05.02.01-Top 20 Banks Online Banking

TOP-20 BANKS HAVE MADE GREAT STRIDES IN DEVELOPING ONLINE MICRO BUSINESS CUSTOMERS COMPARED TO COMMUNITY BANK RIVALS


Still, penetration levels for online banking register far below analyst projections

CALABASAS, CALIFORNIA (May 2, 2001) - A new study of 1,000 micro market companies (business with annual revenue between $50,000 and $999,999) indicates that the top-20 bank holding companies have twice the penetration of online customers compared with community banks. However, penetration levels are low, and future online adoption rates will be far below projections.

"The vast majority of the micro business market is simply not interested in banking online," said Mike Marselli, CCM, Business Markets Analyst at Informa Research Services. "While micro customers of top-20 banks are more inclined to use the online channel, their customer penetration is still only at 12%; that is far from mass market acceptance. The industry needs to take a hard look at these numbers, and go farther with customer education if it wants to reap the benefits of the online channel."

The Informa study shows that while the top 20 bank holding companies have made solid inroads in converting micro market customers to the online channel, indications are that the vast majority of micro market companies will continue to rely on the branch and telephone for the majority of their financial transactions, even for basic balance reporting. In fact, the industry may not be far from market saturation for the online channel. The study shows that while 12% of top-20 micro market customers use online banking, 7% plan to add the service in the next 12 months, a number that is still somewhat higher than community bank customers.

"The top banks have done an excellent job migrating their micro market customers to online banking," said Marselli. "That having been said, these companies are only using the Web for the most basic of services, which include balance reporting, internal funds transfer and stop payment initiation. Almost no one in the market makes electronic payments via the Web, in spite of the fact that one-sixth (15%) of the market makes electronic payments. The vast majority of the time they initiate those payments using the telephone. The most telling of all, only 5% of all micro market companies not currently using the online channel plan to conduct the majority of their non-depository banking transactions via the Internet in the next 12 months."

Although the situation may look frustrating, things could improve with proper customer education. "The online channel has many tangible benefits for customers that use it," Marselli said. "If the industry spent some time rethinking their strategy, to include proactive customer education, things could improve. One thing we also know about the online channel is that once customers start using it, they're hooked."

Mike Marselli, a certified cash manager, 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 Informa study includes nearly 1,000 interviews with micro market companies, and also includes nearly 700 interviews with micro business owners. The study was conducted between January and April 2001, and consisted of telephone-based interviews with micro market companies throughout the US. The study has a +/- 3% margin of error at the 95% confidence level.


About Informa Research Services, Inc. Based in Calabasas, CA, Informa Research Services, Inc., provides the financial industry's most extensive array of market research and decision-support information.

Conducting daily surveys of the retail and business products offered by more than 5,000 financial organizations nationwide, Informa Research Services, Inc., currently supports the product pricing decisions of more than 2,100 clients, representing all 50 states and including the top 25 financial institutions. This electronically transmitted competitive pricing intelligence effectively generates profitable responses to continual market changes, enables clients to effectively position deposit and loan products within local markets, maximizes interest income, and manages interest expense. Informa is the premier provider of fee and feature studies used to determine the competitiveness of fee-based services. In-depth studies are also available on cash management services, trust products, mystery shops, and other specialized services.

Informa Research Services, Inc., is a division of London-based Informa Group plc (LONDON:INF). Informa Group offers "must have" business-to-business information through 3,500 conferences and seminars and nearly 1,500 print and electronic publications from offices in 19 countries.