But now, finally, Web banking is poised to become the preferred way to do noncash transactions in the U.S., even as branch banking continues to flourish.

Currently, at least 40 percent of U.S. households bank online at least once every three months, according to industry consultant TowerGroup, which is projecting that 2008 will be the first year that the number of online banking transactions will outpace any other banking method.

"E-commerce companies like Amazon and Ebay have set consumer expectations so much higher and made people more comfortable with conducting financial business online," said George Tubin, research director for TowerGroup. "Financial institutions have had to rise to that challenge."

That change has taken longer than many would have predicted in the late 1990s, when the growth potential of consumer retail services on the Internet became widely apparent.

Early tech boosters hadn't counted on several obstacles, not the least of which was changing consumers' habits. But there were limitations to the technology itself. Bank Web sites were clunky, slow and vulnerable to hacker attacks. Customers also were put off by the fees that institutions would charge for services such as electronic bill paying.

That's all changed. Usage has soared as families upgraded to multimedia computers with fast broadband connections. And, as the media industry learned, banks understood that they had to make their content free to customers.

"Our approach is to offer a variety of (ways to access the bank) and let customers decide what they want to use," said Betty Riess, California spokeswoman for Charlotte, N.C.-based Bank of America, noting that free electronic bill paying is one of the biggest draws.

Technology driven

Improved technology, though, continues to be one of the most significant draws. For example, consumers with broadband access are about twice as likely to have tried online banking as those still using dial-up connections, according to the Pew Internet & American Life Project.

Financial institutions, for their part, upgraded their sites, particularly over the past year, to add more sophisticated services, and improve security and privacy. Some banks even offer free money-management tools online that are similar to Quicken and Microsoft Money software. Banks also upgraded their small business offerings, enabling even mom-and-pop startups to pay vendors and employees electronically.

Key to the growth was a concerted effort by the financial services industry to assure customers that they were cracking down on cybercrime such as electronic funds transfer fraud. Of particular concern is phishing, in which customers are tricked into providing sensitive financial information to a fake Web site.

Institutions like Bank of America and Washington Mutual now require customers to set up additional layers of security, such as a series of challenge questions or customizing their log-in page so they can be sure they are accessing an authentic site.

Bank of America has more than 23 million active online customers, including 500,000 who access its site through a mobile device such as a cellular phone or similar device the latest form of online access. That gives the bank more mobile banking users than all other U.S. banks combined, according to a TowerGroup study by Tubin published last month.

But some smaller banks are getting even more aggressive with their services. Pasadena-based East West Bank earlier this year became one of a handful of banks to offer customers the ability to do bank-to-bank transfers online.

"There might have been some fear about allowing customers to transfer money to another bank, but you cannot live in fear," Emily Wang, East West's senior vice president. "This is a service that can raise our standing among our customers. Some customers might not use the service at all but they appreciate that we offer it."

And banks are increasingly touting electronic banking services as a marketing tool. Charlotte, N.C.-based Wachovia Corp., which has had to introduce itself to the Southern California market after acquiring World Savings, recently began running radio spots promoting its mobile banking services.

George Swygert, Wachovia's retail bank executive for the region, believes that the bank's promotion of its Web services won't hurt its business at teller windows and ATM kiosks.

"The pie just got bigger," Swygert said. "Twenty years ago, people would wait for their monthly statement. Now they log in every morning and they're checking their balances, they'll do some balance transfers or pay a few bills. It's so much more convenient."

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