Small Business Online Banking Usage

Online banking usage

Up until a few years ago, small business usage of online banking trailed
consumer adoption. In late 2000, 13% of small and microbusinesses used
online banking compared to 16% of consumers . Three years later, online banking penetration is similar to that of
consumers, an estimated 30% overall. At the largest small businesses, those
with sales between $5 and $10 million, usage is now more than 40%, double
the rate three years earlier.

It’s likely we’ll see continued rapid growth for a few more years. Almost
all (99%) small businesses are computerized, either at the business or at
the owner’s home, or both (see Table 18, above) and more than 75% are
using their personal computers for financial activity (see Table 21, next
). It’s only a matter of time before the majority of small
businesses bank online. Looking at the 7.3 million small and microbusinesses
universe, we predict that we’ll pass the 50% penetration point within four
years. However, we may reach that point much sooner. One researcher,
Synergistics Research, is already saying that online banking usage
has passed the 50% mark in the $100,000- to $10-million segment, with the
largest small businesses
($5 to $10 million) topping out at 75% penetration.

Table 21

Small business online and PC financial services usage,


Source: NFO Financial Services Group SOHO/Small Business Owner 2002
Online and Channel Use

Reasons for not banking online are typical, with security and
inconvenience (compared to current methods) the most-cited reasons (see
Table 22, below).
Only 8% mentioned it was too expensive and only 5%
said they didn’t have the necessary equipment (presumably convenient online

Table 22

Reasons for not conducting either business banking or
investing online


Source: NFO Financial Services Group SOHO/Small Business Owner 2002
Online and Channel Use



Table 23

Online banking, billing, payment and other online activities

Q. Does your company use the Internet …?   


Source: NFO Financial Services Group SOHO/Small Business Owner 2002
Online and Channel Use, April 2003



Table 24

Cash Management Usage

Q. Please indicate if the service is


Source: NFO Financial Services Group SOHO/Small Business Owner 2002
Online and Channel Use, April 2003

Advisor usage

While small businesses still turn to their banker for loan
advice, only 17% use a banker for cash management advice, and just 4% for
retirement planning (see Table 25, below). Because small businesses are
skeptical of bankers’ expertise in non-traditional areas, banking organizations
must first explain why they are selling the product, and why the bank’s solution
is superior to more traditional sources. It may be advantageous to partner with
brand names that are more closely associated with the non-traditional product,
e.g., Safeco for business insurance.

Regardless of the channel the customer chooses to get
information and make transactions, a human is usually needed to close the sale.
In a recent Synergistics Research survey of 600 small businesses, only 7% had
opened bank accounts remotely (see Table 26, below). The sales process
can be assisted by email and phone with a branch manager, business banking
officer, or a special small business liaison.

Small Business Loyalty & Growth Potential

Small business loyalty

One consistent trait across all small businesses: loyalty.
Once you land one, it takes significant upheaval, such as a new commercial
loan relationship, before they make a move. NFO research indicates that 81%
of small businesses use the same bank for personal and business services.
And in a survey of Barlow Research clients, about 60% said they kept their
personal and business accounts at the same bank. Evidently, it’s just not
worth the entrepreneur’s time and energy to shop banks, unless they are in
the midst of raising capital. That’s why we believe it is vitally important
to establish a credit relationship with every small business customer
regardless of size.

However, high loyalty is not necessarily the same as high
satisfaction. According to NFO, in 2003 57% of small businesses are very
or extremely satisfied with their primary financial institution, up
from 50% in 2002. This is a mediocre score overall. And with the advent of
the online channel, it is easier than ever to shop around. And since only
22% of small business customers report being actively courted for their
deposits and investments, incumbent financial institution may be vulnerable.

Typically it has been the interaction between the business
owner and the commercial loan officer that has maintained, or sunk, the
relationship. Though personal relationships are still the primary factor,
electronic communications and online services are becoming important side
benefits. The savvy loan or banking officer can use email, instant
messaging, and a Web presence to supplement and extend the face-to-face
relationship. Staying in touch, asking for feedback, and identifying new
needs can all be done through frequent electronic communications.

Growth potential


Table 17

Accounting Method by Small Business Type


Annual Revenues

Who Does Banking?

Accounting Method

Typical Software







$0.25 to
$1 mil


Double entry


Small business

$1 to
$10 mil


Double entry


Source: Online Banking Report, 5/04

The small and microbusiness market holds much promise for financial
institutions looking to grow revenues and profits. Smaller businesses, which
are almost 100% computerized (Table 18, next page), are particularly
well-suited for online delivery; however, since most lack dedicated
resources to handle banking matters, they can be reluctant to change
existing processes and procedures. Even though your bank’s latest online
feature may draw an enthusiastic response in focus groups, expect slow
adoption by small business clients. They are simply too busy to pay
attention to incremental banking improvements.  

While banks and other financial providers have long coveted the small
business market, most have found it difficult to provide the high-touch
services needed by business owners at prices that a smaller business can
afford. However, we believe small business online banking offers a new
paradigm. Automated online tools and electronic communications such as
instant messaging and webinars, allow banks to deliver customized products
at affordable price points, both for the smallest home-office-based sole
proprietor as well as companies with hundreds of employees.


Table 18

Small business PC ownership


Source: NFO Financial Services Group SOHO/Small Business Owner 2002 Online
and Channel Use

The Forecast Growth New Small Business Online Banking

Looking at the entire universe (including self-employed and contractors),
for 2004 we project growth of 2 million new small business online banking
users, a slight decline from the 2.5 million who came online in 2003. And
the rate of growth, due to the higher base, will slow to 17% from
2003’s 28% (see Table 9, below).

Table 9
Forecast of U.S. Small, Microbusiness, and Self-Employed Online
Banking Usage

includes broadest definition of small business
users, population estimated at 23 million

Source: Online Banking Report projections based on industry data (+/-
30%), 3/04;
% OLB = percent of total population that is actively banking and/or paying
bills online (activity within past 6 months)


Table 10

OBR Forecast: Small Business Use of Online Banking
businesses with annual revenues from $50,000 to $10 million, not
including self-employed/contractors

Sources: 1998 to 2002 estimates, TNS Financial Services Small Business
Market Track
, April ’03; (1) 1995 to 1997 and 2003 to 2013: Online
Banking Report estimates plus or minus 33%



The opportunity at your financial institution

For a rough approximation of the small business potential in
your market, use the national average business-to-consumer penetration. For
example, there are approximately 90 million U.S. households with bank
accounts. Therefore about 25% (23/90) are business owners. About 8% (7.3/90)
own businesses that are relatively easy to find via identifiable business
phone lines, D&B reports, compiled lists and so on. The difference, about 16
million, are harder-to-find self-employed and contractors.

Table 11

Estimating the Number of Microbusinesses in Your Market

Number of banking households in your market
                                                    (fill in)

Multiply by the percentage of all households that are microbusinesses 
               x 8% or 25%*

Approximate number of microbusinesses in your market          
               =                        _____

Source: Online Banking Report, 6/04 *Depends on whether you are looking
at all businesses including self-employed/contractors, or just the
larger small and microbusiness segment

Total market size of balance-driven banking products

Looking at just the 1.2 million larger small businesses with
revenues from $1 million to $10 million (not including
self-employed/contractors), TNS Financial estimates total business deposits
of $240 billion and the total loans and lines of $160 billion for a total of
$400 billion. In addition, we estimated the microbusiness segment ($50k to
$1 million) has another $240 billion in deposits and loans. In addition, NFO
estimates that small- and microbusiness owners have another $1.6 trillion of
deposit and loan balances in their personal accounts, for a total of $2.2
trillion. Assuming a 200 basis point (2%) spread on the balances, the sector
is generating about $44 billion in net interest revenues, an average of
$6,000 per business/owner.

But, this only accounts the money paid out to financial
services companies. It ignores the significant internal and often hidden
costs associated with financial management: accounting, bookkeeping,
payroll, treasury, and so on. With the Web, banks have an opportunity to
compete not just for the traditional financial products, but also for the
entire financial operations of the business.

Table 12

Deposit and Loan Balances and Net Interest Margin from Small-and


Source: Small business ($1 to $10 million) segment and owner balances
from TNS Financial Services Group 2003 Small Business Studies, 4/03;
Microbusiness balances and average net interest margin are estimates from
Online Banking Report, accuracy estimated at plus 100%, minus 50%

1OBR estimate of $15,000 per microbusiness, n =
6.0 million

2OBR estimate of $25,000 per microbusiness, n =
6.0 million


Table 13

Small Business Assets by Type, Numbers and Balances


Source: Balances from TNS Financial Services Group (formerly NFO World
Group) 2003 Small Business Studies, 4/03


Table 14

Small Business Liabilities by Type, Numbers and Balances


Source: Balances from TNS Financial Services Group (formerly NFO World
Group) 2003 Small Business Studies, 4/03




Table 15

Misc. Product Usage


Source: Balances from TNS Financial Services Group (formerly NFO World
Group) 2003 Small Business Studies, 4/03



Table 16

Financial Products Purchased for Personal Use1 by Small
Business Owners

Warning: Small sample sizes of respondents with large balances may distort
the numbers.


Source: Balances from TNS Financial Services (formerly NFO World Group/PSI
Global) 2002 SOHO and
Small Business Owner Studies, 4/02; number of small and microbusinesses from
NFO’s 2003 Small Business Study, 4/03

Total population (N) = 7.3 million U.S. small and microbusinesses, not
including self-employed/contractors, OBR estimate +/- 20%

Does not include the value of the owner’s business, commercial real estate
investments, stock options, and other misc. categories

1Products used personally, not for the business

2Total market = (% using) x (average balance) x (7.3 million micro
and small business owners)

3Total balances only, does not include auto leases or insurance

4Across all business owners, users and non-users

5Net worth = personal assets less personal liabilities, does not
include net value of business or non-residential real estate holdings

6Total personal assets less value of residential real estate, does
not include net value of business or non-residential real estate


Barclays Small Business Banking

Q. When is a business most likely to open a new bank account?
A. When they are first starting out.
Recognizing that the best time to get their foot in the door at a business is before the doors even open, Barclays Bank (UK), addresses the issue front and center on its small business banking home page Barclays Small Business Banking : Small Business.
The company offers a number of startup service including complimentary consultations with business advisors and fee-free checking accounts (18 months if you also bank personally at Barclays, 12 months otherwise).

Types of Small Business : Research Results

Types of Small Business

Small business means different things to different people. For the
sake of simplicity, in this report we’ll usually use the term “small
businesses” to refer to the following segments:

Two major classifications used in this report:

1.    Microbusiness: Basic financial needs, such as Quicken
support, simple invoicing,
credit card processing, bill payment, home equity credit lines, and tax
reporting; usually sole proprietorships, partnerships, or S-corps (includes
self-employed); often with less than 20 employees; total revenue of $50,000
to $1 million annually; total credit lines of less than $250,000.

2.    Small Business: More complex financial needs, such as
accounting support, invoicing, payment processing, bill payment, commercial
credit lines, tax reporting, and internal security and fraud controls; less
than 500 employees; total revenue of $1 to 10 million annually; total credit
lines more than $250,000.

Other business types included in above classifications:

·      In-formation Business: Initially, may be more interested in
advice and information on credit, payment processing, and other banking
services; depending on many factors, may move rapidly towards launch and
need to quickly establish accounts and line up financing. Financial needs
vary depending on the business plan and funding.

·      SOHO (small office, home office): Smaller, work-from-home
sole proprietorships. It can also be used to describe mobile workers such as
home-based salespeople in insurance and manufacturing. We classify these
companies as microbusinesses.

·      Selfemployed: Persons who primarily work for
themselves, either as contractors, consultants, or commission-based sales
reps. We classify these individuals as microbusinesses.

·      SMB/SME (small and medium business/enterprise): Usually
refers to the largest segment of “small” businesses, companies with at least
several million in annual revenues. We classify these companies as small

Primary Data Source

The primary data source for this report is TNS Financial Services
(formerly NFO WorldGroup-Financial Services, and before that,
PSI Global). Our thanks to EVP Maria Erickson and her staff for
answering our questions and making data from their Small Business and
SOHO studies available. For more information on purchasing financial
services research contact Ms. Erickson at (813) 227-8562.

The Small Business and the Affluent Entrepreneur 2003 Study
was fielded between April and May 2003; the owners of 3000 U. S.-based
small businesses with annual sales between $500,000 and
$10 million were contacted by telephone or mail to provide the most
accurate and reliable
information possible.

Using the same methodology, 900 small businesses were contacted for
the SOHO and the Entrepreneur Study 2002 between September and
October 2002.


The big picture in small business

Small businesses exist in all markets, in every town and at
every crossing. Using a broad definition that includes smaller part-time
business endeavors, there are more than 20 million businesses in the United
States, one of every five households. And that understates the market
potential. If you also include the personal product usage of the
“business-owning” segment, the total could be as much as 50% of your

Depending on the definition, as many as 30 million business
entities exist in the United States, including self-employed or part-time
sideline businesses such as selling collectibles on eBay, or as few as 1.2
million if you only look at companies with at least $1 million in annual
. For the purposes of this report, we are defining the total small business
market as 23 million, a figure taken from U.S. Small Business Administration

The total includes

·         16 million self-employed/contractors

·         6.0 million microbusinesses with revenues less
than $1 million

·         1.3 million of that is the larger small business
with revenues of $1 to $10 million

Small businesses account for:

·         99% of all employers

·         51% of private sector employment

·         67% of net new jobs

·         52% of U.S. gross domestic product


·         600,000 new businesses are started each year1

·         13% of U.S. households own privately held

·         Business-owning households had higher income, more
education, significantly higher net worth, and were led by individuals in
the prime age group 35-602

·         Boeing Employees Credit Union’s recent
survey showed that 50,000 of its 350,000 (14%) members reported owning
businesses or being key decision-makers in one3

·         IDC reports there are now 15 million U.S.
home-based businesses, 10 million full-time and
5 million part-time4

·         More than 400,000 people make most or all of their
living from selling on eBay5

(1)     SBA Research Summary #211, “Small Business Share
of Economic Growth,” Jan. 2002

(2)     George W. Haynes, Assistant Professor at Montana
State, and Charles Ou, SBA Economist, presented an Advocacy Working Paper at
the Conference of Entrepreneurial and Financial Research in April 2002

(3)     American Banker, 4/13/04

(4)     2004 estimates from IDC as cited in The Wall
Street Journal
, 6/17/2004

(5)     Estimate from AuctionDrop, a company that earns
commissions selling merchandise on consignment through Ebay, as cited in
The Wall Street Journal
, 6/17/2004


Who wants to be a microbusiness?


Table 3

Number of U.S. Home-based Businesses



Change 2004 vs. 1999






9.9 million

9.6 million




5.2 million

6.9 million

(1.7 million)



15.1 million

16.5 million

(1.4 million)


Source: IDC, as cited in The Wall Street Journal, 6/17/04

Everyone it seems. While American attitudes towards big business have
declined markedly during the past four years thanks scandals at Enron,
MCI, and others, the small business remains on a pedestal. Its
human nature to root for the underdog, and the smaller the business the
bigger their perceived disadvantage.  

As you plan your business offerings, keep in mind that a majority of
Americans aspire to run their own business; fully two-thirds (67%) profess a
longing to be in business for themselves. And thanks to computers and the
Internet, there are 15 million home-based businesses in the U.S., 400,000 of
which make their living from selling on eBay. Surprisingly, though, the
number of part-time, home-based businesses has fallen dramatically in the
past five years, probably victims of the flat economy
(see Table 3, above).

Since most tax experts recommend separate personal and business
transaction accounts for even the smallest business, companion
personal/business checking, savings, and card products can be a lucrative
niche for financial institutions. Once you’ve convinced retail households
running businesses from home to add a business transaction account, you can
cross-sell credit and accounting services as the businesses grow.

Channel Preferences


Table 4

Primary Banking Channel Among Businesses
using Online Financial Services



Online banking


Equal mix




Source: Gartner G2, 2002

When it comes to financial matters, small businesses want it all, every
channel, all the time, at the lowest cost. Even among online business
banking users, only one-third say that the online channel is primary

(see Table 4, right). Although businesses may want it all,
they often do not have the resources or inclination to shop aggressively for
the lowest-cost source. The smaller the business, the likelier it is the
principal or a spouse handles banking matters. And these owners are unlikely
to make it a priority to wring every last dollar out of the cost of their
financial services. The story is quite different if the business has a
dedicated bookkeeper or financial manager on staff. This person may have
both the time and motivation to comparison shop; it’s a feather in their cap
if they find cost savings. So you may want to segment your business
customers, not
on total revenues, but on whether the owner handles the banking. And shower
attention on staffers hired to handle the
business’s financial affairs.  



Table 5

Number of U.S. Small Businesses by Annual Revenues

Source: TNS Financial Services Group, Small Business data 4/03, SOHO/Entrepreneur
data 10/02, updated to year-end 2003 by Online Banking Report, +/- 20%


Table 6

U.S. Businesses Entities by Annual Revenues
not including self-employed/contractors

Source: TNS Financial Small Business Market Study 2002, 4/03
(commercial banking numbers from 4/00); updated to year-end 2003 by Online
Banking Report, =/- 20%

1The person at the company that handles the majority of
banking activities

2Could be serviced by commercial banking department depending
on circumstances


Table 7

U.S. Small, Micro, and Self-Employed Businesses Using Online
Banking and/or Bill Pay

millions, n = 23 million (2003)

Source: Online Banking Report estimates 6/04; accuracy estimated at plus or
minus 30% U.S.
All = All small businesses including self-employed, n = 23 million (2002)
Larger = Small and microbusinesses with annual revenues between $50,000 and
$10 million, not including self-employed and contractors, n = 7.3 million

Table 8

Annual Growth Rate of Small, Micro and Self-Employed Businesses
Using Online Banking

millions of net new U.S. small business online banking users and
percent change from previous year


Source: Online Banking Report estimates, 6/04; accuracy estimated at plus or
minus 30%

Introduction to Micro Business Strategic Imperatives





Table 1

Strategic Imperatives for Small Business Success

1.       Identify small business owners within your consumer base and market

2.       Facilitate contact with a human at the bank
3.       Begin a credit relationship with the business
4.       Bank the personal business of the business owner
5.       Provide value-added services for a fee

Source: Online Banking Report, 5/04


The purpose of this report is to help financial institutions use online delivery to increase sales, profits, and market share in the small business market. Although, much of the report is applicable to large and small businesses, our main focus is on the smallest segment, the self-employed and so-called microbusiness, businesses with less than $1 million in annual sales. For the sake of clarity, we’ll use the term “small business” throughout this report. 


We’ll look at the market through the eyes of a financial institution product manager, the background of both authors. Hundreds of ideas and tactics are presented, some with more emphasis than others. All support five key strategic imperatives for approaching this market (see Table 1 above).

While small businesses have lagged consumers in adopting online banking, recent research by
James Van Dyke’s Javelin Strategy & Research  shows that the gap has been eliminated. Javelin’s April 2004 study shows that 56% of all online households used online banking during the past 30 days, compared to 58% of households where the primary financial manager is self-employed (a good proxy of microbusiness ownership). About the only significant difference in behavior was in the usage of Quicken or Money software, where 28% of business owners used it during the past 30 days compared to 17% of non-self-employed (see Table 2 below). Small business owners also tended to visit the branch more often, especially for deposits with 80% having made a branch deposit in the past 30 days compared to 66% of all online households.

Table 2


Online Banking Usage: Self-Employed Online Households vs. All Online Households


Source: Javelin Strategy, May 2004 survey of 2,196 U.S. online households fielded April 2004; screened to be primary household financial manager
SELF = self-employed only (n = 163); NOT = all others (n = 2033); ALL = entire sample (N = 2196)    

Major strategic imperatives

1. Identify small business owners within your consumer
base and market

Since it’s time-consuming and expensive to attract small
businesses from your competitors, your first priority is to mine your own
consumer base for them. Customer surveys, website usage, and deposit
activity are good indicators of small business ownership.

2. Facilitate contact with a human at the bank

To maximize your share of wallet, it’s essential that each
business owner have a human point of contact at the bank. And it needs to be
someone high enough in the organization that they are not turning over every
nine months, one of the biggest complaints small businesses have about their
banking relationships. To maximize efficiency, this human interaction should
be supported with online tools such as email and instant messaging.

3. Begin a credit relationship

More often that not, small businesses use lending
relationships to determine who they consider to be their primary financial
institution. If you are serious about growing your small business share, you
must be aggressive in granting credit to small business owners. And it
needn’t be a commercial loan. More often it will be a consumer product,
especially tied to home equity. The business owner doesn’t care how you
classify the credit internally, they care that you are lending cash to grow
their business.

4. Bank the personal business of the business owner

Some small business owners insist on banking their personal
business at a different bank,
either because of personal relationships or privacy/security fears of mixing
personal and business accounts. 

5. Provide value-added services for a fee

After decades of being beaten up by consumers over every fee
on the schedule, financial institutions are wary of charging fees to their
retail-like small business customers. But, despite what they may say in a
focus group, once they have established an account, small businesses are
loathe moving and are relatively insensitive to pricing. If a business owner
values their time at $100 per hour and it takes 10 to 15 hours to switch
accounts, that’s a $1000 to $1500 soft-dollar cost to moving. However,
businesses are another matter. When shopping for their initial
banking relationship, a new business could be swayed by a couple dollars per
month. That’s why Barclays’ strategy of offering new businesses a
host of initial free banking and professional consultations is so brilliant.


Unique attributes of the small business segment

·         Small businesses crave stability in their financial relationships;
they want to deal with a company they are sure will be there in the future. More
importantly, they want a relationship with a real human who knows their
business and won’t let anything fall through the cracks during management or
business upheaval. What they look for in a provider is expertise, a long track
record, fair pricing, and easy-to-use reliable products.

·         Their sourcing of transactional banking services does not provide
competitive advantage to businesses large or small. It’s a relatively minor
infrastructure expense. However, credit services can make or break a business,
so that’s often the key to the relationship.

·         Online banking, while gaining in importance, is a relatively low
priority for most business customers who care more about the relationship with
their loan/biz banking officer, branch convenience, credit lines, loans,
rates/fees, and customer service.

·         It’s vitally important for most microbusinesses to connect with a
human during the initial sales process – someone the business owner believes
will have a positive impact on credit decisions.
In fact, business owners may value the bond with their banking officer
more than the relationship with the bank.

·         Businesses don’t have the time or inclination to adjust their
systems and procedures for relatively marginal convenience improvements. That’s
why, until recently, they’ve lagged consumers in online banking adoption. But,
once started they will often become fiercely loyal online banking customers.

·         Given the combined value of their personal and business financial
services expenditures, and the owners’ optimistic perception of future growth in
both, small businesses want to be treated like the important customers they are.


·         Smaller businesses have long been dismissed as lacking sufficient
revenue potential to justify the labor required to serve them; however, that
assumption is dead wrong. The combined net interest margin from business and
personal financial products is $35 billion per year with good prospects for

·         The smaller the business, the better the opportunity. Larger small
businesses already have established banking relationships and are on the radar
screen of every big-bank officer in the area. Each of those wins will be
hard-fought and expensive. The better opportunities are in the nearly invisible
microbusiness category, especially among self-employed professionals and
businesses in formation. However, non-banks such as Intuit, First Data,
and PayPal have made in-roads in certain product categories and will
attempt to leverage those relationships to up-sell other services.

·         Credit integration, overall financial counseling, and positive
representation to the inevitable loan committee are a must. Clients often have
good knowledge of the availability and prices of available capital options. Home
equity secured lending, with underwriting flexible enough to accommodate the
self-employed, is especially important when serving microbusinesses

·         Epayment companies such as PayPal, iPay ,
Fidesic)  that enable microbusinesses to easily accept credit
cards and ACH payments, can be an effective means of finding new customers.

Small and Microbusiness Banking 4.0


Oft-overlooked segment is lucrative online opportunity

With more than $2 trillion in assets and liabilities up for grabs, the small
business market remains attractive to financial institutions of all sizes.
Smaller businesses are the lifeblood of many community banks, while the
mega-banks look to the segment for growth opportunities. Even credit unions are
jumping on the bandwagon, creating services to court small business owners. This
report focuses on the online channel and how it can be used to improve profits
and market share in the small business market, especially the smallest
companies, the 6+ million so-called microbusiness with annual revenues less than
$1 million.

But that’s just the tip of the iceberg. If you include all the home-based
businesses, self-employed, contractors, independent sales agents, brokers, and
those actively looking to launch a business, the number of “business oriented”
households approaches 30% of all U.S. households.

Although most banks market aggressively to the 1.2 million larger small
businesses with annual revenues of $1 to $10 million, the other 20+ million
businesses mostly fly under the radar of most banks, and make do with
consumer-oriented financial services.


However, as remote check scanning and other innovations lessen the
need for convenient local branches, a new breed of direct banking competitor
will be trolling for new accounts nationwide. But, incumbent financial
institutions hold strong advantages in trust and convenience and will be
difficult to unseat so long as their online services remain at parity with the

Jim Bruene, Editor & Founder

Anti-Phishing Tools from eBay and Earthlink

Every Internet threat begets an equal opportunity. In the case of phishing, we’ve seen the toolbar creators fight back with buttons that identify safe and not-so-safe websites. eBay and Earthlink both fight phishing via their toolbars. Google and Yahoo’s toolbars block popups and Yahoo has a beta version attacking spyware.

The latest entrant is SpoofStick from CoreStreet. The Internet Explorer plug-in displays the underlying URL in bold letters below the regular browser toolbars. For example, users at a legitimate Citibank site would see, "You’re on" Users who’ve clicked through a phishing message will see something like, "You are at" which will hopefully prevent users from entering confidential banking information.

Financial institutions should consider making the generic Spoofstick available for downloading from their security areas, or even better, private branded a version that shows the financial institution’s own URL in a unique color.

To learn more about how to promote online security and peace of mind, check out Marketing Security: The sensitive issue of publicizing security and authorization enhancements from our sister publication, the Online Banking Report.

Keylogging Viruses and Banking

Before there was phishing there was keylogging. Rember the controversy in South Africa a year ago? Turns out keylogging may be harder to contain than phishing. An article in today’s Wall Street Journal discusses the case of Robotector who unleashed a virus that captured usernames and passwords when victims logged into to any of 30 major banking and payment sites.

What’s a bank to do? There are lots of ways to fight the cyberthieves, but the most important one is to add an additional layer of authentication for moving money out of the bank. We’ve been recommending this for nearly 10 years, but it’s been a low priority due to the relatively low levels of losses experienced online. Well, the times have changed, and it’s time to make authentication a top priority for 2005, or earlier if you can work it into the budget. In the meantime, keep educating users and crossing your fingers.

See Online Banking Report for more details on fighting phishing and other security problems.

NetBank Announces Remote Deposit Scanning Service

According to an article in the May 20 American Banker, NetBank is about to launch a remote deposit service for its business customers. Although details of the yet-to-be-launched service are sketchy, it is expected that business customers would scan paper checks into a remote device that transmitted the images to NetBank for immediate deposit.
This service has two important benefits in addition to the obvious: freeing small business owners from a trek to the branch:
1. Improves cash flow since checks can be deposited immediately rather than on periodic trips to the branch
2. Streamlines record keeping in two ways:
(a) the original check can be filed as a paper receipt
(b) an electronic image is stored at the bank and is available if questions arrive
The service is not expected until August at the earliest. The technology provider is Alogent.
Speaking as both as a small business owner and an industry analyst, this is a great service and a strong candidate for an Online Banking Report Best of the Web award once the service becomes operational.

E*Trade using $175 New Checking Account Bonus

Although it takes some work to get the whole thing, E*TradeBank’s $175 new-account bonus is the richest we’ve seen for a new checking account. Here are the bonus levels (see file for download below):

$75 Open a checking account with at least $1000
$75 Begin a direct deposit of at least $1000 per month
$25 Pay 2 bills online within 60 days
$175 Total

For screenshots and the fine print, download the following file:

Download may_21_financial_innovations_etrade.doc