U.S. Internet banks are being hurt by their reluctance to try services and strategies that are doing well overseas, a Celent Communications analyst says.
"A lot of things happening in other countries could be replicated in the U.S.," said Gwenn Bezard, a senior analyst for the Boston market research firm.
A notable example is the problem of incomplete new-account applications.
Celent research found that 75% of people who start filling out online applications fail to complete them, against a 20% incomplete rate for brick-and-mortar bank branches.
Online applicants have to print out, sign, and mail back a signature card, and that is a big stumbling block.
Inteligo Financial Services SA, a 3-year-old online bank in Poland, came up with the solution of having couriers hand-deliver a welcome packet to each new applicant. The delivery person has explicit instructions not to leave until the signature card is signed.
This service "dramatically" raises the conversion rate, and yet "nobody is doing that in the U.S.," Mr. Bezard said.
Frank Trotter, the president of EverBank Financial Corp.'s branchless division, agrees that such a service would lift conversion rates. But discussions the Jacksonville, Fla., company has had with courier companies never led to a deal.
"It's on the project list, but it's not at the top," Mr. Trotter said.
Bancorp Bank, an Internet bank based in Wilmington, Del., has an arrangement with United Parcel Service Inc. that allows customers to overnight their deposits for free, but the customers have to drop off the envelope at outlets of UPS or its Mail Boxes Etc. Inc. unit.
Rob Snow, a vice president at E-Trade Bank in New York, said the division of E-Trade Financial Corp. of New York considered a partnership with a courier but decided it would be too expensive.
Many E-Trade customers want to set up both trading accounts and bank accounts, so incomplete applications are not a problem at E-Trade, Mr. Snow said.
"Our big challenge as a bank is getting accounts funded," he said, and that was why it came up with Quick Transfer, which lets customers transfer funds from other E-Trade accounts and from other banks. It has been offering the service since January.
Mr. Bezard said another example of a service that is popular in Europe and apparently is not being used at all here is an instant payday loan from Inteligo.
For small loan amounts, the bank will offer instant approval. "If the answer is yes," Mr. Bezard said, the cash is placed "in real time into your current account. In four minutes you can have 500 bucks in your account."
"My belief is that nobody does that in the United States," he said. "You need to have a very powerful core processing system."
Mr. Snow said that E-Trade's customers can link a home equity line of credit to their bank accounts. The funds can be accessed through their checking accounts almost instantly, he said.
Direct banks in the United Kingdom have also devised a banking product that links a mortgage with a customer's checking and savings accounts. These loans allow a mortgage holder who has other accounts at the bank to get a discount on the mortgage interest, because the balances in their accounts are counted against the principal when the bank calculates the interest charges.
Mr. Bezard said the Intelligent Finance division of Halifax PLC offers this type of account. Another direct bank, One Account, founded in October 1997 by a unit of London's Virgin Group Ltd. and Royal Bank of Scotland Group PLC, liked the idea so much that it took its name from the product.
"Essentially the bank is bundling all your products, all your cash flow, all your savings," Mr. Bezard said.
In the upcoming quarter NetBank Inc. plans to begin offering a combined account package that offers better interest rates to customers who open several accounts. But the online bank has not announced a linked mortgage and demand-deposit account product.
E-Trade Bank's Mr. Snow said that "a lot of customers want the benefit of relationship pricing if they have the choice" but that E-Trade Bank has no plans to offer a linked mortgage account. It is "an interesting idea" but more of an incentive than a product, he said. "You're really giving the customer a direct benefit for money that they're putting in the bank."
The real test of a product's value is whether the customers would want it by itself, Mr. Snow said.
"If you decouple them, they still need to make economic sense," he said. his customers "still want some separate products. They don't want everything tied together."
