If you lost 100,000 customers in the course of one fiscal year, as Internet-only banks have, what would you do?
Close up shop? Revamp your product line? Perhaps you would take the plunge and pour venture capital into a major marketing push.
Some businesses might study their market to determine what went wrong. Still others would assemble consumer focus groups to hear what potential customers really want from the business.
While those are all viable ideas, for some reason the online banking business gives little indication that it is interested in any of the above. From the outside looking in, it seems like Internet banks are stuck in neutral.
Do the Math
Even though Jupiter Media Metrix research indicates traffic to Internet banks plummeted 8.1 percent from July 2000 to July 2001, there does not seem to be much evidence of any recovery strategy on the part of the virtual institutions.
That 8.1 percent dropoff translates to a loss of 100,000 visitors, down to 1.1 million from 1.2 million. At a time when the online banking industry is struggling just to stay alive, 100,000 people is a huge loss. Consider this: if each of those 100,000 people spent a mere US$100 in the course of that year, how much stronger would online banks be at this moment?
Further, with technology routinely available to track individual customer activity online, wouldn’t you expect online banks to run interference and do whatever is necessary to keep the traffic steady?
In short, wouldn’t you expect Internet banks to do … something?
We Want Options
Perhaps the online banks are paralyzed with fear of failure. After all, even if they had aggressively attacked the downslide early, it might not have been a successful endeavor.
Americans have made themselves clear: we want multiple channels. We want to shop online and offline, on the phone and in a catalog. We want more than one way to buy consumer products, and we definitely want multiple channels to do our banking. The idea of banking exclusively on the Internet has not found widespread appeal among Internet users, not to mention among potential Internet users.
Sort of makes you wonder how an Internet bank without, say, a drive-through teller, is supposed to make a stand.
The Allure of Bricks
According to Jupiter Media Metrix, banks with the critical competitive edge are those that exist in traditional channels with an online option. Need some convincing? As usual, the proof is in the numbers.
During that same dismal period where online banking lost 8 percent of its visitors, brick-and-click banks saw the popularity of their Internet services skyrocket. From last July to this July, visitors to Web sites of existing offline banks jumped a whopping 110.5 percent, from 6.4 million to 13.4 million users.
Apparently, there is something attractive about knowing you can drive to the bank and touch your money if you really want to.
Meanwhile, as it turns out, consumers may be onto something with their active avoidance of online banking. The Center for Democracy and Technology has released findings showing that of 100 online and brick-and-click banks surveyed, only 22 offer clearly posted opt-out rights regarding how consumers’ personal data is used by the bank.
That means the other 78 percent of banks either sell or transfer their customers’personal information to outside companies — or make it tough for customers to exercise opt-out options. Thirty-four banks had few or no opt-out options, the study said.
The study did conclude that Internet-only banks did the best job of offering consumers privacy options. Still, if the banking industry as a whole gains a reputation for compromising customer privacy, the first to suffer will be pure-play banks.
How will the fittest online banks survive?
According to Jupiter, the future of such institutions depends on specialization. The era of online banking being all things to all people, short-lived as it has been, is coming to an end.
Like so many other dot-coms, every online bank must find a niche, and then forge ahead with aggressive marketing touting their specialties. If digital signatures ever get off the ground in a big way, perhaps online mortgage banking may reap the rewards.
In advance of such developments, every bank would do well to tighten up its privacy features and reassure consumers that their personal information is secure once it is disclosed.
And maybe think about adding that drive-through window.
What do you think? Let’s talk about it.
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.
Online banks WILL survive. Like Tom (post above) I’m a very happy customer at NetBank. I left my bricks-and-morter bank, National City, because I was sick of paying $5.95 per month for online bill pay. PLUS – I’d get dinged with another $5 account maintenance fee if my balance dipped below $500. At Netbank I’m earning +2% in my checking account and +4% in my money market account. I have NO miminum balance in my checking account and only an average monthly balance requirement of $250 in my money market. On top of that online bill pay is limitless and free and easy to use. I’m also considering applying for a home equity loan from NetBank where they have some of the lowest rates in the country. Sure, online banking may not be for everyone but there is a market for it. I’ll gladly skip the option to speak with a teller in exchange for no fees and higher interest. To top it off the phone customer service I received from NetBank is better than the in-person service I receive at bricks-and-morter branches.
I disagree. Online banking is a god-send! No more waiting in line, no more annoying tellers, no more automated phone lines. And, I get interest-bearing checking, free online bill pay, and the ability to consolidate all my accounts into one single online statement. You just have to do a little research, and you’ll see it’s much better out there! Check out http://www.netbank.com
Net banking is the best! The big problem is that all this publicity is making them shut down. I’ve been a Wingspan customer for the last two years, and couldn’t be happier. Free bill pay, $5 a month in rebates for ATM fees, high interest rates, online inter-bank transfers, you name it. I don’t understand why anyone would use a brick-and-mortar bank. Now Wingspan is getting rolled back into BankOne, and I’m screwed!
As far as the stats on a 110% increase in online banking for traditional banks, this just shows how viable online banking is. The core problem is that switching banks is the biggest pain in the world – direct deposit, bill pay, automatic withdrawals.. To move this to a new bank is so much work that it is very difficult for banks to acquire new customers.
I think the problem is that the general public doesn’t understand the value of net-only banks. On a balance of $10k, you can save/make about $50 a month compared to a traditional bank. Once the general public realizes the monetary benefits of using a net-only bank, traditional banks are going to be in trouble.
NetBank Bank is a customer’s worst nightmare. It may seem okay if you have no problems, which is what my case was prior to November 2005. In Nov. 2005 I was the victim of Visa Check card fraud. When I notified NetBank Bank they shut off the card as they should have, and once I submitted their required paperwork they issued a "provisional credit" for the stolen funds.
The NetBank form for reporting the EFT withdrawal included a section for me to include a police report number. Unfortunately the theft occured over a thousand miles from where I lived; I went to my local precinct, where I was told that they had no jurisdiction over the matter and to tell the bank that I could not file a police report.
After informing NetBank of my interaction at the local police department, both via "bank-mail" (NetBank’s in-house e-mail service) and telephone, I got no response. I made over nine attempts asking how I should proceed. I received NO response.
Approximately ten business days after the provisional credit was issued it was reversed. The only explanation was that I had not submitted the requested documentation.
I have subsequently sent numerous faxes and certified mail requesting information and assistance from NetBank Bank… I have received nothing in return.
The details of the entire affair are too lengthy for this comment, but I am going to put together a web site where consumers can follow my travails, and see for themselves that NetBank Bank is not interested in its customers, other than to control their money.
It is my sincere opinion that I will have to file a claim against this company in order to get their attention.
During the interim, I am on a mission to alert consumers considering doing business with this organization to carefully consider whether they want to do business with a firm that does not offer a branch in which they can speak, face to face, with a representative of some import.
NetBank is, in my opinion, organization whose leadership appaers to consider that ignoring a customer will lead to their capitulation; a war of attrition, if you will.
For those of you doing your "reasearch" heed this warning: STAY AWAY from NetBank Bank!
Now that Wingspan is shutting down, I’ve been considering moving to NetBank, but I’ve got two major issues. 1. Not ATM rebates. What’s up with that? Every other net-only bank offers at least $5 a month. 2. Their bill pay is garbage. How can they take the money out of your account before the payee has cashed the check? Until NetBank changes this policy, I don’t care how much interest they charge. I’ve been looking at eTrade and AmericanExpress. VirtualBank also looks decent. Does anyone have any feedback on any of these?
Arik – I’ll give you the two negative points about NetBank. Thus far I’ve “dealt with” the first point by getting extra cash on top of my debit card transactions (not all merchants allow you to do this, but I think most grocery stores do). By doing that I’ve only had to withdraw cash from an ATM (and pay the fee) 1x in the last 6 months. Regarding the withdrawal of funds before cashing the check – I wholeheartedly agree – that policy bites. If you find a net-only bank that has every feature NetBank has + addresses these two issues, please post your results to this board.
Online Banking Trust is lacking and the websites are confusing. Too hard to get to talk to a live voice. Brooks Alden