TowerGroup: Adoption Curve For Online Banking Has Yet To Crest

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The adoption curve for e-banking has apparently not yet crested. New research from The TowerGroup finds that adoption of e-banking by U.S. households continues to rise steadily.

"Online banking has officially become a standard delivery channel within a retail financial institution's integrated delivery system," said George Tubin, senior analyst in the Delivery Channels practice at TowerGroup. "In 1996, just 2.4-million U.S. households had signed up for online banking. By 2003, that number hit 29.2-million. And by 2007, TowerGroup expects close to 37% of all US households to be registered to bank online -a total of 42.5 million households. This equates to a compound annual growth rate of nearly 9%."

Among the other findings of the research:

* More than 80% of American households use more than one banking channel, including branch, telephone, online, ATM, etc. The company said that labeling customers/members with a single-channel view (i.e., an "online banking customer") can be misleading. "The online banking channel is one of a mix of critical touchpoints," the researchers said.

* The most common consumer objections to online banking include a belief that it costs more, fears about Internet security or making mistakes in transactions, or a sense that it is simply not necessary given other banking options.

Many of the top online banking providers are rapidly working to eliminate these barriers to adoption. Initiatives include: offering free access to critical online banking features such as check imaging and bill payment; promising zero liability for online banking customers should some kind of security breach occur; and studying customer online behavior to try to simplify website navigation and usability.

* In ongoing studies of online versus offline customers, the nation's most successful online banking provider found that customers who use online banking show 80% lower attrition from the bank, make 30% fewer calls to the customer service line, and have higher overall account and loan balances. The institution also found that after just 2.5 years of using online banking, these customers were 21% more profitable.

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