Saturday, June 24, 2000

Feds try to sell e-banking to people getting benefits

By Sarah Anne Wright
The Cincinnati Enquirer

        Community organizations and local banks are being tapped by the U.S. Treasury to help educate their members and customers on the merits of automated banking and direct-deposit services of monthly checks from the federal government through new Electronic Transfer Accounts.

        Representatives from the Urban League, African American Catholic Ministries, Goodwill Industries, Bethel Baptist Church, Firstar Bank, First Third Bank and the Electronic Fund Transfer Program of the U.S. Treasury met Friday to discuss the merits of using the new ETAs.

        ETAs are no-frills banking accounts designed by the Treasury Department to provide a low-cost option for recipients of federal money. The ETAs are targeted to the 8 million recipients of federal money who do not have bank accounts or familiarity with automated banking.

        ETA recipients are pre- approved, and permitted four free withdrawals a month and four balance inquiries. The account costs $3 a month. Participating banks receive $12.60 from the government for every account they open.

        Ohio is a target market for the ETA roll-out because it ranks fifth among all states for monthly federal checks issued after California, New York, Texas and Pennsylvania. Almost 640,000 Ohioans still choose to have their benefit checks sent by mail.

        As of April, three out of four Americans have their monthly payments such as those from the Social Security Administration and the Veterans Administration deposited directly into their accounts.

        Only half of those receiving supplementary security income, such as disability payments, opt for direct deposit.

        The federal government and financial institutions stand to save quite a bit of money if they can make their operations paperless.

        Nationwide, 15 million people still choose to have their checks mailed to them each month at a cost of millions of dollars.

        The Treasury Department estimates that the total transaction cost of a check is 42 cents, compared with just 2 cents per automated transaction.

        Direct deposit is also faster, safer and, to some — depending on the proximity of automatic teller machines — more convenient for recipients. However, not all recipients have the same access to neighborhood ATMs where they can check their accounts and withdraw money.

        “There aren't a whole lot of ATMs in Over-the-Rhine,” said George Findley, director of the African American Catholic Ministries, who attended Friday's meeting.

        “You're going to see a lot more ATMs popping up in more creative venues,” said Stephanie Muzzy, assistant vice president for deposit product management for Firstar. The bank has 200 ATMs in the Cincinnati area.

        Another reason recipients don't use direct deposit is that they aren't comfortable using ATMs.

        “The speed of the machines is potentially a problem,” said James Graham, the regional manager for the Electronic Funds Transfer Program.

        Authorities are discussing the possibility of slowing the operation of ATMs during ETA transactions, and setting up practice ATMs to help familiarize people with the machines.

        The ETAs are being offered by 500 participating banks throughout the country. In the Cincinnati area, Fifth Third, Firstar and Westwood Homestead Savings and Loan are beginning to offer the accounts, and 30 financial institutions statewide are signed up with the ETA program.

        So far, only three or four individuals locally have signed up for the accounts. The Treasury Department would like to see a couple of hundred accounts opened by the summer's end.


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