By Bob Sullivan Technology correspondent
updated 5/25/2005 10:20:43 AM ET 2005-05-25T14:20:43

The popularity of online banking continues to soar, according to a new survey by the Pew Internet & American Life Project.  More than 50 million U.S. adults now bank online, a jump of 47 percent during the past two years.

Online banking is the fastest-growing Internet activity, Pew said.

“It grew like gangbusters from 2000 to 2002, and then again from 2002 to 2004,” said research director Susannah Fox.  In 2000, about 14 million people used online banking sites. That figure jumped to 37 million in 2002, and is now at about 53 million people, according to the study — or about 44 percent of all Internet users.

The biggest reason: the increase of home broadband connections to the Internet.  Consumers with broadband access are about twice as likely to have tried online banking as those still using dial-up connections.

“We've seen an uptick in 'online chore' activities, especially as broadband proliferates,” Fox said. “People are making the upgrade to broadband from dial-up, and when someone switches they are more likely to try more activities and do more activities online.”

Bank of America spokeswoman Betty Riess said consumers are flocking to the Web version of her bank. In December 2003, there were 9.2 million active Web users — by December 2004,  there were 12.4 million users. Those figures include customers obtained during Bank of America's acquisition of Fleet bank.

About 50 percent of all Bank of America checking account customers bank online, she said.

“I believe customers are becoming more comfortable online,” she said. “They really like the convenience of being able to view account information on the Internet.” Electronic bill paying is the biggest draw, she said.

Fraud not a factor — yet
So far, concerns about online fraud apparently haven't taken a toll on online banking. Its growth neatly parallels growth in complaints about electronic funds transfer fraud, which have also doubled since 2002, according to the Federal Trade Commission . Banks have also fought off concerns about so-called phishing e-mails, used by computer hackers to trick consumers into revealing online banking account numbers and passwords. Still, Fox says banks are concerned that fraud may yet crimp growth in online banking.

“The banking industry is justifiably very concerned that fraud will put a cap on online banking,” she said.  “Studies show online customers make fewer service calls, and people who do online banking are less likely to switch, so banks are concerned that phishing could cut down on that, and they are trying to do consumer education around that.”

Gartner fraud analyst Avivah Litan says that phishing fraud is still too new to have dented growth in online banking.

"The adverse effects of cybercrime and phishing won’t show up in this type of survey," Litan said. "First, the escalation in online banking adoption was already occurring when phishing started becoming rampant. Secondly, the effect will show up in next year’s surveys when we look at actual vs. projected growth. Growth will already start flattening because of a larger base of online banking customers; so the question is how much will growth be retarded because of consumer security concerns."

Litan predicts that fraud worries will cut out 1 to 2 percent of growth in online banking this year. The impact of fraud could have a deeper dampening effect, however, as other consumers will limit the way they use banking Web sites.

“We also know from past research that consumers who bank online engage in less online activities than they would otherwise if they felt safer,” she said. “For example, they may not sign up for online bill payment, or they may only bank online with banks that don’t enable transfers between accounts that they have not previously established as permissible.”

Despite concerns about fraud, a recent study by Javelin Research suggested that online banking actually makes Internet users safer — or at least cuts down on hassles and losses connected to fraud. Consumers who regularly check their accounts online spot fraud faster, and as a result, they have an easier time recovering, the study suggested. The results indicated that consumers who spot fraud online suffer an average theft of about $500. Consumers who wait for paper records and suffer ID theft suffer average losses of $4,500.

“What we've seen is that as people go online and experience it and see that it is secure they are increasingly comfortable with it,” Riess said. It's also a good way for consumers to keep a watchful eye on their accounts.  Customers can use a debit card at lunch, and by the time they get back to the office, they can check the transaction online, she said.

The Pew study also revealed a few other subtle online banking trends. Men are now slightly more likely than women to have tried online banking — 49 percent to 39 percent.  Also, the more educated consumers are, and the more money they make, the more likely they are to use online banking.

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