Everybody wants the proverbial sticky site, and in banking, Wells Fargo & Co., more than any other, has it. Although there'slittle agreement on the number of Web banking customers that the Top 10 banks have, sources almost universally credit Wellswith having the winning Web share.

If one looks not just at Web-banking customers, but at PC-banking customers, too, Bank of America Corp. has more online customers than any other institution. Bank of America won't disclose how many of its 1.7 million online customers bank by Web, however, while Wells reports that, as of last month, 1.3 million of its 1.4 million online customers were Web bankers.

Bank of America contends that it's immaterial which electronic channel customers use, but with the industry trying to shift PC-bankers to the Web, most sources suggest that Bank of America does not want to substantiate the belief that Wells, its arch-rival, is winning the Web race. (One analyst, who refused to be quoted, threatened to eat her computer if even half of Bank of America's online customers are Web users.) The bank, which she said has "about five separate online initiatives," had a strong PC-banking tradition before merging with Web-banking NationsBank Corp. By contrast, Wells was strong on the Web when it merged with Norwest Corp., then grew share by leaps and bounds once it introduced Web-banking to Norwest customers in July.

By mid-August, Wells had made history by becoming the first bank with one million customers on the Web. In October, First Union Corp. said it had also crossed that threshold. However, it's not agreed that First Union ranks third in terms of having the most Web-banking customers. Those who have done original research on banks' Web customer bases agree that First Union, Citibank and Bank One Corp. make up the remainder of the Top Five, but disagree on their respective rankings.

Between number 5 and 10, the rankings get very muddy. Chase Manhattan Corp. is sixth, according to some of the anomalous findings: research by both Gartner Group and Meridien Research (in its case, late 1998 PC and Web data combined). Datamonitor estimates that Chase may even rank third. However, the latest and most comprehensive research, by Gomez Advisors Inc., puts Chase 10th.

FleetBoston Financial Corp. is harder to assess. It doesn't making Gartner's Top Ten, but ranks fifth with Meridien and Datamonitor. When one contrasts monthly and occasional users of Web banking, as Gomez did, more divergence appears. Among active users, the old BankBoston customer base ranks sixth, the old Fleet base 10th (the duo merged last September). Yet, when both active and occasional users are combined, Fleet slides off the scale and BankBoston slips to eighth.Different Placements
The others Gomez places in the Top 10-shockingly, ahead of Chase-are Washington Mutual and Wachovia Corp., plus U.S. Bancorp. Wamu is also mentioned by Yankee Group, and Wachovia by Gartner. Both firms also mention PNC Bank Corp. Gartner analyst Laura Starita also counts Crestar Bank-now part of Wachovia-and Huntington Bancshares in the Top 10, suggesting that numbers seven through 10 all have "about 300,000" Web-banking customers. Yankee, by contrast, guesses that National City Corp. is in the Top 10.

To try to establish the Web market share of traditional banks (a follow-up story will treat pure Internet banks), USB contacted six leading banks and 10 research firms. Wells, Bank of America, Citi, Chase, First Union and Bank One were contacted and all, except Chase, provided Web customer numbers as of November/December. Eight of the research firms responded, three of which-Gomez, Garner and Meridien-had done original research into banks' online shares.

As a rule, banks quoted higher numbers, particularly of Web customers, than researchers credited them with. Ironically, the reverse was true for Bank One, which said it vigorously prunes dead wood from its customer lists. Wells also had more customers attributed to it than the bank says it has: Gomez extrapolated 1.44 million Web customers from its consumer survey, while Wells says it has 1.3 million.

The data likely to be of most interest comes from Gomez because it is the most recent, it looks at Web banking alone and it isolates the serious users-those who bank on line at least once a month. Gomez defines banking as either transferring money, paying bills or initiating contact with the bank, excluding passive activities such as monitoring account balances. Of the 19,000 North American consumers Gomez surveyed in November, 4,000 do Web banking.

Chris Musto, director of financial services, shared early results for the U.S. market with USB a few weeks ago. Gomez was then analyzing the results of this exceptionally comprehensive, targeted study, some of which are in the accompanying bar chart.

The first finding was that Web banking is more common than is often suggested. Gomez reckons that of 90 million people in the U.S. who use the Web 11.1 million people bank by Web. That compares with 8.5 million suggested by the secondary research of Mainspring Communications Inc., and 6.6 million suggested by Gartner's primary research.

Other researchers' findings for PC and Web banking combined suggest totals of 6.3 million individuals (Cyber Dialogue, New York) or 3.8 million to 4.7 million households (from Boston-based firms Yankee Group and Forrester Research, respectively). Though the Census Bureau suggests that there are an average of 2.6 individuals per household, Mainspring analyst Dan Latimoresays usually only one person per household banks on line.Citi Now Web-Only
Gomez says that 5.9 million of banks' 11.1 million Web customers transact on line at least once a month. As the table on pg. 51 shows, only half of a bank's Web customers typically are active. Yet, the Top 10 may be doing better than the rest, considering that Randi Purchia, a research director with Merdien, says that, as a rule, only about 25% of a bank's Web customers use its site once or twice a month. "High-end users, those using the site for multiple functions including trading and asset management, are the most loyal, and are mostly male," she says.

Gomez found that almost one million of the roughly six million "active users" are Wells Fargo customers, and a half-million are Bank of America's. Gomez puts Citi third, with 273,170 active Web customers-well below the 750,000 Web-banking customers that Citi told USB it had last August. As of November, Citi chose not to break out Web-banking numbers, quoting 2 million for Citigroup overall. Citibank, a relative latecomer to Web banking in October 1998, is exceptional in having no remaining PC-banking customers.

The banks that reported the most growth were Wells and B of A, adding 95,000 and 100,000 customers a month, respectively. First Union said it doubled its online base in the first 10 months of 1999. Bank One reported the lowest growth: 25,000 new Web customers a month. As for the total growth in online banking, researchers variously suggest that there will be between 18.5 million and 30 million Web bankers by 2003-2004.

Are people looking in the right place? First Manhattan Consulting Group, New York, suggests not. Discussing its November survey of 35 of the Top 100 banks, First Manhattan's president, James McCormick, says bankers need to wean themselves off quantitative measures of their Web success, such as numbers of users, and consider instead the profitability of those customers.

One element he says bankers should consider, attrition rates, have been very controversial lately. A consumer survey published last August by Cyber Dialogue-the first to measure defection of online banking customers, industrywide-suggested banks are losing almost as many online customers as they are gaining. Specifically, it said that in the 12 months ended last July, 2.2 million new customers were gained, and 2.1 million lost. That's excluding the effect of PC-bankers switching to Web-banking.

Cyber Dialogue said most of those who gave up banking on line did so because of complicated service and poor customer support. Cyber Dialogue suggests that Web banking has experienced a 33% "churn rate" industrywide since its inception. However, the "low" end of the range-suggested by several other sources-including banks themselves, is 15%.

Gomez' findings weren't so stark, suggesting that in addition to 11.1 million who bank by Web, 1.62 million signed up, then gave up. Another 1.89 million signed up and never started. Indeed, Deluxe Corp.'s eFunds unit suggests that 85% to 90% of Web applicants never actually open an account, often because the applicant doesn't send in the required opening-balance check.

E funds just introduced a new mechanim for funding accounts online. Bank One has agreed to be the first user of that application, integrate, starting this quarter.

Instant funding may be a Key Web site element in the future ensuring that customers sign up for electronic bill payment-a "sticky" service, in Web parlance. Cyber Dialogue said banks exaggerate their Web customer bases in several ways, including counting those who sign on, regardless of whether they are active, and counting accounts rather than accountholders, of which there are fewer.

Besides the wasted cost of acquiring fleeting Web customers, the profitability of banks' sites is affected by the exceptionally high cost of servicing Web customers, since they make more inquiries of the bank.

Banks lauded for their online service (lowering costs and fostering loyalty) include Citi, Wells and Bank of America, which took first, second and third, respectively, in a top bank rating by Vanderbilt University last spring (reflected on www.supportzone.com). Gomez, which does extensive quarterly rankings of Web banks, ranks Wells first, Citi third, Bank America fourth and Bank One fifth in the "relationship services" category.

Traditional banks score notably low on Gomez' ranking of the best on the Web. Its fourth-quarter 1999 ranking, including site reviews, is imminent on www.gomez.com. Those of our Top 10 who made Gomez' third-quarter list of the 20 best sites overall are Wells (rated 1), Bank One (7), Citibank (8), Huntington (10), Bank America (15) and Bank Boston (17). The accompanying table notes some distinguishing features of the five largest sites, using their own reports and an analysis by BISYS Corp.

Besides the largest 10, who is worthy of mention? Keycorp notes that it jumped to 13 from 28 in the Gomez third-quarter ranking and says the site it introduced last October is one of the very few Top 100 bank sites that are personalized. (For example, "My Key" acknowledges the user's birthday and other key dates in his or her life.)

Bowne Internet Solutions, a Toronto-based provider of Web personalization software, cites Deutsche Bank and Summit Bancorp as two of its leading lights. Marshall & Ilsley's Corp.'s unusual personal touches include free home pages for customers. Salem Five Cents Savings Bank, long recognized as doing a good job on the Web, just introduced a new site www.directbanking.com, featuring more products and more personalization. For private banking clients-a hot area, and harbinger of how Web customization may look-Northern Trust Co. is recognized as a leader.

Analysts generally are unimpressed with the levels of personalization and one-to-one marketing on bank sites. Forrester's Brook Newcomb says Wingspanbank.com, Bank One's site that several praised, is the only site he considers outstanding. In Newcomb's case its for offering third parties' loans and insurance products.

Meridien's Jennifer Schmidt praises banks that have established virtual shopping malls on their sites, including Royal Bank of Canada, Chase (with Chaseshop), and Citibank (with Citiplaza). These seem to improve bank-client relationships, she says, "as smaller corporate clients are given the opportunity to be on line, where they may not be able to do so on their own, and individuals are given an extra convenience." (Citi and Chase were also offering holiday shopping discounts to their Web-using cardholders.)

Whatever a site features, it shouldn't appeal only to the "price- sensitive," First Manhattan's McCormick tells bankers. Contrary to popular belief that Web banking customers are inherently more profitable, he says they fall on both sides of the profitability divide, "and price-sensitive customers are overwhelmingly toward the unprofitable side." Concentrate instead on value-added services, including giving advice-at a premium, he advises.

His study, done in conjunction with the Bank Administration Institute and reported at BAI's retail delivery show last month, somewhat echoes a study done in spring by the Office of the Comptroller of the Currency. It found that banks with transactional Web sites aren't more profitable or better in other respects than banks that lack them.

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