Banks are seeing their online services attract mainstream customers who are
comfortable with conducting the majority of their banking business in a paperless
environment.
“We’ve seen phenomenal growth in terms of online banking and online bill payment,” said Betty Riess, a spokeswoman for Bank of America. “And we expect that growth to continue. It’s important for us and for our customers. Studies show that online, bill-paying customers over time tend to stay with the bank longer and have deeper relationships with banks in terms of higher loan or deposit balances.”
In July 2003, Bank of America had 2.5 million active users of its bill-pay services. That number has grown to 4.6 million at the close of July 2004 – a figure that includes customers received as a part of the Fleet merger, though Riess said the majority of the new users came independently of the merger. The merger solidified Bank of America’s leadership in online banking, bringing its total to 10 million active subscribers.
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With Bank of America and Fleet combined, the company is adding more than 350,000 new active subscribers and 150,000 new bill payers every month.
“We’ve seen it go from early adopters to much more of a mainstream service now,” Riess said. “It’s a bit of an evolutionary process; first, people would go online to look at their account, then they’d go to look at what checks had cleared. Now it just seems to make sense to pay bills and handle all of your finances online.”
In June, comScore Networks, a group that measures consumer behavior and attitudes, released an analysis of the state of online banking in the country. The group found that more than 22 million users logged into accounts at the nation’s top 10 banks in the first quarter of 2004, representing growth of nearly 30 percent over the first quarter of 2003. During the same period, the use of online bank bill-payment services grew by 37 percent.
In a release, Jim Larrison, vice president of comScore Financial Services Solutions, said online banking and bill payment continue to be among the fastest-growing applications on the Internet. Alongside broadband access, he said, heavy online and offline promotion have played a big role in increasing the customers who regularly go online for banking.
According to comScore, more than 4.6 million consumers, or about 20 percent of the total online banking population, actively used online bill-payment services offered by the top 10 banks. The consumers paid an average of 14 bills online during the quarter, with an average value of approximately $250. The total value of bills paid by consumers through the top 10 banks in the first quarter was nearly $17 billion.
BankNewport first ventured into online banking in the mid-1990s with a non-transactional Web site. The site grew from there, offering customers a portal to their account activity and later, features like electronic checking. Bob Maddock, executive vice president of commercial banking, said the bank has seen steady growth from customers logging on to the site and that online bill pay has seen consistent month-over-month increases.
“We remain a high-touch bank, in that a lot of our customers conduct their business in one of our branches,” Maddock said. “But online banking is something customers expect now and there’s really no barriers to entry.” BankNewport charges $4.95 a month for the service.
Maddock said customers were hesitant about using the service when it was first offered, due mostly to security concerns. But he said after people are educated about things like firewalls, the service becomes an easy sell. In the next year, Maddock said BankNewport is planning to tie more cash management services to their online site as well as launch a new software platform that will give more functionality to online bill-paying customers. Kiosks will also be installed this month in some of the bank’s branches to allow for demonstrations of the bank’s online capabilities and hopefully increase the comfort level of customers.
“Everyone’s time-poor nowadays,” Maddock said. “But as everyone gets a little more savvy, I really expect the use of online banking to continue to grow for quite a while. It’s a great tool to have.”
Riess said Bank of America expects that its growth in online banking to continue and is listening to customers’ requests, as well as conducting focus groups and surveys. She said online use, which has surged over the last two years, has been due mostly to the institution removing barriers to trying the service.
By eliminating fees for online bill payment (the service had previously only been offered free to customers maintaining a certain account balance), Riess said customers were much more likely to try the service. And she said once people try the service, they tended to stay with it. Not long after the proposed merger was announced last fall, Fleet announced that its bill payment would also become a free service.
According to Riess, the most popular areas of www.bankofamerica.com, ranked by number of visits, are online banking, credit cards, the branch and ATM locator, deposits (checking and savings), small business and mortgage.
comScore’s most recent online banking report also included an analysis of the competitive landscape. The Online Banking Development Index was created as a way to compare a bank’s performance in engaging its customers online and included several components across three major categories, including adoption, engagement and loyalty.
Bank of America led the top 10 banks with an index of 118, followed closely
by Citibank and Fleet. While Bank of America ranked strongly across the board,
its greatest strengths were in the adoption and engagement categories. The bank
was second only to Citibank in the percentage of its online customers who use
bill-pay services.
