Finovate Blog

Last year, we predicted there would be 32 million U.S. households banking
online by year-end 2003. Actual results appear to
be slightly higher, with an estimated 33 million households as of Dec. 31.*

The payments area continued to be a major factor in the household growth,
as direct bill-pay at billers’ websites increased 20-fold, from 1 million
users at the beginning of 2001 to 20 million at year-end 2003.

Not only is online banking penetration growing, but the level
of usage is also increasing. Power Users, households that access bank
accounts AND pay bills, have grown five-fold in the past three years; from
3.5 million to 23 million. Less than half use their bank’s pay-anyone
bill-pay service, electing instead to go directly to the biller’s site to
settle the bill.

For 2004, we project an overall growth of 4 million new online
banking/bill-pay households (range: 2 to 5 million), about…

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2003 Results

During 2003, online banking continued to grow at a rapid clip, adding 5 to 6
million new households, bringing the U.S. total to around 33 million, an 18%
increase over 2002. Worldwide totals grew at a faster clip, up an estimated 25%
to 30%, or 25 to 30 million households, ending 2003 at more than 130 million.  

Table 3

Consumer Households Using Online Banking: U.S. vs. Worldwide

millions of households actively using online banking and/or
online bill payment

Source: Online Banking Report estimates, accuracy estimated at plus or minus
12% U.S., 25% worldwide

Table 4

Annual Growth Rate of U.S. Online Banking Households

millions of U.S. households and percent change from previous
year

Source: Online Banking Report estimates, 12/03; accuracy estimated at plus
or minus 12%

Definitions

As the market has matured, we’ve noticed much less variance in the estimates
from most major researchers. Most of the…

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Table 1

Online Banking Timeline
number of U.S. households using online banking/bill payment

Source: Online Banking Report estimates based on industry data plus or
minus 15%, 12/03

 

Every spreadsheet and business plan needs a prediction of
future demand. So every year we gather forecasts made by prominent researchers
and analysts, compare and contrast their results, layer on our own insights, and
develop a 10-year forecast. Accuracy is estimated at plus or minus 15% for years
one through three, plus or minus 20% for years four through seven, and plus or
minus 25% for the out-years.

Over the years we’ve demonstrated a respectable track record . Our first
comprehensive forecast made six years ago (year-end 1997), predicted that online
banking usage would increase nearly 6-fold (560%) from 4.5 million in 1997 to 29
million households by year-end 2003. That prediction was nearly dead-on, perhaps
10% low, with an estimated
29…

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To many long-time bankers, online banking hadn’t proved its worth prior to
2003. However, with usage surpassing 30% of all U.S. households, and with
leaders such as Bank of America pushing past 40%, even the skeptics are
beginning to recognize the potential. By the end of the decade, total U.S.
penetration is expected to approach 50%.

Unlike many new technologies, online banking delivers on three levels:
improved customer satisfaction, increased sales, and cost savings. Now that
these institutional benefits have actually been documented, the rest of the
decade promises to see an extraordinary build-out of online capabilities, much
like the explosion of ATMs in the late 1980s as the channel became profitable.

Looking back at the last year, three changes stand out:

The onslaught of email spam and scams causing short-term headaches and
long-term credibility problems. The change in U.S. press coverage from somewhat negative to very
positive…

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