Online banking is swiftly moving from its position as an extravagant application used by a select few to a convenient functionality craved by the growing mass of Internet users, according to International Data Corp. (IDC), Framingham, Mass., a market research firm specializing in information technology. A recent study by the IDC found that nearly 6.6 million U.S. households were banking online in 1998. IDC predicts that by 2003, that number will increase to more than 32 million. A proliferation of low-cost PCs and other networking devices in the home market, causing a surge in the number of Internet users, plus alleviated concerns over security are the major factors driving the growth, suggests Paul Johnson, senior analyst, Internet and eCommerce Strategies program. The survey estimates the number of banks offering online banking services will increase from 1,150 in 1998 to 15,845 by 2003, primarily via the Web. These numbers represent 6% and 86%, respectively, of all U.S. commercial banks and credit unions. According to IDC, online banking is evolving through three phases. The first phase offers functionality similar to what is available through telephone banking systems -- access to account balances and transaction data. The access is provided through a dial-up or browser-based service. The second phase emphasizes interactive technologies such as online bill payment and personalized reminder services. The third phase involves direct marketing of credit and lending services, personalized financial management features, and services such as securities trading and insurance offerings. "A strong link exists between banking, bill payments, and the Internet," says Johnson. "Although there is still uncertainty in the bill presentment market, banks must seize the opportunity in front of them. Online banking may be the critical service that enables banks to maintain their role as the dominant provider of financial services.