Online Banking Usage Explodes in the Micro and Business Markets

After years of flat-line growth, Internet banking usage has nearly doubled in the last 12 months.

CALABASAS, CALIFORNIA (May 15, 2002) - A new study of 2,000 micro and business market companies indicates that their online banking usage has doubled in the last 12 months. In this study, micro market companies are defined as businesses with annual revenue between $50,000 and $999,999, while business market companies are those with annual revenue between $1,000,000 and $19,999,999.

"For the last five years, the banking industry has slowly built their Internet banking presence to the point where nearly every financial institution in the country that offers business banking services now offers their business customers a robust online Internet banking platform," said Mike Marselli, manager of the Informa Research Services study. "As recently as 2001, small business and especially micro market companies had largely ignored the online channel for the vast majority of their non-depository transactions, for things like stop payments and balance reporting."

The study found that micro market usage of online banking increased at a rate of 70% from 2001 to 2002 and business market usage grew at the rate of 95%. The growth rate in the micro market is particularly astounding considering that online banking usage in that market was relatively flat for the five years prior to 2002.

"Although these numbers are encouraging, the banking industry still has a long way to go until the day when the Internet becomes the channel of choice for small businesses," said Marselli. "The fact is that most small businesses remain branch-dependant. The vast majority of businesses that bank online use the services for balance reporting and viewing transaction details. The branch and telephone are still the primary channels of choice for other transactions, such as payment initiation, problem resolution, and purchasing additional services."

According to Informa's study, when the majority of these businesses, go online to do their banking, they are performing functions they used to handle via telephone. Internet banking has not replaced small business' dependence on the branch - it has merely supplemented it.

"Banks must continue to educate their small business customers to use all available online services if they really expect to make a serious dent in their reliance on branch offices," concluded Marselli.

Mike Marselli, a certified cash manager and business analyst, has over 13 years experience in the financial services industry, serving with Dun & Bradstreet Information Services and PSI Global prior to joining Informa Research Services last year. His background includes experience in business-to-business market strategies, industry trend forecasting, e-commerce trend analysis, and primary market research.

The business market research study, performed by Informa Research Services, includes nearly 1,000 interviews with micro market companies and nearly 1,000 interviews with business market companies. These interviews included nearly 1,200 personal interviews with business owners. The study was conducted between February and May 2002, and consisted of telephone-based interviews with micro and business market companies throughout the US. The study has a +/- 3% margin of error at the 95% confidence level.