According to Murphy, lending aside, virtual banks may offer many services valuable to small businesses-or they will soon. Murphy expects virtual banks to offer payroll services, employee benefits management, bill presentment and even tax-filing services at a reasonable cost in the near future, allowing business owners to manipulate a vast sea of financial information affecting the profitability of the enterprise.
"Virtual banking offers the business owner an exceptional opportunity to understand your exact financial position at any time,' he says. "That's really valuable.'
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As yet, there are only a handful of virtual banks targeting business customers, among them Compubank and ebank.com Inc. Most large brick-and-mortar banks in the country offer online banking services to both consumers and businesses, as do many small and regional banks.
But virtual banking and online banking are not the same thing. And, according to Chris Musto, director of financial services for Lincoln, Massachusetts-based Gomez Advisors Inc., which maintains a useful Web site on e-commerce in its many guises, both are still evolving
"Small business tends not to get a great deal of value from online banking,' Musto says. For one thing, online banking requires that you dial into your bank using a modem and download your account information using software that must be compatible with the bank's.
Doing virtual banking over the Web, in contrast, connects the business to its bank through a Web browser, not a modem, eliminating the need for compatible software. The Web-based interaction, says Musto, allows the business to engage in a variety of sophisticated cash-management transactions.
Whatever form it takes, however, electronic banking can't do everything for the business customer, Musto adds. "With consumers, online bill payment means sending money to somebody,' he says. "With the business customer, it's one person's job to get all the payables together and another person's job to approve the payment, and one person may have an ATM card allowing deposits and another a card allowing withdrawals. The needs of small businesses are very distinct.'
In short, Musto adds, electronic banking is still finding new ways to meet the demands of the business customer. "But the Web opens up a new cost equation for business banking, and I think we'll see banks and nonbanks alike competing for the loyalty of the business customer on price and on the quality of the interaction. "
Juan Hovey writes a weekly column on business finance and insurance for The Los Angeles Times. He lives in Thousand Oaks, California.