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ING Direct US <ingdirect.com> has added an online demo, perhaps the only pure savings account demo online: a good idea, if you are serious about the high-rate deposit business. Users need reassurances you are trustworthy and competent. A good online demo helps on both counts (click on inset for closeup). To view the demo yourself, click here.
—JB
Despite intense competition from MasterCard and Visa issuers, American Express has been able to maintain a substantial share of the high-end market for credit/charge cards. For the twenty years we’ve followed the company, its marketing has consistently conveyed an upscale image.
Case in point: The email we received today asking us to upgrade from our existing Gold Card to an American Express Platinum (click on inset for a closeup look).
The subject line said it all:
Upgrade to a card with premium service
The benefits cited included:
* Complimentary airline ticket on any of the 18 participating airline partners
* Airport club access (Continental, Delta, Northwest Airlines)
* Hotels & resort special privileges
* Free Membership Rewards program
* By Invitation Only (privileged access and tickets to events that, in many cases, can’t be purchased through any other source)
Analysis
The American Express solicitation is heavily oriented towards travel and entertainment benefits which plays to the company’s strengths. A bank could do the same by concentrating more on the "premium service" aspect. For example:
For more ideas, see "E-Service 2.0" (OBR 105/106).
Bank of America launched a co-branded version of Earthlink’s toolbar designed to prevent users from surfing to fraudulent websites. Of note is its official name, Bank of America Toolbar Powered by Earthlink. It’s highly unusual for a bank, especially the largest consumer bank in the country, to give a partner such high billing. Our guess, although unconfirmed, is that Earthlink is paying the bank for the product placement.
In a similar manner to eBay’s toolbar released in 2002, the BofA/Earthlink version uses red, green, and yellow lights to indicate whether a website is known to be safe (green), known to be fraudulent (red), or unknown 
(yellow). A popup blocker is also included. The toolbar is free and can be downloaded by any Internet Explorer for Windows user, you do not have to be a customer of the bank or Earthlink. According to Earthlink, a Mac version will be available soon. The toolbar does not work in other browsers.
The toolbar was announced in a press release today, and is accessible from a small link on the right of the homepage (click on inset for a closeup).
Analysis
Bank of America’s toolbar is the first of what we expect to be a major source of differentiation during the next five years: the branded desktop presence (see OBR 85, for more information). The Scamblocker toolbar is a relatively low-tech entry into the space. More sophisticated offerings, such as Southwest Airlines Ding (NetBanker, 5 Dec), are on the way later this year, if not at BofA, then at its U.S. competitors.
—JB
Credit card companies have been poaching revolving balances from each other for years primarily through direct mail. It helped boost the share of early movers, such as Capital One. But once the tactic was widely copied, it dragged margins down for all.
The same technique has been used online with dedicated balance-transfer microsites posted by Bank of America and others beginning in 2003. The online balance transfer is better than paper because it can be interactive, prompting the user to make additional transfers, or to correct errors in the information input. However, it still requires the user to make a trip to the website to make the transfer.
Enter E*Trade’s new Mileage Maximizer program, launched with a page-dominating color ad in Tuesday’s Wall Street Journal. With the Mileage Maximizer, the bank encourages users to make purchases on their existing non-E*Trade rewards card, then have the balances AUTOMATICALLY swept to an E*Trade 8.9% APR line of credit each month. The bank’s website is used to initiate and maintain the transfer process. But like recurring bill payments, once the sweep is established, it will occur each month with no interaction by the user.
E*Trade may well be the most innovative online financial services company. Here are some of the industry firsts they’ve logged over the years:
—JB
Editor’s Note: Mileage Mazimizer was awarded an "OBR Best of the Web" in our report on online lending published Jan. 31, 2006 (OBR 126).
Online marketing consultancy Compete <compete.com> released interesting results today about the popularity and effectiveness of the DING!, the innovative desktop application that Southwest Airlines released earlier this year (see NetBanker 4 March 2005).
According to the Boston-based firm, the Southwest application has been downloaded almost 1 million times this year (click on inset for closer view). More importantly, DING! users are 45% more likely to book through Southwest than non-DING users leading to more than $60 million in incremental bookings this year. 
These 1 million DING users join the nearly 20 million using similar toolbar-based programs from Google, Ebay, and many others.
In related research, Compete’s recent study of online banking users found widespread interest among consumers in receiving MORE information from their financial services providers:
Analysis
The next two years are an ideal window to launch a direct-to-the-desktop application like DING or a toolbar-based interface such as Google Toolbar or Billeo. A significant number of users have grown accustomed to the technology, while at the same time, due to widespread phishing and spam, email has become less effective for online marketing.
Going direct to the desktop provides a secure, trusted pipe directly to the user where you can deliver account-related info, triggered messaging, service announcements, and the occasional sales message.
For more information, see Online Banking Report #85, Grabbing Desktop Mindshare, published in 2002.
—JB
UK-based person-to-person lender Zopa <zopa.com> is the fourth and final company to win an OBR Best of the Web designation from Online Banking Report in 2005. Also winning this year were:
The company’s innovative lending model is highlighted in Online Banking Report’s annual, Top 10 Achievements in Online Financial Services. The report will be published next week (OBR #125).
—JB
Online competition continues to heat up as the major banks begin offering 4% APY specials just in time for the holidays, and those year-end bonuses. Today, four of the top 20 U.S. consumer banks are offering specials of 4% or higher on their homepages:
Citibank (2nd largest U.S. deposit base) is the biggest player to crack the 4% mark with a nine-month certificate aggressively promoted on its homepage with a page-dominating animated banner and hawked in one of the bank’s four postage-stamp ads running along the bottom (click on inset for a screenshot).
Note also the large Red Cross donation banner (bottom) supporting fund-raising for South Asia earthquake relief.
An email advertising the 4% CD was sent to customers 21 Oct. 2005. It was identical to one sent 1 July 2005, except the rate was 3.45% at that time (click on screenshot right).
Other Top-20 Bank Specials
Three other top-20 banks also offer 4% or higher deposit specials on their homepages:
year (NetBanker, Aug. 26), increased the emphasis with a huge front-and-center ad on its homepage, a red piggy-bank with 4% in it (click on screenshot right).
al, a 14-month CD that requires a National City checking account ($1500 minimum opening deposit) and at least $10,000 (click on screenshot right). Here’s the fine print: To qualify for this offer, depositor must have an existing National City personal checking account or open a Preferred Interest Checking account with $1500. Annual Percentage Yield is available from 11/21/05 through 11/30/05. Maximum deposit limit $250,000. Offer only available for consumer deposits.
D (click on screenshot right). The rate is good for $10,000 to $250,000 and must be opened with "new money" (from outside the bank). —JB
The new UK-based person-to-person loan marketplace Zopa <zopa.com>, first discussed here Aug. 3, is offering a 2% bonus to lenders who make money available prior to 30 November 2005 (click on screenshot left). In order to earn the bonus, would-be lenders must offer competitive rates.
The website cites an example of the potential return of a 4.9% rate on a 36-month installment loan:
4.9% interest paid by borrower
+2.0% Zopa bonus
(1.3)% expected loss rate
———————————-
5.6% return to investor
Analysis
Zopa claims to have attracted 32,000 users, including 16,000 lenders in the eight months it’s been online. So far, it has not lost any money to loan defaults, but that would not be unusual for a lender in its first few months.
The 2% bonus to lenders is not sustainable since the company only books a 1% loan fee, plus commissions, if any, when borrowers elect to take credit insurance. Evidently the company has more buyers (borrowers) than sellers (lenders). With such a novel concept, it’s no surprise that the number of people willing to take money is higher than those willing to give it out. As the concept becomes better known, and assuming that interest rates are allowed to float, the supply of money should reach equilibrium with demand.
—JB
In a blow to the future of account aggregation, Wells Fargo, the second largest online bank in the 
United States, is discontinuing its OneLook account aggregation service which ran on software from Teknowledge (click on the email message from Wells Fargo to customers, left). The Wells Fargo in-house account aggregation service, installed in November 2002, was the first to be integrated into its online banking services with its own tab.
For more information on the subject and the Wells Fargo service in particular, read Online Banking Report, #96/97 Account Aggregation 3.0.
—JB
Washington Mutual, the sixth largest U.S. bank ($172 billion in deposits), becomes the most high-profile financial institution to officially throw their hat in the direct banking business, looking to stem the tide of high-balance deposits headed to ING Direct, Emigrant Direct, and others.
According to yesterday’s report in American Banker, the bank will begin testing a high-rate deposit product available only from its direct banking unit, WAMU Direct, in four markets: Boston, Philly, Atlanta, and Phoenix.
Apparently the bank will be using the domain name <wamudirect.com> once the transfer of the name is made from the California man who had originally registered it. The bank won rights to the domain name in an arbitration case settled Oct. 14.
—JB
Here’s the latest online metrics from Wachovia according to today’s presentation at BAI’s Retail Delivery Conference by Lawrence Baxter, the bank’s Chief E-commerce Officer:
Overall bank size:
Online metrics (calculations in italics are ours):
Analysis
Only major surprise is the small number of alerts per customer, just over 1 per month. The average bill payment amount, $380 per payment, and annual volume of funds transfers, $20,000 per customer are high, and probably include business volume.
—JB
ING Direct’s <ingdirect.com> three million U.S. customers now must enter passwords into the site with an on-screen PIN pad. Users have the choice of clicking on their numerical PIN or typing the corresponding letter into an on-screen box (see screenshot below). The letters are scrambled each time to defeat many keylogging programs.
Although, the virtual PIN pad technology has been widely deployed elsewhere in the world, it’s new in the United States.
Analysis
Until recent deployments at Bank of America (NetBanker May 26), Citibank (NetBanker May 30), E*Trade (NetBanker March 2), and a handful of others, ING Direct has been the sole U.S. bank making at least a minimal attempt to make login more secure. For the past four years, it’s required a third piece of information at login (partial social security number or year of birth). It’s not really multi-factor authentication, because the third piece isn’t too difficult to figure out, but it at least provided the perception of better security (click on screenshot below to see closeup of login page).
The virtual PIN pad, first used by ABSA Bank in 2003 (see Online Banking Report 96/97), isn’t foolproof, but it does make it tougher for key-loggers and phishers to successfully recreate the login process at the bank. It’s also a relatively inexpensive improvement with very little customer impact. In fact, I’d expect that the customer response is overwhelmingly positive.
If the bank combines these cosmetic security features with robust behind-the-scenes authorization controls, it should have enough to keep the crooks at bay AND satisfy regulators.
—JB
