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Online Banking Appears to Be Wave of the Future

Healthy Economy

Should Propel Trend of Doing Internet Business

E-commerce is making an impact on the local finance industry, whose leaders see the coming year as about the same for their general business activities as it was in 1999.

Half of the 18 local finance industry leaders surveyed in the 10th Annual Deloitte & Touche/San Diego Business Journal Economic Outlook Survey said E-commerce activity has significantly affected their business.

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Declining computer prices have made it possible in the past year for community banks to go online with a variety of banking services, while cheaper personal computers have meant more consumers are jumping into electronic banking.

Seventy-two percent of the finance industry leaders predicted the national economy this year will be about the same as last year. Slightly more than half , 56 percent , see the national conditions for the banking industry as about the same as last year as well.

That’s despite recent interest rate increases by the Federal Reserve that might put a crimp in mortgage lending. One local commercial banking leader explained why.

“Commercial lenders aren’t as affected by interest rates as mortgage brokers. An increase in the federal funds rate means you’ll be getting a better return on a liquid asset,” said Ron Carlson, president of La Jolla-headquartered Scripps Bank.

He agreed with those responding to the survey that electronic banking will have a growing impact in the coming year on community banks as well as at large national banks.

“More prevalent in the coming year will be interactive transactions where you can open an account over the Internet or apply for a loan, get loan documents and sign them electronically,” said Carlson, president of the largest publicly traded bank headquartered in San Diego County.

To enable this shift to totally electronic banking services, recent legislation signed by the governor makes electronic signatures legally binding for many contracts, including loan documents.

He also predicted there may be more consolidations among local banks in the coming year.

The growth in E-commerce among banks as well as the general business community is creating opportunity for those seeking venture capital for a dot-com company, one venture capital placement executive said.

“The Internet is hardly developed at this point,” said Dan Mutters, vice president of investor relations for IP Equity Inc. of San Diego. It specializes in venture capital funding for Internet companies.

“There is still plenty of growth available on the Internet,” said Mutters, whose firm found about $10 million for small Internet companies in 1999. He said the largest placement was $1 million for Informationhigh ay.Com, a Canadian Internet service provider based in Toronto.

“Some investors want equity, others want to make a loan,” Mutters said. “The average venture capital investor is sophisticated and looking for an equity stake at the earliest possible stage.”

The booming economy in the county has led to more difficulty in recruiting employees for some financial institutions. While seven of the executives polled reported no difficulty in hiring employees, six reported some difficulty and five said they had extreme difficulty.

“While our outlook is good, we have had difficulty attracting highly qualified candidates to open offices here, and we could open 75 to 100 additional locations in San Diego County,” said one anonymous survey respondent.

Seven executives, or about 40 percent of those surveyed, foresaw a 1 percent to 5 percent increase in the number of their employees, while 33 percent expect no change at all. Only 17 percent foresaw more than a 5 percent employee increase.

Financial industry workers will probably see fatter paychecks in the coming year, according to the survey. Eight, or 44 percent, of the finance executives predicted an increase in employee compensation of 3 percent to 4 percent.

Only three saw increases of 6 percent or more and four saw increases of 5 percent to 6 percent. Six percent of the executives saw only a 1 percent or 2 percent pay increase for their workers, while another 6 percent didn’t plan to give any pay increases at all.

Last year’s change in California government will have a negative impact on the state’s banking industry, six of the bankers said, while seven said there will be no impact at all. Only one said the new Democratic Party administration would have a very positive impact on banking.

Local politicians didn’t fare any better among the finance executives. None said they were very satisfied with the current political leadership in San Diego, although nine said they were satisfied. However, seven said they were dissatisfied with local political leaders.

Survey: Workers’

Wages Climb in ’99

Employee compensation increased by an average of 5 percent or more this year among nearly two-thirds of small and medium-sized businesses, according to a national survey of presidents and CEOs belonging to the Alternative Board.

Compensation increases were registered by 82 percent of the surveyed firms, according to the survey.

The No. 1 concern facing 66 percent of the company heads surveyed was the shortage of qualified workers.

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