President
& CEO Bruce Cleveland answered your question on Quote.com
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September
19, 2000
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Other
Quote.com Online Chat Sessions
September 5, 2000
September 7, 2000
September 20, 2000
If
you have an online account, can you still come in and see a teller?
Will Presidential Bank offer free checks or past statements
online?
What made you see the value in becoming the first bank to open
an account over the Internet?
Do you feel that you can fully service customers all over the
world?
Is online banking going to grow by word of mouth?
What are some upfront costs and minimums to think about?
What are some typical hidden costs for businesses? What are
some advantages?
To what extent are online service customizable?
Other than checking, what kinds of services can I expect higher
rates for online?
The online world is eliminating intermediaries. How will banks
survive in this world?
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Why
is it if you have a bricks and clicks online account that you can't see
the teller? What is the reasoning behind that?
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There seems to be a misconception here.
Anyone with an online account is completely welcome to come in and use Presidential’s
branches at any time, once their account is open. We merely require the account
to be opened online to make the transaction more efficient, and to make sure that
our customers are Internet-ready.
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Will
Presidential Bank be offering free checks or past statements online?
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Presidential already offers 50 free
checks with each new Internet checking account, and past statements (back to June
1997) are already available online, also free.
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Your
website says that Presidential was the first bank to open an account over
the Internet. I'm interested in this sort of thing: can you give a little
background on what made you see value in the Internet? How has that changed
since that first account?
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An interesting question. Back in
1995, many people saw the promise of the Internet (Amazon.com, for example,
also opened for business on the Internet in 1995), because of the efficiency
it offers businesses in reaching customers anywhere in the country (or the world,
for that matter), and because of its speed and convenience for the customer.
But in the beginning, as a place to
do actual business, the Internet was really dead, like a restaurant with no customers.
Then around the beginning of 1999, the Internet just took off, with many ordinary
consumers starting to use it for certain kinds of business, such as banking. Web
sites have gotten a little more sophisticated over time as well, but it seems
to me that the main change is in customer acceptance. And, we are probably still
quite early in the process of people moving more of their business to the Internet.
However, from here on out, the change in people’s habits will probably be more
evolutionary than revolutionary.
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Your
bank is in D.C. I see. Do you feel you can fully service a customer in
Seattle? Do you take customers from say Canada or other countries?
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Presidential has customers in many
different countries. Just today, for example, someone from as far away as Australia
opened an account. Because the Washington, DC area has a significant international
transient population, and also many Americans who spend years working abroad,
we have quite a few customers who reside outside the United States.
At this time, we only offer accounts
in U.S. dollars, and we require that deposits be made in US funds. Foreign customers
must either (a) give us a US social security number, or (b) sign US Internal
Revenue Service Form W-8 (which we can supply, or you can download from the
IRS web site) certifying that they are neither a US citizen or US resident.
If we can service a customer in
Australia, then we can certainly service a customer in Seattle. If you live
in the DC area, you could come to one of our branches if you wanted to. Once
you get to Baltimore or Richmond, you might as well be in Seattle, or Australia.
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Word
of mouth is the best referral. Is this how online banking is going to
take off?
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Good question! Word of mouth is actually
Presidential’s biggest single source of new customers. Some people have difficulty
believing that our online banking products are as good and simple to access as
we say they are. But when a friend who already has an account tells someone what
a good deal they are getting from Presidential, whatever reservations that may
have existed are usually resolved.
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What
are some upfront costs and minimums to think about?
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As long as you have a computer
(or access to one), there really aren’t any upfront costs to banking online at
Presidential, once you make the required
minimum initial deposit for the account you choose. You initial checks will be
free, your PC Banking and historical statement access will be free, and if you
open an Internet Checking Plus account, your bill-payer service will also be free.
As long as you maintain the required
minimum balance (never more than the required minimum initial deposit), and
don’t overdraw your account or request special services (such as wire transfers
or cashier’s check’s), we will never charge any fees to your account. The minimum
initial deposit to open an account ranges from $100 to $2,500, depending on
the type of account you open.
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What
are some typical hidden costs for businesses? What advantages should they
be taking advantage of with online banking?
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At Presidential, there really aren’t
any "hidden" costs. Unlike many banks, Presidential does not charge
per-item charges for check and deposit activity in business accounts. As long
as you maintain the minimum balance, there are no service charges at all. Both
our regular PC Banking system and our enhanced online Business Banking system
for business customers are free. You will be charged for outgoing wire transfers,
but we do not charge for incoming wire transfers, as many banks do. Most business
want to print their own checks and you will need pay the cost of having your
checks printed.
In addition to very low fees, online
banking at Presidential offers business customers the advantages of immediate
free access to real time account information, an online archive of all past
bank statements and check images, online initiation of wire transfers and ACH
transactions, and a friendly customer service center ready to assist with deposit
account transaction weekdays 8AM to 10PM Eastern time.
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To
what extent are online services customizable?
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All of Presidential’s online services
are available to all customers (except online Business Banking is only for business
customers). You just activate the services you want, by calling our customer service
center and getting a User ID and temporary password (which you immediately change
to a password of your own choosing).
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Other
than checking, what kind of services can I expect higher rates for online?
CDs? Money market?
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Although at Presidential we feature
our 6% APY unlimited checking account rate (on the first $25,000 in your account),
because this rate is so much better than unlimited checking rates paid by most
other banks (typically less that 1%), we also try to offer very attractive rates
on our other accounts as well. For example, a 1-year Internet CD pays 7.00% APY
($1,000 minimum), and an Internet money market account pays 5.50% APY ($10,000
minimum).
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The
online world is eliminating intermediaries--it's allowing buyers to skip
the middleman and go straight to the supplier. So how will banks survive
in this world? Will homeowners go straight to online communities of families
who have linked together to be lenders? Sort of a global credit union?
Thoughts?
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Thanks for your thoughtful question.
First, it must be remembered that in the United States and most other countries
of the world, no organization or entity can go into the banking business without
being approved and regulated by the government, and investing adequate capital.
Furthermore, the kind of "disintermediation" of which you write has
already progressed much farther than most people realize in all areas of consumer
lending. Virtually all home mortgages originated by Presidential and most other
lenders are already packaged into securitized pools of loans guaranteed by GNMA,
FNMA, FHLMC, and private issuers, which are then sold to institutional investors
in what is an extremely efficient marketplace that already bypasses the banking
industry. Likewise, a significant portion of the car loans, credit card receivable,
and home equity loans in the US are also now securitized, rather than being held
by the lenders that originated them.
At Presidential most of the depositors’
money actually goes into special-situation consumer loans that do not fit into
homogeneous pools, and into commercial loans to businesses, homebuilders, and
owners of commercial real estate. These loans require specialized lending expertise
to originate and usually must be customized to the specific needs of each borrower.
We believe that our earnings really come from our lending expertise, not from
our deposit gathering. Raising deposits over the Internet gives us a means to
efficiently fund the lending that we do, and pass some of the savings along
to our deposit customers.
On the lending side, the Internet
offers us an efficient channel through which to establish initial contact with
some of our loan customers, but the Internet can not fully automate the process
of originating and closing complex one-of-a-kind lending transactions, so we’re
not worried about globalization.
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