Online Banking

The online banking revolution has largely failed to materialize - at least, not at the pace that was first envisioned. Still, the proliferation of the Internet has given online banking a fresh transfusion of growth in the last two years. Non-bank companies have taken advantage of the low barriers to entry made possible by the Internet to encroach into the banking and bill presentment marketplace. Meanwhile, new legislation has opened the door to competition from brokers, insurance companies and other financial service competitors, all of whom are fighting banks for their customers.

This report attempts to define the market for online banking and financial services, including the major transactional categories: e-banking, online brokerage, Internet-enabled credit cards, online insurance and online lending, plus electronic bill pay and presentment. The report details the competitive forces shaping the market, the regional breakdown of the market and its participants, and the competitive dynamics between the bricks-and-mortar players and the upstart online-only companies sweeping into the marketplace.

Finally, this report projects the near-term future of the online banking and larger financial services marketplace, with an emphasis on what banks and their competitors must do to attract and retain customers.

Despite the widespread attention that online banking and finance has attracted, from the financial services community, from government regulators, and from budding "Netrepreneurs," there is surprisingly little agreement in the analyst community about the size, structure and scope of the online banking sector. Projections on where the market is going vary widely, with that variation matched only by the disparities in the historical data. The aim of this study to test the conventional wisdom about the online financial services market, and to define clearly and concisely, its structure, key players, and the marketing imperatives that will drive it over the next several years.

Title

Introduction

• Study Goals And Objectives



• Reasons For Doing The Study



• Contribution Of The Study And For Whom



• Scope And Format



• Methodology



• More Banks Than Urls



• Terms And Definitions Used In This Report



• Software-Based Vs. Internet Online Banking



• Internet Banking, Online Banking, Pc Banking AND Electronic Banking



• Transactional Websites



• Information Sources



• Government Agency Online Resources



• Online Databases



• Industry Trade Association Websites



• Industry Contacts/Telephone Interviews

Summary

• Online Banking Impact On The Marketplace



• U.S. Households Banking Online



• Behind THE Projections

Overview

• Banking In The Information Age



• The Internet, The Telephone, And The Atm



• Banks Face Multiple Competitive Forces



• Bank Mergers Are Creating Fewer BUT Larger Banks



• Non-Bank Competition Is Driving Banks TO Acquire Other Financial Services Companies



• Toward THE Financial Services Supermarket



• The History Of Online Banking



• Slow Adoption In The Early Years



• From "High Tech" Users To "Early Adopters"



• Software-BASED "Pc Banking"



• Branchless Banking



• Internet Banking Changed THE Landscape OF Online Banking IN Two Ways



• First, Banks Would Become Increasingly Dependent ON Outside Technology Firms



• Second, THE Internet Offered Banks No Way TO Intercept Customer Access AND Charge A Fee



• The Online Banking "Growth Spurt" In The Late 1990S



• E-COMMERCE Gains Traction WITH Consumers



• Conversion OF E-SHOPPERS TO E-BANKERS



• The Big Banks Commit TO Online Banking



• Factors IN Online Banking Growth



• Industry Consolidation



• Historical Number Of U.S. Banks And Thrifts



• The Mega-Mergers



• The Impact Of Consolidation On Consumers



• The Disappearance OF THE Community Bank?



• The Future OF In-Person Banking



• Branch Proliferation



• A Wealth OF Consumer Choices



• Privacy Concerns



• Mega-Merger Metrics



• The Benefits OF Consolidation FOR Banks



• The Risks OF Bank Consolidation



• Future Trends In Financial Service Consolidation



• The Mega-Banks



• The Convenience Banks



• The Bank Boutiques

The Financial Sevices Regulatory Environment

• Historical U.S. Banking Legislation



• The Laws That Changed The Industry Most



• The Ramifications Of Gram-Leach Bliley



• Digital Signatures: The Next Revolution In Online Banking

Characteristics Of The Online Banking Market

• The Race To Get Banks "Wired"



• Large And Small Banks: Different Customers And Different Needs



• Assessing When AND How TO Go Online



• Brochureware Vs. Transactional Online Banking



• Customer Relationship Marketing



• Banks Are "Rediscovering" The Customer



• How Bank Websites Contribute TO Crm



• Customer Loyalty Is AN Elusive Commodity



• The Internet Lets Customers "Shop Around"



• E-Customers Are Demanding AND Fickle



• Online Banking Contributions To Crm



• The Online Banks' Stragegies For Increasing Market Share



• Free Checking, Free Foreign Atm Use AND Free Online Bill Payment



• Interest Bearing Checking Accounts



• Instant Loan Approval



• View AND Pay Loan Balances Online



• Internet-Enabled Credit Cards



• Financial Services Supermarkets



• Online Funding FOR Checking Accounts



• Live Online Customer Service



• Free Telephone Banking



• Interactive Account "Demos"



• Check Archiving



• Fraud Protection AND Insurance



• Transactional Online Banks



• Online Banks - Size Distribution



• Online Banking Penetration By Asset Class



• Online Banking Share Of Total Bank Assets And Deposits



• The Online Banks - Share Of Assets



• The Online Banks - Share Of Deposits



• Online Banking - Regional Penetration



• The "Silicon South"



• The Northeast AND West



• The Midwest



• Inside THE Regional Numbers



• The Online Banking Regions - Projected Growth



• Traditional Branch Vs. Online-Only Banks



• The "Built In" Market Advantages Of The Branch Banks



• Internet-Only Banks: Bridging The "Perception Gap"



• Cyber-Banks Typically Start Small



• Top Ten Clicks-And-Mortar Banks - Assets And Deposits



• Top Clicks And Mortar Banks - Online Accounts



• Bank OF America/Nationsbank



• Citibank



• Wells Fargo



• First Union



• Fleetboston



• Bank One



• Chase Manhattan Bank



• Washington Mutual



• The Leading Internet-Only Banks



• Wingspanbank



• American Express Centurion Bank



• E*Trade Bank/Telebank



• Everbank.Com



• Netbank



• Security First Network Bank (Sfnb)



• Directbanking.COM



• First Internet Bank OF Indiana



• Bankdirect



• Compubank



• Top 100 Online Banks In 1999



• Assets And Deposits



• Inside THE Rankings



• Key Characteristics Of The Top 100 Online Banks



• Bank Type



• Charter Type



• Geographic Distribution



• Website Functionality



• Privacy Statement



• The Top Ten Online Banking Websites



• Website Traffic



• Profiles Of The Top Ten Online Banking Websites



• Wellsfargo.COM



• Fees



• Privacy AND Security



• Technology Partners



• Bankofamerica.COM



• Features



• Customers



• Fees



• Privacy AND Security



• Technology Partners



• Citibank.COM/CITIFI.COM



• Direct Access Features



• Direct Access Fees



• Privacy



• E-COMMERCE



• Citi F/I



• Technology Partners



• Firstunion.COM



• Features



• Technology



• Security



• Bankone.COM



• Features



• Security AND Privacy



• Technology Partners



• Netbank.COM



• Features



• Privacy AND Security



• Technology Partners



• Chase.COM



• Features



• Security



• Compubank.COM



• Features



• Security AND Privacy



• Technology Partners



• Wingspanbank.COM



• Features



• Security



• Technology



• E*Trade Bank/Telebank



• Features



• Security



• Technology

Key Competitors To Online Banking

• The Online Financial Services Universe



• Account Distribution



• Financial Services Websites



• Number Of Urls



• Transactional Vs. Informational Websites



• Projected Url Growth



• Behind THE Projections



• Discreet Site Visits



• Online Banking Vs. Brokerage In The U.S.



• Share Of Internet Households Trading Online



• Online Banking Vs.Brokerage.- Number Of Accounts



• Accounts PER Household



• Account Growth



• U.S. Household Asset Mix



• Online Bill Presentment And Payment



• Electronic Bill Pay Vs. Bill Presentment



• Checkfree Holdings



• Person-To-Person E-Payments



• Electronic Bill Presentment



• Ebpp Market Growth

Banking Technologies

• Financial Service Sector It Spending



• Bank It Spending



• Leading Bank Technology Players



• Fundsxpress



• Concentrex



• M&I Data



• S1 Corporation/Q-UP



• Digital Insight/Nfront



• Homecom



• Online Resources & Communications



• Security



• Digital Certificates Or Signatures



• Toward A Single Operating Platform



• Future Technologies



• Smart Cards



• E-Money (OR "Cybercash")



• Biometrics



• Wireless Banking AND Web Tv

International

• Worldwide Internet Usage



• The Global Market For Online Banking

Demograhics

• Internet User Demographics



• Demographics Of The Online Banking Customer

List Of Tables


Summary Table:

Online Banking Market - Share Of Total Banking Universe And Share Of Online Transactional Universe, Through 2005

1 The Online Banking Customer - Frequency Of Use, Through 2005


2 Online Banking Households Vs. Total Online Households, Through 2005


3 Online Banks Vs. Total Banking Universe*, Through 2005


4 A Decade Of Mega-Mergers


5 Top Announced Bank Mergers Of 1999


6 Differences Between Brochure Sites And Transactional Sites


7 Transactional Online Banks, Through 2005


8 Characteristics Of Online Vs. Bricks-And-Mortar-Only Banks — Average Assets And Deposits


9 Banks Offering Transactional Internet Banking — Size Distribution, 1999


10 Percentage Of Banks Per Asset Class Offering Transactional Online Banking, Through 2005


11 Online Banks By Asset Class — Number Of Banks, Through 2005


12 Online Banks — Market Shares By Asset Class, Through 2005


13 Online Banks — Growth By Asset Class, Through 2005


14 Online Banks Vs. All Other Banks And Thrifts — Assets, Through 2005


15 Online Banks Vs. All Other Banks And Thrifts — Deposits, Through 2005


16 Online Banks Vs. All Other Banks And Thrifts — Share Of Deposits, Through 2005


17 Online Banks Vs. All Other Banks And Thrifts — Deposit Growth, Through 2005


18 Regional Market Shares, 1999


19 Online — Bank Regional Market Penetration, 1999


20 Online Banking — U.S. Market Penetration, 1999


21 Transactional Online Banks By Region, Through 2005


22 Transactional Online Banks, Regional Market Shares, Through 2005


23 Transactional Online Banks By Region — Projected Growth, Through 2005


24 Traditional Online Banks Vs. Internet-Only Banks Number Of Players, Through 2005


25 Traditional Online Banks Vs. Internet-Only Banks Market Shares, Through 2005


26 Traditional Online Banks Vs. Internet-Only Banks Growth Rates, Through 2005


27 Top Ten Clicks And Mortar Banks - Asset And Deposits, 1999


28 Leading Clicks And Mortar Banks - Percentage Of Accounts Online, 1q 2000


29 Top Ten Internet-Only Banks* Assets And Deposits, 1999


30 Top Ten Internet-Only Banks — Number Of Accounts


31 Top 100 Online Banks — Share Of Assets And Deposits, 1998 And 1999


32 The Top 100 Online Banks In The U.S., 1998 And 1999


33 Bank Acquisitions Affecting The Top 100 Rankings In 2000


34 Top 100 Online Banks — Charter Type


35 Top 100 Online Banks Geographic Type


36 Website Functionality Of The Top 100 Clicks-And-Mortar And Internet-Only Banks


37 Privacy Online Guidelines


38 The Top Ten Online Banking Websites, Dec. 1999 Vs. Apr. 2000


39 Wellsfargo.Com Snapshot, April 2000


40 Wells Fargo Online Offerings


41 Bankofamerica.Com Snapshot, April 2000


42 Bank Of America Online Offerings


43 Citibank Pertinent Web Information


44 Direct Access Features


45 Citibank.Com Snapshot, April 2000


46 First Union Direct On-Line Features


47 Bankone.Com


48 Bankone On-Line Features


49 Netbank.Com


50 Netbank On-Line Features


51 Chase.Com Snapshot, April 2000


52 Chase On-Line Features


53 Compubank.Com Snapshot, April 2000


54 Compubank On-Line Features


55 Wingspanbank.Com Snapshot, April 2000


56 Wingspanbank On-Line Features


57 Etradebank.Com Snapshot, April 2000


58 E-Trade Bank On-Line Features


59 The Online Transactional Universe - Accounts, Through 2005


60 The Online Transactional Universe - Market Shares, Through 2005


61 The Online Transactional Universe - Growth, Through 2005


62 The Online Financial Services Universe — Number Of Transactional Websites, Through 2005


63 The Online Financial Services Universe — Discreet Site Visits, 1999 And 2000


64 Online Financial Services — Site Visits Per Url, 1999


65 Online Banking Vs. Online Brokerage Penetration — Total U.S. Households, Through 2005


66 U.S. Internet Households Trading Online, Through 2005


67 Growth In Number Of U.S. Households Trading Online, Through 2005


68 Households Using Online Banking And Brokerage, Average Accounts Per Household, Through 2005


69 Online Banking Vs. Brokerage - Accounts, Through 2005


70 U.S. Household Asset Mix, Through 2005


71 E-Enabled Checkfree Billers


72 Financial Institution It Spending*, Through 2005


73 Financial Institution It Spending — Shares, Through 2005


74 Financial Institution It Spending — Growth*, Through 2005


75 Projected Bank It Spending By Distribution Channel, Through 2005


76 Projected Bank It Spending — Distribution Channel Shares, Through 2005


77 Projected Bank It Spending Growth By Distribution Channel, Through 2005


78 Technology Firms Getting Banks "Wired" — Clients And End Users, Through 1999


79 Bank Technology Company Revenues, 1998 And 1999


80 Global Web Users — Growth, Through 2005


81 Global Web Users — Market Shares, Through 2005


82 International Online Banking Universe, Through 2005


83 Share Of International Online Banking Universe, Through 2003


84 U.S. Internet Access, Through 1999


85 U.S. Retail Vs. Business-To-Business Internet Sales, Through 2000


86 Profile Of The Average E-Banking User, 2000


87 Bcc Online Banking Survey


88 Total U.S. Population, Through 2005


89 U.S. Households, Through 2005


90 Internet User Demographics, Through 1999


91 Number Of Fdic Insured Financial Institutions, Through 2003


92 Households Banking Online, Through 2005


93 Number Of Banks And Urls, 1999


94 Transactional Online Banks By State, 1999

List Of Figures




Summary Figure:
Online Banking - Share Of Transactional Universe, 2000

1 Households Banking Online, 1985 Through 2005


2 Transactional Online Banks Vs. Total Banking Universe, Through 2005


3 Evolution Of Online Banking In The U.S., Through 2005


4 Historical Number Of U.S. Banks And Thrifts, Through 2005


5 Historical Number Of Banks, Bank Branches And Bank Offices, Through 1996


6 Percentage Of Bank Websites That Are Transactional Vs. Brochure, Through 2005


7 Percentage Of Banks Offering Transactional Online Banking, Brochure Sites Or No Web Presence, Through 2005


8 Online Banks Vs. All Other Banks - Share Of Assets, Through 2005


9 Online Banks Vs. All Other Banks - Share Of Total U.S. Bank Deposits, 1998 And 2005


10 Transactional Online Banks — U.S. Regional Distribution, 1999


11 Number Of Online Banks Per Region, 1999


12 Top 100 Online Banks By Type


13 Online Bank Geographic Shares


14 Transactional Vs. Informational Financial Websites, 2000


15 Online Banking Vs. Brokerage, Average Accounts Per Household, Through 2005


16 Online Banking Vs. Brokerage, Account Growth, Through 2005


17 U.S. Household Asset Mix, 1995 And 2005


18 Relative Costs Per Bill Pay Channel*


19 The Electronic Bill Presentment And Payment Market Account Growth, Through 2005


20 Global Web Users


21 Foreign Offices In The U.S. — Total Deposits, Through 2000


22 The Online Banking Global Market


23 International Use Of E-Money