Online
Banking Marketspace and Trends
History
of Online Banking
Online banking began on October 6, 1995, when Presidential Savings Bank
offered its customers an online alternative to traditional brick and mortar
banking. This move in electronic customer convenience was quickly emulated
by an Internet-only bank, Security First Network Bank, and then followed by
other “brick and click” banks such as Wells Fargo, Bank One, and Chase Manhattan
Bank.
Online banking is still in its infancy. According to FDIC, while approximately 40%
of the 10,623 banks and thrifts in the U.S. market have a web site, only 376
offer transactional Internet banking.
About 30 Internet-only banks operate in the US. All of the web-only banks in the US combined
have about 250,000 depositors, out of the nearly 6 million customers who say
they do a lot of their banking over the Internet.
IDC estimates that by 2003, 15,845 banks will offer online
services mostly via the web, up from 1,150 in 1998. Nearly 6.6 million US households bank online in 1998, a number expected
to increase to more than 32 million by 2003.
1 in 5 new online bank customers are likely to abandon setting
up accounts due to time consuming red tape and complicated deposit procedures,
according to a survey published by Frederick Schneiders Research. Up to 80% of those who began to open up accounts
online did not complete the process. Despite
this, 80% of those who use online banking services prefer them to traditional
banks, according to a survey that polled 444 respondents from an opt-in list,
commissioned by e-funds and the Deluxe corporation.
“As much as $600 billion of the market value represented
by today’s financial service companies may eventually be moved online. To claim a share of the market, investors are
betting on Internet banks that cater not only to tech savvy customers with
checking accounts, but also to B2B customers” – Bill Ford, partner, General
Atlantic Partners, Greenwich, CT.
What
Type of Consumer Uses the Internet?
About 120 million people have shopped via the Internet, and
about 25% of their purchases were made on impulse, according to an Angus Reid
poll. More than 28,000 people in countries
ranging from Philippines and India to Chile, Sweden, and Canada were surveyed
as part of the recent study looking at how an estimated 300 million people
shop.
According to Wired Magazine’s “Digital Citizen Survey” conducted
April 2000, 31% of American’s considered themselves “very wired,” with 11%
of all Americans conducting banking and investing online.
What
Type of Consumer Banks Online?
-
Wave 1 – Bank
shoppers. These people are already
online and ready to bank. If their
bank does not offer a compelling presence, they’ll go elsewhere.
-
Wave 2 – Innovation seekers.
These people report they’ll go online to bank in 3-6 months. They’ll be well aware of the banks that innovate. Those banks that do not create added convenience
for and empower the Wave 2 member will miss the opportunity and will likely
lose the Wave 2 segment of their existing customer base.
-
Wave 3 – Latent Adopters.
These people use web banking but don’t embrace it.
As they see it, the potential of web banking has not been achieved.
-
Then there are Disusers.
These people are not ready to transact business over the Internet.
There are 1.6 million of these so-called disusers, or 1.89% of the 90 million
Internet users.
- Overall, web bankers have a median income of $76,000, vs. $60,000 for non-web
bankers. According to Gomez Advisors 2/15/2000: Large traditional banks and Internet only startups
are entering the online marketplace with increasingly sophisticated offerings. 9 of largest 10 largest retail banks now offer
Internet banking. Of the 11 million
people who currently access account information over the web, 5.9 million
are active bankers who go online at least once a month to transact business.
Will
Online Banks Succeed? What are the Obstacles to Success?
Aside from the customer service factors of convenience, speed, and higher
interest rates, the American Bankers Association estimates the average cost
for a teller transaction is $1.07 compared with 27 cents at an ATM and as
little as .01 for online transactions after set up expenses.
However, the Internet is forcing banks to be more customer-centric.
GartnerGroup conducted a survey showing that 72% of retail banks
with a transactional Internet presence do not have a strategy for getting
a return on their investment.
As the number of consumers in the US utilizing online banking services continues
to grow at a rate of more than 20%, one of the critical issues for bankers is
defining exactly how support for the delivery channel is provided. A 1999 GartnerGroup
survey of call center managers shows that the call center is the most popular
means of support for online banking. (B. Adrian, GartnerGroup report
“Six Forms of Call Center Support for Online Banking.”)
A
Look at the Online Mortgage Market
About 1% of the more than $1 trillion a year mortgage market originates
online, but some analysts profit it will grow to 10 or 15%, even 25%, by 2003,
according to Paul Muolo, Executive Editor of National Mortgage News.
Are
Consumers Willing to Try Online Mortgages
|
Definitely/probably will try online mortgages:
|
21% |
| Might consider it: |
29% |
| Probably will not try it: |
33% |
| Definitely will not try it: |
15% |
| Not sure: |
2% |
(Fannie Mae 1999 National Testing)
According to statistics from Forrester Research, mortgages and credit
cards are expected to lead the growth in online lending, with mortgages accounting
for 10% of the total online lending market by 2003.
Jupiter Communications expects online mortgages to be one of the fastest
growing sectors over the next few years, with industry revenues topping $155
billion by 2003, up from $4 billion in 1998.
Security
Issues
Presidential Bank has always considered security a top priority, and regularly
hires Internet security experts to attempt account penetration. The experts
have never been able to penetrate Presidential's accounts.
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1995 - 2012 Presidential Bank, FSB
last updated 10/07/2010 lmm
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