Years into the Internet age, going online means a lot more than putting a company brochure on the Internet. As community banks consider what kind of online presence they should have, they face the same competitive considerations as at their brick-and-mortar branches: how to attract customers, and how to set themselves apart from competitors.

With the dropping costs of technology and an abundance of online service firms, it’s easier than ever for a bank to put its business online. But the plethora of options can be confusing to even the most tech-savvy banker.

The Boston consulting firm The Yankee Group has created a new Online Financial Strategies Planning Service to help institutions from community banks to insurance and mortgage companies develop online strategies. Companies that rushed to register a URL years ago are now rethinking what should be on their Web sites, according to director Trish Jaffarian.

“The market’s really moving from ‘I have to do something’ to ‘I have to do the right thing,'” Jaffarian said.

Research by the Yankee Group shows that one-fourth of consumers on the Internet use some kind of online financial service. Banks can use Web sites to build customer loyalty and promote cross-selling. But customers still have concerns about the cost, security, access and convenience of online banking. More consumers will likely go online to manage their finances when companies address these issues. But do small-town community banks need to be online as much as multibillion-dollar holding companies?

“I think ultimately they’re going to need to find a way to provide that capability,” Jaffarian said. “I don’t believe that the Internet is going to replace the office around the corner for people. But I do think even as the smaller banks have had to find a way to provide ATM access, most organizations are going to need to find a way to provide Internet access.”

For community banks to make successful online offerings, they need to deliver Internet banking services without sacrificing the personalized customer service they have become known for, she said.

The group will examine what kind of online strategies are most successful and contract with companies to help them devise a strategy. To understand the business, the Yankee Group will regularly survey consumers about their use of online financial firms. Companies may consider new alliances or brand development to increase profitability. Financial firms may adopt new software or customize their products to improve their sites. The Yankee Group will also work with companies to meet regulatory requirements and address liability.

“The industry is undergoing some fundamental changes,” said Jaffarian, who worked as director of corporate research at BankBoston before joining the Yankee Group. “We’ll help our clients identify and capture opportunities.”

Companies are taking advantage of the Internet to diversify their offerings, whether by forming partnerships with other firms or contracting with a company to private label services. In addition, financial companies are finding ways to add extra value for customers on their Web sites to keep them returning to the sites again and again.

But community banks that have developed such sites are still in the minority. Many community banks are taking a wait-and-see approach to the Internet, trying to determine what kind of online services their customers want before paying for all the bells and whistles, according to Gene Graham, executive vice president of the Community Bank League of New England.

“About 50 to 60 percent of our members have Web sites, but not all of them have Internet banking or are considered interactive,” Graham said.

The development of online banking services will largely be driven by how consumers accept the new way of banking.

“If that’s what people want, banks will provide the service,” Graham said.

The Pioneer

Salem Five Cents Savings Bank pioneered Internet banking with a Web site introduced in 1995, but most Bay State banks have only introduced Internet banking within the last year or two. Abington Savings Bank launched its site about a year ago, but is in the midst of redesigning the site to add new benefits to customers.

“In order for any company’s Web site to be attractive other than a transactional-based Web site, it needs to have constant change and content and additional services,” said Kevin M. Tierney, the bank’s chief operating officer and executive vice president. “Otherwise it becomes static and customers lose interest.”

The bank’s improved site will soon add a host of links to help customers conduct research, buy Red Sox tickets, or find out what will be served for lunch at the public schools, Tierney said.

“We think it’s an opportunity for the community bank to become a community marketplace and the community bulletin board, much like we have community bulletin boards in our branches,” Tierney said.

The bank formed a strategic partnership with an aggregator of purchasing services as well. The bank’s small-business customers will be able to sign up and buy office products or other goods at a discount through the bank’s Web site.

In the next month or two, the $703 million-asset bank will add a new service allowing customers to sign up for e-mail accounts and use the bank’s Web site as a portal. The bank contracted with BISYS Information Solutions to provide the customized Web portal.

“The Internet is an integral part of our overall strategy to our customer base,” Tierney said. “We’re looking to become a gateway, a destination site.”

Community Center
A Connecticut Internet company takes a similar approach, helping banks build Web sites that become a sort of community network. Glastonbury-based Open Solutions formed in February with the idea that a community bank can become the center of a community’s online traffic.

The open community sites allow a bank’s retail customer to check their account balance, then shop at an online bookstore without leaving the bank’s Web site. Banks share in the revenue from purchases made through their sites. Screen scrape technology allows Web site visitors to surf without viewing ads from the bank’s competitors.

“A bank’s greatest asset is that the bank is at the center of the community and it’s a very trusted partner,” said director of business marketing Mickey S. Goldwasser.

By providing valuable community information on the bank’s Web site, visitors will be enticed to return often, not just when they need to balance their check books.

“A lot of people are signing up for Internet banking but not a lot of people are using it,” Goldwasser said. “It’s boring. Who wants to watch money moving out of their account? Providing customers the ability to see what’s going on in their community or to go shopping gives them a reason to go there.”

Open Solutions works with banks with up to $3 billion in assets and is negotiating to sign its first Massachusetts clients. It has signed 30 clients so far this year.

Smaller institutions can use the Internet to obtain products and services at discounted costs. The Community Bank League of New England is exploring using group purchasing to provide discounted Internet access. Kansas City, Mo.-based e-Scout uses the same principle to help community banks save money on buying products such as office supplies and computers. The company started by United Missouri Bancshares will launch its redesigned site today.

More than 1,100 community banks and more than 4,200 businesses have signed up with e-Scout, which is a sort of Internet buying club.

“The soul of this nation’s economy lies in its community banks and businesses,” said CEO Sandy Kemper. “We are creating an e-commerce marketplace that gives every independent business the commerce, sourcing, marketing, and business processing power of a Fortune 100 company, while preserving the special character and trust in America’s communities.”

Most of e-Scout’s members are in the Midwest. The company does not have a presence in Massachusetts but plans to roll out its services across the United States.