The webinar on the innovative Upost remote deposit program has been rescheduled to May 26 at 2 PM Eastern time.
For more information, read our initial article.
— JB
Deposits, Checking, Savings, CDs
Intrust Pays $6 Per GB for Online Archives
If you are wondering how much it might cost to enable long-term or lifetime archives for your customers, here’s a data point from an article in today’s American Banker about the pros and cons of pooling image archives with other banks.
Intrust says that it’s latest 5-terabyte upgrade cost just $30,000. Doing the math, that’s $6 per gig for approximately 5000 gigabytes of storage. Here’s the exact quotation attributed to Jim Simon, Intrust’s VP of operations:
Last summer (Intrust) put its entire (image) archive online as a result of a five-terabyte storage system upgrade that cost just $30,000.
Analysis
At $6 per GB, storage space for online archives is already so inexpensive that it won’t be long (2 to 3 years) before real-time online access to 7+ years of image/statement history is the norm in banking; and by the end of the decade, we expect most financial institutions to offer lifetime archives.
So if you want to use lifetime archives as a point of differentiation, you better move fast. You only have a one- or two-year window before it’s just another me-too upgrade.
For more information:
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Previous Netbanker article which includes lengthy research notes
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Upcoming Online Banking Report to be released in early June
—JB
Honor System for Bank Remote Deposits
Few innovations of the past five years can top Pennsylvania State Employees Credit Union’s (PSECU) Upost@Home service. Launched in late 2001, the service allows qualified members to enter deposit items online for instant credit to their account. Members then send the paper items to the CU through the mail for reconciliation.
The service was named an OBR Best of the Web winner in 2003 and earned the #23 spot on the OBR list of the Top 25 Innovations of All Time (see OBR 103).
Now the service is being marketed to other financial companies through PSECU’s CUSO affiliate, eCU Technologies. The service is already in place at Southland Civic Credit Union and Deere and Company Credit Union.
As part of the marketing effort, eCU has released updated metrics on the usage at PSECU and the estimated cost savings:
Total deposit sessions: 700,000
Total deposit dollars: $300 million
Deposits per session: $430
Total losses: $13,000
Losses as a percent of deposits: 0.4 basis points (0.00004)
Losses per deposit session: $0.02
Savings per deposit session (vs. teller or ATM): $1.14
Total program savings: $800,000
Action Item
Specific results from three credit unions along with program details will be discussed at a free Webinar May 23. We urge you to attend.
—JB
ING Direct and the Internet-only Banking Redux
During the height of the bubble, there were dozens, perhaps hundreds of banks secretly planning to launch Internet-oriented brands. But the strategy fell out of favor with the very public downfall of WingspanBank, which lost funding during a corporate restructuring at Bank One; followed by the collapse of NextCard, which went belly-up after a ill-advised bet on sub-prime credit.
But despite these public failures, there was never anything wrong with the underlying strategy. Quite the opposite. Direct banking has been a viable business model ever since deposit deregulation in the 1970s. The Internet only makes it easier to reach and serve customers.
Case-in-point: ING Direct, still not five years old in the United States, has amassed 2.5 million accounts holding $29 billion in deposits at year-end 2004, making it the 30th largest financial institution in the United States. If they continue to grow at the same pace, they should be close to cracking the top-20 by this time next year. Their laser sharp focus on savings accounts, trendy branding, and consistent high rates has put them on the map.
This success has not gone unnoticed around the country. They are frequently discussed at industry gatherings and internal planning meetings. However, you aren’t likely to see many of its more traditional competitors jumping on the high-deposit bandwagon. It doesn’t make sense for them to alienate their customers and branch employees by offering higher rates online. And they are not about to reprice their entire deposit base to compete with ING Direct and the other high-rate institutions.
However, I think you will see smaller banks look to the Internet for growth using new brands or brand extensions. In perhaps the most aggressive launch since ING Direct in 2000/2001, Emigrant Savings practically owns the deposit real estate at BankRate.com. In a recent visit, the bank’s Emigrant Direct brand not only had the top banner, they also bought the skyscraper on the left-hand side, effectively "framing" the entire content screen (click in the inset for a better look).
Note to ING Direct, check your skyscraper ad at BankRate.com (see above). Emigrant Direct has hung a small ad on the bottom of your banner that looks like part of your ad. I hope you are at least getting a discount from BankRate.com.
—JB
If you’d like to learn more about the future of online banking include internet-only, check out the Online Banking & Bill Pay Forecast: Current, future and historical usage: 1994 to 2016 from our sister publication, The Online Banking Report.
Financial Data Archive Trends
Now that Google has doubled the free online storage for its Gmail users* to 2GB, you’d think banks would get with the program. There’s value in storing them bits. However, you are still lucky to get a year’s worth of data, and many places provide just 3 or 6 months (probably about 50k of data, if that).
In May, Online Banking Report will publish a report on the state-of-the art in online archives at financial institutions. You can get a sneak peek at the notes we’ve compiled so far by downloading this file (23-page Word doc):
Of the 100 or so banks and credit unions we’ve looked at, most hold data for less than one year. Here are the storage champs according to a quick look at the data:
- Transaction data: 2 years — tie between Charter One Bank and Commerce Bancshares (Kansas City)
- Estatements: 3 years — Bank of America
- Check images: 5 years (according to customer service, 7 years according to its website) — E*Trade
We’ll scrub the data, summarize it, and explain the implications and opportunities next month.
Also I am looking for commentary on the subject. If you’ve got a comment on the pros, cons, or business case for online archives, send me an email.
—JB
*Google Gmail is still in beta, if anyone needs an "invite" to open an account, just drop me a note.
Wells Fargo’s Remote Deposit Capture
Last year, NetBank was one of the first banks to talk about allowing business customers to deposit checks directly via scanner, so called remote image capture or remote deposit capture.
NetBank has yet to go live, but several others have including: First Tennessee (the first to go live in March 2004), Bank of New York (announced 08 Nov 2004, see inset), HSBC (announced 08 Nov 2004), Wachovia (announced 13 Dec 2004), BB&T (announced 10 March 2005, live 01 April 2005).
Also, know to be implementing or testing: PNC, E*Trade Bank, Bank of America, LaSalle Bank, JPMorgan, BB&T, Mellon, Citibank, Key Bank, Zions, and Glenview State Bank (IL).
Now you can add Wells Fargo to that list.
Last week, the online banking pioneer announced its extremely well named remote deposit capture service, Desktop Deposit. The service allows businesses to scan checks into their PCs using a USB device from the bank. No word yet on pricing and availability.
Analysis
Remote deposit capture, either at the customer's PC or at a scanner-equipped ATM, has the potential to negate one of the branches last roles, check cashing. It could be especially appealing to small businesses who benefit from the obvious time savings (no more trip to the bank) and better cash flow (no stashing checks away until the weekly bank run).
But the more important benefit to businesses are the improved record keeping and easier resolution of billing disputes. Images of deposited items are available immediately online and can be easily searched, retrieved, and forwarded, should a question arise later. Finally, the business retains the original paper item for a back-up paper trail.
And given the large value to the business, banks should be able to increase checking account and/or online banking fees for remote-capture clients, thus profiting from a process that wrings paper checks out of the system.
Resources:
- NetBank Announces Remote Deposit Scanning Service">, NetBanker, 24 May 2004
- The Tech Scene: Remote Image Capture – Small Banks React, American Banker, 6 April 2005
— JB
Everbank’s Foreign Currency Deposits
Two-time Online Banking Report Best of Web winner, Everbank landed a flattering two-page spread in the April 2005 issue of Business 2.0.
The author, David Dent, is highly complementary of the bank’s innovative strategy of allowing deposits to be held in a variety of foreign currencies. Not only has it been lucrative for currency investors, it’s been a boon to the bank.
Everbank’s foreign-denominated deposits are closing in on US$1 billion. Specifically, at year-end 2004, foreign currency deposits accounted for $850 million, or 25% of the bank’s $3.5 billion in total deposits.
Analysis
This is a good example of how a small player can mine a niche using the national reach of the Internet. Look for other banks, both Internet-only, and traditional financial institutions to do the same in other areas, such as lending to small businesses, transaction accounts geared to traveling sales reps, impenetrable savings accounts for the security conscious, and so on.
Resources: OBR Best of Web winners: 1995 to 2004
— JB
Instant Online Bank Account Opening
WSJ.com – Banks Speed Process For Opening Online Accounts
The Wall Street Journal reports today in its Personal Finance section on the plans at Citibank, Wells Fargo, Bank of America, Wachovia, and HSBC to offer instant online checking account signup later this year.
Analysis
While it makes sense for these national powerhouses to enable instant account signup, smaller financial institutions needn’t feel they must follow suit.
Bank accounts, especially checking, aren’t impulse purchases like the consumer goods sold at other online retailers. Most bank customers won’t mind if their checking account is opened by the end of the week.
More important than instant signup are clear explanations of what happens next, email status reports as the process progresses, and clear privacy and security guarantees. A personal telephone call or email followup from a new account rep wouldn’t hurt either.
— JB
Branchless Banks now Hold 2% of U.S. Retail Deposits
The Wall Street Journal published a story today that marks the growing importance of branchless online banks, Online Banks are Boosting Yields. Our sister publication, Online Banking Report, was the source for the article’s market statistics on branchless banks, which have developed a small, but significant following around the world.
In the United States, there are several dozen branchless banks, but more than three-quarters of the total branchless bank deposits are held by two banks, ING Direct and E*Trade Bank. Total branchless bank* deposits in Q3 2004 were about $65 billion, or 1% of all U.S. deposits, or about 2% of all deposits under $100,000. See below for more specific details.
Branchless Bank Deposits
As of Sept 30, 2004, the deposit totals of the major branchless banks are as follows:
ING Direct $26 billion in 1.9 million accounts ($14,000/acct)
E*Trade Bank $23 bil in 2.3 million accounts ($10,000/acct)
NetBank $2.7 bil in 200,000 accounts ($14,000/acct)
Everbank $2.3 bil in 370,000 accounts ($6,200/acct)
All the rest $5 to $10 billion total
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Total $60 to $65 billion
Total US Deposits
The total amount of deposits held in U.S. commercial banks on 9/30/04 was $6.4 trillion including retail and commercial deposits.
If you look only at deposits of $100,000 or less (a proxy for retail deposits), total deposits were $3.7 trillion.
Branchless Bank Deposit Market Share
Branchless banks hold about 1% of all U.S. deposits ($65/$6400).
Looking at just deposits under $100k, branchless banks hold just under a 2% share ($65/$3700), actually 1.8% if you want to be more precise.
Source: FDIC
What it Means
It’s not as big of a splash as Amazon made in books, but it’s a solid start for an niche about 7 years old (Netbank started in 1997). I expect it will continue to grow 25% to 35% per year for the rest of the decade, eg, doubling the branchless banking deposit base every 2 to 3 years.
*We define "branchless bank" as a separately branded insured depository institution that derives the majority of its business through direct methods (mail, phone, online) with minimal brick and mortar presence. We are excluding direct banking units operating under lending or insurance brands such as Principal Bank, State Farm Bank, IndyMac, MBNA, and so on.
—JB
AmSouth’s Online Bank Account Switching Tool
AmSouth Bank has posted a new "special offer" on its home page. The bank’s "Click to Switch" program promises, "The fast online way to tell your bank it’s over."
Clicking on the graphic leads to a page with some advice for switching checking accounts. It’s the usual laundry list of advice, none of which is really helped by the online connection. There is one useful link for changing the direct deposit of social security benefits. Though, that is likely to be of little use to most online users contemplating a switch to AmSouth Bank.
We like what AmSouth is doing, we just wish there was more meat in the offer.
Online New Bank Account Acquisition
Wondering whether to improve your online account opening process? In a recent American Banker article, Citibank said that 10% of its new checking accounts are opened online, and that’s before they streamlined the process making it paper free. Previously, customers had to mail or fax a form with their handwritten signature.
Citibank offering $75 for new checking accounts
Citibank is offering $75 for customers who open a checking account online.
Fine print:
$1,500 minimum deposit
must initiate 2 bill payments within 60 days of account opening