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Is
Online Banking at a Crossroads or Traffic Jam? |
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| 11/11/2004 |
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| eMarketer estimates that 31.5 million households are currently banking online, and that figure will rise to 45.0 million by the end of 2007.
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According to the new eMarketer Interactive Banking report, the success of online banking is creating a crisis at many banking institutions.
Customers have unquestionably adapted to online banking services — they use them, like them, even demand them — but far too many banks are still struggling with how to integrate interactive banking into their other customer service channels.
"Until banks stop treating the Internet as a new, separate channel, run by a separate division within the company," says David Hallerman, Senior Analyst at eMarketer and author of the report, "not only will they continue to lose money on the service, they will fail to take advantage of the cost-savings, customer-retention, cross-marketing and revenue-building opportunities the Internet offers."
No one agrees on exactly how many online banking customers there are, but everyone agrees that there are a lot.
"Counting how many customers bank online is an inexact art," says Mr. Hallerman. "First off, while a few banks that have strong Internet bases are willing to reveal their numbers, most other institutions are extremely close-mouthed about the topic. Secondly, what's an online banking customer? Is it a customer who has ever banked online, or is it a customer who has banked online recently? And does it matter what the customer does online? If it's only checking balances, but no transactions, is that an online banking customer?"
For eMarketer's count of US households banking online, the definitions include only those who've banked online recently, within the past 60 days. However, any online banking action counts, even if it's not transactional (such as moving funds from one account to another).
On that basis, eMarketer estimates that 31.5 million households are banking online this year, a figure which should rise to 45.0 million by the end of 2007.
"While this year's growth rate for online banking is still considerable, at 17.5%," says Mr. Hallerman, "we're projecting a smaller rate of growth over the next three years, as more and more consumers add the channel to their banking experience."
Figures from eight researchers for 2004 range from IDC's older projection of 24.0 million at the low end to NFO's 36.0 million, and Financial Insite's 37.0 million at the high end.
While the absolute numbers may be difficult to gauge, the growth rates for online banking are more in line. For 2004, all estimates call for double-digit gains, and six of the eight researchers project growth rates between 11.5% (Celent) to 20% (NFO).
The figures bear out the comment Chris Musto gave to Newsday earlier this year, "Online banking has gone mainstream."
To put all these customer counts into perspective, eMarketer has calculated the percentage of online banking households as a share of all US households (based on Census Bureau data) and as a share of online households (based on eMarketer estimates). eMarketer projects that by 2006, more than one-third of all US households will be doing at least some portion of their banking on the Internet.
There is no question that online banking is now a mainstream activity. The question is — can banks make it a strong revenue stream?
Source of Article: eMarketer
Date of Article: November 10, 2004
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