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Digital Insight Now Officially Part of Intuit

By Jim Bruene Posted on February 8, 2007
Categories: Bill payment, Intuit, Personal Financial Management, Small Business

Intuit's $1.3 billion acquisition of Digital Insight closed yesterday, marking the beginning of a new era of innovation in small business online banking (previous coverage here). It's a market that's been underserved for years (see Online Banking Report's, Small- and Microbusiness Online Banking, #107/108).

Intuit, which has iPod-like domination of small business accounting and bookkeeping via Quicken and QuickBooks, can now leverage the software relationship into the banking relationship. The bloggers at Intuit's QuickBooks team-blog expanded on that theme here, discussing their goal of integrating electronic invoicing and payments into the bank site:

Why the purchase? One reason is to try to sell functionality of our record-keeping software as a service through banks, letting small businesses create, send, and get paid for invoices, all online at a bank's site. With millions of QuickBooks customers, we think we have some insight into small business' needs…. We learned from our tax return business how quickly packaged software can move to a Web service. Last year, for the first time, more people used the online version of our Turbo Tax Web service than the desktop version.

This is not necessarily bad for financial institutions. In fact, it probably levels the playing field for the smaller banks and credit unions that are the core of the DI client base. Through integration into Intuit's accounting products, smaller banks will be able to offer sophisticated small business solutions that equal or surpass what Bank of America or Wells Fargo offers today.

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Is the United States Overbranched?

By Jim Bruene Posted on February 7, 2007
Categories: Branch Banking, Metrics & Market Research

Well, not so much when compared with other Western countries; however, the bigger question is whether they are all overbranched. Only Singapore, with 111 branches per million inhabitants, is in a good position cost-wise. Italy and Switzerland, with more than 700 branches per million, have their work cut out for them as they reduce the number of branches from a level twice as high per capita as the U.S. total of 372 per million.

At our sister publication Online Banking Report, we've predicted that the total number of branches in the United States will fall by about 40% during the next 20 years (see note 1). Given expected population growth, that equates to about half the number of branches per million (using the BIS baseline, our projection is that the U.S. would have fewer than 200 branches per million in 2025). The reason for the decline is the rise of the out-of-branch channels: phone, online, ATM, and soon mobile (see note 2).

Here's some interesting data from the Bank for International Settlements <bis.org>. Click on the table below to read the five-year data trend. The 270-page PDF is located here.

Interestingly, of the 13 countries covered in the report, only Hong Kong, Singapore, Sweden and The Netherlands have fewer branches per capita than the United States. We have almost 25% less than the 13-country average. Only two countries showed an increase in the 2001-2005 period: Italy which added 1,500 branches and the United States which grew about 6,000 (see note 2).

Here's the list in order of most branches to fewest per million inhabitants:

1. Italy                 >>> 762
2. Switzerland   >>> 701
3. France            >>> 649
4. Belgium          >>> 566
5. Germany        >>> 561
6. UK                     >>> 472
<< <AVERAGE >>> 471
7. Japan               >>> 459
8. Canada             >>> 441
9. U.S.                    >>> 372
10. Sweden          >>> 295
11. Netherlands >>> 270
12. Hong Kong   >>> 249
13. Singapore     >>> 111

Notes:

1. See Online Banking Report's Decline of the Branch (#128), published May 2006.

2. Tom Brown's been writing about the trouble some banking chains have been having with the performance of their new de novo branches (see here).

3. In 2001 and 2002, the U.S. branch total in the BIS data-set excluded credit unions.

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ING Direct Books 42,000 New Electric Orange Checking Accounts

By Jim Bruene Posted on February 5, 2007
Categories: Deposits, Checking, Savings, CDs, Direct Banking, ING Direct

According to an American Banker story last week (here), as of Feb. 1, ING Direct had cross-sold 42,000 (see note 1) checking accounts to its 4.3 million savings customers, a penetration of 1%. Keep in mind, the new checking account has been slowly rolling out over the past 60 days to current customers only (see note 2), and is not yet mentioned on the bank's website. It is expected to be launched to the general public within the next 30 days.

You can view these initial results in two ways:

Glass is half full — Even with just 42,000 accounts, ING Direct may have the largest "Internet only" checking account base, at least when measured by the number of active accounts

Glass half empty — Because ING Direct's checking account pays 50 to 80 basis points (0.50% to 0.80%) more than savings on $50,000+ balances, many (most??) of the new checking account customers simply moved large balances into the checking option, providing few incremental deposits.

Notes:

Make that 42,001 accounts. I just opened one this morning. It took all of about 30 seconds to do it. Existing customers simply choose an account nickname, enter the dollar amount they want transferred into the account (from the pre-existing link from an outside account), and agree to the disclosures. See below for the confirmation screen.
I received my invitation to open an Electronic Orange account last week (screenshot here). I've had an account there since 2001.

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YADB* Huntington Goes Direct

By Jim Bruene Posted on February 3, 2007
Categories: CashEdge, Direct Banking, Forms & Loan Applications, Huntington Bank

First reported by Bank Deals today (see note 1), Huntington Bank has recently launched a new direct bank, called DirectHuntington <directhuntington.com>. It goes against the naming convention of having "direct" follow the main brand name, but it shouldn't make too much difference. Still, the bank should secure domain-name rights to HuntingtonDirect.com, currently used by New.net Inc to post a few generic banking links and throw a pop-up or two at unsuspecting users.

Huntington chose a color palette that makes it stand out from other financial institutions, a good move. However, the yellow 5.30% APR doesn't stand out as well as it should given its importance in the purchase decision (see sceenshot below).

But once again the CashEdge-powered online application leaves a lot to be desired (see previous coverage here and second screenshot below). But before you can even see the application, you must agree to the "Consent for Electronic Disclosure," a terrible first impression for someone who's thinking of sending you ten-grand or more (see screenshot below).

The upper-right Online Guarantee is a nice touch, but it links back to the main Huntington site which might be confusing for users (see screenshot below).

Direct Huntington online deposit application page 1

There is no mention of DirectHuntington at Huntington's main website <huntington.com>. However, there's a secret code (anywheresavings) you can enter into the Special Offers box that takes you to the direct banking site.

*Yet another direct bank

Note:

The Bank Deals writer had a relatively uninspiring call with DirectHuntington's customer service when he researched the account.

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Trabian’s “Give With Us” is a Cost-effective Way to Start a Blog AND Make a Difference

By Jim Bruene Posted on February 2, 2007
Categories: Blogs, Public Relations, Trabian

When's the last time you saw a new Web app that:

Was good for your brand
Was useful for your customers/members
Gave your employees a voice
Helped your community
Had zero IT support cost
Allowed you to begin blogging with virtually none of the risks of a typical blog
Caused non-customers to bookmark your site and/or subscribe to its feed
Prompted the local press to write glowing reviews
Put your name in front of community organizations, and their well-connected board members
And was affordable?

Take a look at the Web-based volunteer clearinghouse originally conceived by CU thinktank Filene Research Institute. The application is being commercialized as Give With Us by Trabian, a Dallas-based design firm that built Filene's prototype called My Community Connection (see note 1).

You can see the original Filene version in production at SELCO Community Credit Union <selco.cugive.com>, where 77 volunteer opportunities have been posted since its launch less than six months ago (see note 2). The revamped, and much more Web 2.0-looking, version from Trabian will be housed at the cleverly named <www.givewith.us>. The online product tour is not yet available, but we have the world premier exclusive screenshot below, courtesy of Trey Reeme of Trabian.

How it works
The application is basically a blog where anyone can post volunteer opportunities. Readers can take action by clicking a button to either:

Sign up
Email a friend
Leave a comment

Unlike other community websites that are bookmarked once then forgotten, users can sign up for a feed so that new opportunities continue to flow to their feedreader or browser. Hopefully, they'll add an email subscription option for the majority of users who are not yet using feeds.

Cost
The cost is $2,500 upfront plus $1,000 annually for the license. I don't need to tell you what a bargain that is. You get state-of-the-art blog design and functionality for the price of a Yellow Pages' ad.

You will need to assign a staff member to moderate the blog, clearing postings and comments for final publication. Assuming two posts and a couple comments each week, it shouldn't take more than a few minutes a day. But it needs constant attention, you can't have the moderator on vacation for a week with no substitute.

Analysis
The biggest problem will be attention, or rather lack of it. How do you get overworked volunteers and nonprofit staffers to take time to post volunteer opportunities? Even harder, how do you get the community to remember to look at your blog when they are in a volunteering mood?

SELCO has a link on its homepage <selco.org>, but how do you reach out to the larger community to make this relevant? The SELCO website has 77 volunteer postings, but only 3 comments in the past 6 months. That suggests it's relatively lightly used by those donating their time.

But any new offering takes time to get rolling. It's not unrealistic that you could end up being THE place in your market where volunteer opportunities are publicized. But that will take more effort than just posting it on your homepage.

For example, searching for "volunteers in Eugene," SELCO's home market, doesn't bring up the CU's site until result number 160, far too low for anyone to notice (see note 2). Selco should consider using Google AdSense to get its program listed in search results. With no other bidders, it'll only take a dime or so to get the number-one listing.

Another way to receive more attention would be integrating the volunteer opportunities with fund-raising services. For example, a financial institution could create a "donate here" button for the organization's website that instantly deposits donated funds into the nonprofit's checking account.

Notes:

Trabian is a specialist in Web 2.0 design and so-called "social media." The company also built Filene's website along with several interesting credit union sites; refer to its website for a client listing. Trabian also runs the OpenSourceCU blog tracking, which tracks blogs and other social media in the credit union market.
Click on the screenshot at right to see the front page of SELCO's My Community Connection site.
The number-one result is a competing site, VolunteerMatch.org
which lists 98 opportunities in a tabular format.

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ING Direct’s Deposit and Customer Totals Decline as Direct Bank Competition Intensifies

By Jim Bruene Posted on February 1, 2007
Categories: Deposits, Checking, Savings, CDs, Direct Banking, ING Direct

For the first time in its short six-year history, ING Direct's U.S. division showed declines in both total deposits and customer accounts during third quarter, the latest data available (see the table below, originally published in our year-end industry forecast, Online Banking Report #137). Although the runoff was relatively small – $600 million in deposits, or about 1% from the peak, and 150,000 accounts, or about 4% from the peak – it's a clear indicator that the entry of Emigrant Direct, HSBC Direct, and especially Citi Direct have taken a toll on the direct banking giant.

Looking at quarterly results below, you can see that average account balances began declining in Q1 2005, as some of the hottest money, large balances held by extremely rate-conscious consumers, moved to better paying accounts; still, total deposits and customers continued to grow rapidly through 2005 and into 2006. However, in the second and third quarters, deposits began to flatten as the number of accounts grew only 230,000 compared to 560,000 in the same period a year earlier.

ING Direct appears to have deliberately slowed growth by maintaining deposit rates 50 to 100 basis points lower than the new entrants. With its marketing muscle, the bank could choose to grow deposits if it closes the rate gap. The bank's new checking account, gradually rolling out to current customers, may help stem the tide, with higher rates for larger balances (see coverage here).

Table: ING Direct Deposit and Customer Totals: 2000 to 2006 (click to enlarge)

PDF version of this table here.

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Everbank Takes on ING Direct with 6.01% Checking Account Campaign

By Jim Bruene Posted on January 31, 2007
Categories: Advertising & Promotion, Deposits, Checking, Savings, CDs, Direct Banking, Everbank, ING Direct

Everbank launched its "What are you waiting for?" campaign today by giving away 2,500 free subway tickets at 6:01 AM in lower Manhattan. The time was chosen to coincide with the 6.01% APR promotional start-rate on its FreeNet checking account (see Note 1).

The campaign targets ING Direct's soon-to-be-released Electric Orange checking account, which currently pays beta users 3% on balances under $50,000 and 5.3% on balances greater than $50,000 (see Note 2).

Everbank launched a microsite called <whyruwaiting.com> with direct comparisons to ING Direct (see screenshot below).

Clicking the large Compare Banks button in the lower right leads to a comparison to ING Direct and several other major competitors (see screenshot below):

The campaign has not been extended to the Everbank website, which shows a banner for the 6.01% offer, but no mention of "Why are you waiting?" (see screenshot below).

Clicking through the banner leads to the following page:

Notes:

The 6.01% is a promotional "teaser" rate is good for three months, then resets to the "regular" rate which are currently as follows:
Under $10,000 = 3.25%
$10,000 to $25,000 = 3.30%
$25,000 to $50,000 = 3.60%
$50,000 to $100,000 = 4.00%
More than $100,000 = 4.41%
The minimum deposit is $1,500 and the maximum that earns 6.01% is $100,000.
ING Direct customers can also easily transfer funds into the companion savings account which pays 4.5%. ING's Electric Orange account began rolling out in waves to its 4 million savings account customers in December (see coverage here). Coincidently, I received my invitation yesterday (see screenshot below).

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New Twist on Financial Institutions Blogging, Messages from the Credit Union Board

By Jim Bruene Posted on January 30, 2007
Categories: Blogs, Trabian

Here's a blogging application we didn't consider in our recent report, Online Banking Report's Bank 2.0: Blogs and Feeds (here), a credit union board of directors creating a blog to communicate with the full membership.

The blog, which launched Jan 1, is called The Boardcast <boardcast.typepad.com> and is written by the board of directors at UFirst Credit Union <sunyplattsburghfcu.com>. Board VP Virginia Brady is said to be the moderator. However, most postings sound like they've been authored by someone within the credit union. That's fine, but it should be clear to readers whether a post comes from a boardmember or a credit union employee.

UFirst publicizes the blog in two places on its homepage (see screenshot below):

Analysis
Blogs are a good way for volunteer boards at non-profits to communicate with the full membership. They are inexpensive, timely, and promote two-way communication. In fact, we believe nearly every company and organization will eventually have one. However, they are not without risks and headaches; for example, here are a few issues that must be dealt with:

risk of generating pubic controversy for the board member(s) writers
the time commitment necessary to post at least weekly so the blog remains relevant
making sure the board and management are on the same page before making the post
monitoring and responding to comments
conflicts of interest with the board member's day job or business

Thanks to OpenSourceCU for the first post on this new blog (link here).

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Citi Mobile Appears Ready to Go Live in February

By Jim Bruene Posted on January 28, 2007
Categories: Citibank, Mobile Banking

I opened my Citibank checking account statement today and out fell one of those text-only "terms and conditions" notices that are rarely read. However, the title of this one caught my attention (emphasis added):

Important Information: Introducing Citi Mobile

It's an update to the bank's terms and conditions incorporating access via web-enabled cellphone or other mobile device. The statement was mailed January 23rd and the notice carried a 2006 copyright with an "01/07" date by the item number.

There's no mention of any fees for the service, which begins in February 2007, according to the statement insert. Readers are referred to the Citibank website for a list of compatible phones, but we couldn't find anything on Citi Mobile today.

In a Google search we ran across an older Citi Wireless Services website <wireless.citi.com/wireless/homepage> with a 2001 copyright date (see screenshot below), but it discusses the previously available services such as alerts sent to mobile phones. There is no mention of the new mFoundry-powered services (see previous coverage here).

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HSBC Direct Attracts 350,000 Accounts

By Jim Bruene Posted on January 26, 2007
Categories: Advertising & Promotion, Deposits, Checking, Savings, CDs, Direct Banking, HSBC Direct

In a Jan. 1 case history published in Direct Magazine (article here), HSBC Direct says it has attracted 350,000 customers since the launch of its high-yield savings account just over a year ago (Nov. 2005).

Assuming typical high-yield balance levels of $8000 to $10,000 per account (our estimate), the bank has attracted more than $3 billion in deposits. The bank has marketed its 5%+ APR account heavily, so it's not likely that the new business is making much of a profit contribution yet.

Based on the bank's reported online ad spending, its acquisition costs were $75 per account from the online spending only, not including what it spent in other media to support the direct business unit (see note 1).

The bank said it is working on new products to offer through the direct bank. This is a crucial step in the evolution. There just aren't enough customers with $10,000 savings balances to feed all the financial institutions looking for new deposits. HSBC's ability to sell other services to its 350,000 new customers will determine the long-term success of the direct banking initiative.

Thanks to former Forrester senior analyst, Ron Shevlin, now VP at Epsilon, for the link in his Marketing ROI blog.

Notes:

According to data from TNS published in American Banker here, HSBC spent $20 million online during the first three quarters of 2006. To calculate the acquisition cost we annualized the online spending and divided by 350,000. This calculation excludes the portion of non-Internet advertising that went to support the direct unit. The bank's total ad spend was $42 million during the first 3 quarters of 2006.

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Wells Fargo Extends Hours via ATM Deposit Capture

By Jim Bruene Posted on January 25, 2007
Categories: ATMs, Kiosks, Remote Deposit Capture, Wells Fargo

Wells Fargo explanation of remote ATM deposit capture No matter how comfortable and convenient your branches are, forcing customers to rush to the branch to cash a check before closing time is not helping cement the relationship. And it leaves you vulnerable to competitors with longer hours or branches that are closer to your customer. And extending hours into the evening and weekend may be great for the customer, but its tough on the bottom line.

That's what makes Wells Fargo's latest move doubly smart. Because deposit/check-capture ATMs automate the check cashing process, the main reason customers visit a branch late in the day, the machines can serve almost like a virtual branch for many users.

So Wells Fargo is leveraging its so-called "Envelope-free" ATM network to provide what amounts to extended branch hours, providing same-day credit for checks deposited in its Envelope-free ATMs to 7 PM. By adding three hours to what was a 4 PM cut-off, the bank instantly has a network of 1200 extended-hour locations (see Note 1) for a fraction of the cost of keeping branches open an extra 10 to 15 hours per week.

As remote deposit capture becomes a key selling point for banks, we expect deposit cutoff times to disappear altogether, just as many bill payment systems now allow payments to be initiated up to midnight for same-day processing.

Notes:

The bank announced Tuesday that it will be expanding its network of envelope-free check capture ATMs to 1200, from the current 400 (see press release here). The Wells Fargo Envelope-free page is here.

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Forrester Calculates the ROI for Publishing a Company Blog

By Jim Bruene Posted on January 25, 2007
Categories: Blogs, ROI

Forrester analyst, and blogger, Charlene Li announced Forrester's latest look at so-called "corporate blogging" (see post here). I haven't read the full report, but Charlene's post, and the Excel model she linked to (here), provide significant detail on the model. The full report is available to Forrester clients free of charge or to anyone else for $379 here (see also, Charlene's powerpoint presentation that accompanied her December webcast on the ROI of blogging here).

I'm sure there will be plenty of debate about the assumptions that went into the model, but here's the bottom line for one of the highest profile corporate blogs, General Motors Fastlane (see screenshot below; Forrester case study on Fastlane available for $279 here).

Blog benefits (2006): $410,000
– PR value (articles) $215,000
– Product feedback value (virtual focus group) $180,000
– Word of mouth/awareness value $15,000

Blog costs (2006): $255,000
– Producing content (mostly exec time) $155,000
– Brand monitoring service $50,000
– Blogging platform $25,000
– Review & direction $21,000
– IT support $3,000

Net value to GM (2006): $155,000
ROI: 69%

Much of the blog's value stems from the product feedback gathered and press articles written about the blog or what was mentioned in the blog's posts and/or comments. The estimated value of the word-of-mouth generated is minimal, just $15,000.

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