trouble adjusting to the online business environment, though it noted it did not have enough data to draw conclusions about the industry as a whole. Citing 81 examinations by various banking regulators, the agency said 44 percent of the institutions inspected had not fully implemented even the limited guidelines now in place. It said a quarter of banks and thrifts did not have a well-thought-out strategic plan for their online banking activities, while almost a third had no policies and procedures in place to guide their online operations and address security concerns. None of the examinations showed any evidence of financial losses or security breaches as a result.