How to be a home banker

FINANCE DOWN THE LINE: from PEPs and shares to home loans and banking, by computer or phone, the revolution in direct dealing has only just b egun

Competition in electronic banking has heated up with both Barclays and Citibank launching personal computer banking services for customers.

Barclays PC Banking allows customers to dial in to the bank to get information on their account and make transactions through the system. Customers also get the Microsoft Money '97 program. Customers will be able to pay bills, check balances, transfer money between accounts and set up or amend regular payments. Barclays also plans to introduce a banking service via the Internet, which will provide basic banking functions.

Citibank Direct Access offers a broadly similar range of functions but with an international dimension: you can use your PC to make transfers to accounts in other European countries as well as in the UK, and the system also understands 15 different currencies. This reflects the bank's international customer base and its target market: people earning more than pounds 30,000 a year who travel frequently.

Although PC banking is still in its infancy in Britain, it is well-established in other markets. Citibank, for example, already has 350,000 users, mainly in America and the Far East, and in the UK it has pioneered "palmtop banking" on the Psion Organiser hand-held computer.

Several other banks and building societies are either looking to, or have launched, online banking services. Bank of Scotland was first to introduce home banking in 1985. TSB launched last year and Nationwide has been offering home banking for the past 18 months. NatWest, Alliance & Leicester and Lloyds have been running pilot schemes and are expected to begin full- scale services later this year, and the Bank of Scotland operation has been updated.

To use a PC banking service you need a modem and the banking software. You will have your own unique PIN number which will allow you to gain access to your account, so no one else should be able to get into it.

These systems use direct-dial dedicated numbers: they do not use your Internet service provider. The security software is built in to both ends of the system, yours and the bank's, and is based on principles in secure inter-bank transfers.

Once inside your account you can bring up your current balance. Depending on the system your bank or building society uses, you also should be able to bring up a statement of recent transactions. You can usually pay bills on-screen, but as with most Automated Teller Machine (ATM) payment systems, you normally need to fill in a form beforehand with the payee's account details and your reference. If you run into problems, most services provide a helpline.

The idea of PC banking is to enable customers to do all the things they would normally do in the branch but from their home, says Alan Oliver of Nationwide. "People of all ages are working long hours and it's not always easy to get into branches at a time that suits them. With home banking, you can operate your account from the comfort of your home at the time it suits you."

Nationwide and Citibank offer free PC banking services. The only cost for customers is the phone call when your computer dials up the bank's computer via its modem.

Others charge for the service. For example, Bank of Scotland charges subscribers pounds 4 a month, while Barclays PC Banking with Microsoft Money has a one-off pounds 25 fee; the annual fee is pounds 15 (waived for the first year) and customers have to buy the software for their PC, which costs pounds 29.99. Costs of the Internet service have yet to be announced.

Several other banks and building societies are looking at offering banking services over the Internet, though there are still concerns over security.

If all this is starting to sound a little too hi-tech then telephone banking could well be the answer. Since First Direct set up the first phone banking service in 1989, several others have followed suit. A number of the high-street banks and building societies now offer phone banking and the new wave of banks, such as Prudential and Sainsbury, are telephone based, though they do not provide the full range of services.

With the full-service banks you can carry out most banking transactions over the telephone, such as ordering a cheque book, arranging for bills to be paid, arranging overdrafts and loans and stopping cheques.