News Analysis: Nonbanks Collect More Internet Fees

Consumers spent nearly $2 billion for Internet services in 1996, but financial services companies cashed in on less than ten percent of those services. That share is expected to surge though, hitting 39 percent by 2003, according to a report on "U.S. Consumer Internet Fee- Based Services Markets," by Frost & Sullivan, a Mountain View, CA- based consultancy.

Within the financial services sector, nonbanks hold a slight edge over banks in collecting fees for Internet services. That lead is predicted to grow steadily during the forecast period, with nonbanks projected to collect a 55 percent share of Internet financial service dollars in 2003 and banks claiming 45 percent.

Internet banking subscribers, currently estimated at 1.2 million persons, are expected to outpace the 2.5 million dial-up home-banking customers by 2000. And while many banks don't charge for Internet banking ofocusing on enticing customers to the less costly channelothey soon will. Of those banks that do charge for Internet services, the average price is $76 a year, expected to rise to $108 a year by 2003.

The nonbank side is dominated by brokerages and companies selling financial information. In 1996, non-banks generated $100.7 million in Internet revenue, projected to skyrocket to $2.56 billion in 2003. Information services currently make up about 60 percent of that market, a number expected to stay steady.

The study also notes that because banks pay little to establish an Internet presenceonearly three-quarters spent less than $25,000omany have shirked their usual strategic planning routines. "As more financial services companies create sophisticated, market-focused Internet sites, customers will be able to distinguish between genuine value-added services and mere electronic billboards," the report states. "Banks that wish to carve out a niche for themselves on the Internet should be aware of the need for proper strategic planning." FB