Brenda L. Greer,
Here is another article.!!!!!!!!!!
Kiosks, PCs take borrowing out of banks
When Harmony Woodyard wanted to apply for a credit card last month, she stopped by
Huntington Bank's interactive video kiosk in the University of Toledo's student union. The freshman
made her selection on the touch screen and talked to a banker who appeared on the video screen.
"I've always been intimidated by big banks," she says. "But this was easy to use."
A growing number of banks are betting consumers like Woodyard will prefer the convenience and
speed of electronic devices that process loans and credit-card applications. And the banks see
technology as a way to cut costs. Small banks, in particular, see video links, loan machines and
World Wide Web sites on the Internet as an easy way to extend their reach beyond their branches
and grab a bigger piece of the huge consumer-loan market. U.S. consumers have racked up $1
trillion in outstanding installment debt.
But consumer advocates argue that high-tech lending will make it so easy to get a loan that people
will borrow money on impulse and buy things they can't really afford. And they complain that
machines, which use computer programs to decide who qualifies for a loan, will arbitrarily exclude
borrowers with less-than-perfect credit histories.
About 15 banks are trying out automated loan machines made by Affinity Technology Group of
Columbia, S.C. These machines can complete a loan on the spot and issue a check - all in about 10
minutes. The machines make only unsecured personal loans now, but they could be used to make
more complicated secured loans, such as auto and home-equity loans.
But not every effort will succeed. New York Life Insurance, for example, recently closed a
subsidiary that produced interactive loan kiosks when efforts to sell the business failed.
Still, the banks testing Affinity's machines like them.
Among the reasons they give:
Many consumers, such as Woodyard, are more comfortable with a machine. They are not
intimidating, says Beverly McKinney, president of Bank One West Virginia, which has installed nine
machines that make loans of $1,000 to $10,000. One is located in a 24-hour Wal-Mart. Many
experts say consumers prefer the anonymity of the machines because they don't have to face a loan
officer if their application is denied.
The machines are inexpensive. Kenneth Rous, vice president at Reisterstown (Md.) Federal
Savings Bank, says a machine can process a loan for less than half the cost of a traditional loan.
Banks don't own the machines. Rather, the banks pay Affinity a fee for each loan, ranging from
about $40 to $65 a loan, depending on the number of loans.
Reisterstown's parent company, Susquehanna Bancshares, has set up six machines at its
subsidiaries. Farmers & Merchants Bank and Trust in Hagerstown, Md., for example, is passing on
some of its savings to machine users by offering a 9.99% introductory rate vs. rates that can go as
high as 21%.
As long as the machines are issuing only small personal loans, however, cost savings will be
marginal, says Robert McCormick, president of First Manhattan Consulting Group in New York
City.
The machines help banks attract customers. "Our goal is to (bring in) younger consumers," says
Luke Yancy, executive vice president of Union Planters Bank in Memphis, which has 11 machines.
Research shows younger customers are most likely to try new technologies.
But Huntington National, based in Columbus, Ohio, considers automated loan machines too
confining. It has worked with NCR to develop interactive video kiosks, called Personal Touch
machines.
"We wanted to replicate what you can do at a traditional branch," says George Jeffers, vice
president in charge of electronic banking at Huntington. Although the technology is expensive to
develop, it lets customers print out account statements, get product information and calculate loan
payments using various interest rates and down payments. And it can call a banker who will appear
on the video screen and help a customer apply for a personal line of credit, credit card or installment
loan. Huntington's machines can't yet complete a loan and issue a check. But an advanced version
that can do those things should be ready in 6 months to 12 months, Jeffers says.
Some experts believe machines will have a limited appeal. "There will be a role for machines," says
William Keenan, senior vice president of NatWest Bank Delaware. But, given a choice, consumers
will prefer to bank at home, using the Internet or interactive television, he predicts.
Now, however, only a few lenders, such as First Union Bank of Charlotte, N.C., are accepting loan
applications online from personal-computer users. Other lenders require those customers to print
out an application from the lender's Internet page or call a toll-free number.
Banks are moving slowly because of concerns about Internet security. But those concerns have
been overblown, says Sherri Neasham, president of Financenter, an Internet-based service that
helps consumers get loans and other personal-finance information. Her company has been offering
online home-loan and credit-card applications using Netscape Navigator since early this year.
Low overhead makes it possible to offer some Internet services at below-market prices. Neasham's
company has arranged to sell mortgages issued by American Finance and Investment, a mortgage
banker in Fairfax, Va. Financenter claims applicants can get the lowest rate in the USA on a
standard loan, low fees and a credit decision in 48 hours. The lender also waives the credit report
fee, so consumers can apply for credit without any upfront charge.
Elsewhere on the Internet, Credit Card Network is a clearinghouse that lets computer users shop
for a card from among hundreds of listings. Mark Muchnick, director of the Seattle-based network,
says about 80 credit-card issuers let consumers apply on line. He says they are increasingly
embracing the Internet because the direct-mail market has been saturated.
Credit Card Network and Financenter are part of a growing number of Internet financial
intermediaries. They can be a benefit to consumers by making it easy to shop and encouraging price
and rate competition, says Bill Burnham, an associate in the financial-services group of consultants
Booz Allen & Hamilton. But consumers need to remember intermediaries are not regulated.
"It's 'buyer beware,' not only in life in general, but on the Internet as well," Burnham says.
Although some consumer groups are concerned that high-tech lending encourages people to take on
too much debt, lenders say consumers already are inundated with credit-card solicitations and have
plenty of opportunity to get into debt.
Consumer advocates also fear high-tech lending, which relies on computer models to rate
applicants, is too rigid. For years they pressured banks to develop more flexible standards, so poor
people and minorities were not turned down because they have a nontraditional or less-than-perfect
credit history.
"I think if banks go to a formula approach, they will be moving backward," says Janice Shields,
banking researcher at the Center for Study of Responsive Law.
But some lenders, such as Union Planters Bank, automatically review applications turned down by a
machine. "If we feel the machine did not give them due consideration, we call the borrower," Yancy
says.
And there is one important benefit for consumers: Unlike loan officers, machines are
colorblind. "They make an objective decision," says Burnham. "There is no room for prejudice to
enter the lending process."
By Christine Dugas, USA TODAY
FYI, THX
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