New Online Banking Report Published: Social Investing Communities

imageThe latest research from our Online Banking Report division is now available. It’s a double issue (#152/153) released today entitled:

Online Investing Communities: Will social networking revolutionize saving & investing?

We believe social networking will eventually play a large role in online investing, and evidently we are not alone. We found 54 companies involved in investment-information exchange and only six of those have monthly traffic of 100,000 or more.

So, while we like the idea, it will take awhile to catch on. Only about 25% of the U.S. population owns individual stocks, and only a small subset of those make a trade every year. Furthermore, the prime social networking demographics, those younger than 35, are less likely to own or follow stocks. As a result, we project that it will be well into the next decade before adoption passes the 10% mark.

In preparing the report, we asked 400 U.S. online users their thoughts about the idea of sharing investment info in a social network setting setting such as Zecco Share or Motley Fool CAPS (see note 1). While there was a decent amount of interest from the under-30 group, 30% were somewhat or very interested, the overall enthusiasm for the idea among all U.S. adults (21+) was only 22%. See the full report for more research results and the resulting 10-year social investing forecast.

About the report
Subscribers may download the report here as part of their annual subscription plan. Others may purchase it here. The printed version will be mailed to subscribers later this week. 

For more information read the abstract here.

1. We asked U.S. online users for their opinions about social networking for investment information (fielded April 18-19, 2008, n = 401). The top-level results are including in the report. For more detail, All-Access subscribers may download a complete summary PDF document of all questions and answers or download an Excel file of the raw data. In addition, All-Access subscribers may use our online research tools to run their own cross-tabs and filters on the dataset. The dataset will be available next week through subscriber accounts at

Zions Direct Uses eBay to Auction New-Account Vouchers

Link to Zions eBay store While not the first bank to experiment with eBay auctions (see note 1), Zions Direct is the first to open a dedicated site within eBay and the first to sell "new-account vouchers" (see screenshots below).

Apparently the vouchers, listed in the gift certificate category, skirt eBay rules against auctioning financial services. The buyer of the certificate can redeem them for a cash deposit into their Zions Direct brokerage account. Zions Direct also auctions CDs every week directly on its website (see previous coverage here).

Bidding starts at $0.99 for the vouchers which range in value from $500 to $1,000. Bidders can pay via PayPal or check. The amount of the voucher is deposited directly into the buyer's Zions Direct account, which is required to redeem the voucher. So not only are buyers receiving cash at a discount, they also can earn frequent flyer miles and a free grace period if their PayPal account is connected to a rewards credit card. There is no requirement that buyers be new customers, nor are their limits on how many certificates can be purchased. In fact, bidder shecdoggy bought 5 of the vouchers totaling $4,000 at a total discount of $72.50.

So far the bank has sold 16 vouchers worth at total of $12,800 to 9 unique bidders for an average of $12.50 less than face, a discount of 1.6%. And there are currently 10 vouchers up for auction (see screenshot below). As more people have caught on, the spread has been reduced to less than 1% on recent auctions (see past and present listings here, Zions Direct eBay store here).   

From a marketing perspective, this is brilliant, at least in the short run. For a cost of $15.95/mo for a basic store, and $30 to $40 per voucher (mostly in eBay/PayPal fees), the bank gets its name on eBay, numerous mentions in blog posts and press stories, a cool ad on its homepage (see screenshot below), positions itself as innovative and provides customers a nice little spiff.

Long-term, however, the terms will have to be adjusted or the bank will just be handing over easy money to the "gamers." The certificates will be purchased at face, or slightly over, by existing customers who rack up frequent flier miles and a do a little interest arbitrage during their credit-card grace period. The bank will need to lower the amount of the vouchers to $100 to $200 to reduce the potential for gaming, or if possible, restrict purchases to one per customer. Another cost reduction tactic would be to disallow PayPal payments, but that would reduce the effectiveness of the promotion. 

Zions Direct Auction Listing


Zions Direct eBay Store



Zions Direct Homepage (18 Jan 2008)



1.  In the late 1990s PNC Bank was the first to try CD auctions. In 2004, WaMu used eBay technology in a market test (see previous article here).

ING Direct to Acquire Sharebuilder

ING Direct will spend $220 million in cash to buy Sharebuilder, a unique Bellevue, WA-based discount brokerage, with upwards of 2 million accounts across 660,000 customers (see previous coverage here). The deal was first reported in the Seattle PI last week (here) and confirmed yesterday (here).

At an acquisition cost of about $100 per account or $300 per customer, it seems workable at face value. However, both Sharebuilder and ING Direct’s core businesses have historically been relatively low margin, so it will take good execution to make the acquisition pay off.

Many (most??) of Sharebuilder’s accounts have come through co-branded programs with 40 banks and 140 credit unions including National City Bank and Boeing Employees Credit Union. It’s biggest brand name partner is Wells Fargo (see co-branded holiday promotional email from 2002 below), which not coincidentally, is also an investor in the company. It will be interesting to see if the company’s financial institution partners will continue to promote Sharebuilder accounts now that it’s a division of ING Direct.  

ING Direct has offered a small assortment of mutual funds to its customers for years (product page here), but they have not been widely promoted. With the Sharebuilder product, ING Direct will have another tactic to fend off the fierce online competition for high-rate deposits.  

Update (8 Nov 2007): comScore released interesting traffic data on the two companies today. In Sep 2007, ING Direct had 2.0 million unique users and Sharebuilder had 1.1 million and there was only a small overlap of approximately 100,000 users. So the combined entity would have an estimated 3.0 million uniques. However, most of the overlap represents customers of both companies. comScore data shows that 8.4% of Sharebuilder logins in Sep. also logged in to ING Direct that month. That means 50,000 to 60,000 Sharebuilder customers are already ING Direct customers, meaning the net account pickup is closer to 600,000.  

Wells Fargo/Sharebuilder email from 2002 (received 16 Dec 2002)

Wells Fargo Sharebuilder email

Wells Fargo co-branded Sharebuilder new account application
(7 Nov 2007):

Top 25 Web 2.0 Financial Websites

Since its September launch,  Your Credit Advisor <> has posted several trendy lists to attract traffic to its credit card application portal. The latest entry, "Top 25 Web 2.0 Apps for Money, Finance, and Investment."

The article includes helpful summaries of each site's capabilities. It's a good jumping-off point to do a little outside-the-box thinking about Web-based finance (see also, Online Banking Report #135/136, "How to Web-2.0 your Online Banking").

This list includes:

  • Two loan sites: Zopa and Prosper (see previous coverage here)
  • Six personal finances sites: Three we've covered: Dimewise, foonance, ioweyou (see our previous coverage here) and three new entrants: NetworthIQ, MedBillManager and Wesabe, a fascinating social money site we'll cover later this week
  • Five real estate sites: Homethinking, iiProperty, Rentometer (owned by iiProperty), Trulia, and Zillow (see our Zillow coverage here)
  • Two miscellaneous sites: PayScale, cFares
  • Ten investment sites: BullPoo, Motley Fool's CAPS, DigStock, FeelingBullish, GStock, MoneyTwins (foreign currency), SaneBull, StockTickr, WikiFinancial

Holiday Gift Ideas From My Bank?

Link to ING Direct store Who'd have guessed banks would become a popular source of holiday gifts, other than good old-fashioned greenbacks of course?

Now that niche audiences can be targeted with online promotions during the holidays, many financial institutions are marketing financial products packaged as gifts. Prepaid Visa/MasterCards are the hottest item, but there's also potential in other areas. 

Gift cards
The second most popular gift item this year, after apparel, is expected to be prepaid cash cards. While the majority of the $20+ billion purchased will be direct from retailers, hundreds of banks and credit unions, such as Boeing Employees Credit Union (BECU) have joined the fray (see email below). If marketed right, financial institutions could gain a significant share of total sales. See our previous post here about integrating gift cards into online banking for more information.

Boeing Employees Credit Union gift card email BECU CLICK TO ENLARGE

Credit reports
is taking advantage of the giving season to market credit reports and/or FICO score gift certificates. The cost is $20 for a three-bureau credit report, $15 for the FICO score and explanation, or $30 for both (see email below). An even better gift would be a year of credit monitoring.

Equifax email for credit report gifts CLICK TO ENLARGE

Investment accounts
For years, ShareBuilder has marketed "the gift of stock" during the holidays. This year, many of its partners, such as National City Bank, are offering a $50 gift card as a bonus for new accounts (see screenshot below). That way grandma and grandpa can give junior something that's good for him, an investment account for the future AND something he'll actually like, $50 to spend at the mall.

National City Sharebuilder landing page CLICK TO ENLARGE

Piggy bank 2.0
The Savings Machine from ING Direct For the younger set, ING Direct has for a year been selling The Savings Machine, a toy bank/calculator/ATM machine. And judging from the note on its website,* it's proving to be a popular Deal of the Month with a lower $17.95 price tag which includes free shipping (see inset). Several years ago, ING Direct reported nearly a million dollars in sales from its online merchandise store <>, an inexpensive way to get its name on the street.

*Note by the "Savings Machine" product page today: All orders placed from 4 Dec to 11 Dec will be shipped out the week of 11 Dec due to the large amount of backorders.

Crowdsourcing Finance

CrowdThere's an interesting new buzzword in tech sources, crowdsourcing. You can probably guess the meaning: having users perform tasks that directly assist the business such as creating the core content (eBay, Flickr), editing the content (Wikipedia, Craigslist's "flag this entry"), or adding value to it (blog comments, trackbacks).

Marketocracy_homeIt's not a concept that lends itself to financial services, or does it? Marketocracy <> is a website where 55,000 users run their own "mutual funds," beginning with one million in play money provided by the site (click on inset for screenshot). There is nothing particularly unusual about that as many brokerages and websites allow users to create model portfolios to track.

However, it's what Marketocracy does with these 65,000 user-generated portfolios that makes it innovative. It created a real mutual fund that tracks the portfolios of the 100 most accurate stock pickers in its user base. The Masters 100 Fund (MOFQX) <> has averaged an 11.65% annual gain since inception (Nov. 5, 2001) vs. 5.76% for the S&P 500.

Financial institution opportunities
While turning customers into investment advisers is a bit of a stretch for most traditional financial institutions, there are more mainstream functions that could be outsourced to end users. For example, a community calendar that users could update in real-time (wiki). Or a personal finance forum where customers post questions or describe their financial situation and solicit advice from other bank customers. To make it more credible, the bank could "vouch" for respondents with some type of "reputation" score. Prizes could be offered to the most interesting questions and/or answers to help spur adoption.

Mastercard_priceless_adHow about having customers design your ads? MasterCard tapped into the popularity of its "priceless" ad campaign with a "create your own priceless ad sweepstakes" earlier this year. The much-parodied ads are so widely followed that MasterCard has a dedicated website where the ads run <> (see inset).

Really heading out of the box, how about creating a lending environment that combines the portfolio-management skills of Marketocracy with the person-to-person lending platform of Prosper? Masked loan applications could be posted online and users could choose which loans to fund and at what rates. Actual loan performance would be tracked over time, and the best virtual "loan officers" would receive recognition and prizes (and maybe a job offer). Taking this one step further, why not let the amateur loan officers put actual skin in the game, participating in the loans that were funded through the online loan market.



Brokers Push Margin Loans

Flipping through the latest issue of SmartMoney magazine, it came as no surprise to see a full-page advertisement from Fidelity. But what caught my eye was the subject matter. Margin loans.

And this was no soft-sell pitch with smiling 50-somethings sipping Chardonnay on their deck. It was all business, showing how Fidelity's margin-lending rates fared against those of its major competitors. The hard-hitting approach isn't carried through to its website though, which opts not to show any comparative data.

E*Trade, one of the best financial marketers, is said to be offering teaser rates as low as 3.99% to encourage investment clients to transfer higher-rate debt to their margin accounts (WSJ, 4/20/06). However, its published rates vary from 6.74% to 9.74%. The retail banking sweet spot, loans of $50,000 to $250,000, are priced at 8.74%.

Fidelity_marginratesFidelity doesn't go quite that low. Rates vary considerably depending on the balance, but under $500,000, borrowers pay 8.5% to 10.5%. Only those borrowing more than $500,000 pay an ultra-low rate of 5.5% (see inset for current rates).

What's going on here? Brokerage firms are finding that customers are willing to borrow against their securities to finance all types of non-investment purchases. UBS AG's wealth management unit says that 75% of its $10 billion in margin-loan outstanding has been used to purchase things other than securities.

Expect more competition from brokerage firms as empty nesters and younger retirees finance portions of their lifestyles with loans against their investments. Deferring tax liability on portfolio gains is a big part of the decision to borrow. But there's also the psychological aversion to seeing investment balances decline.

Financial institution loan officers should be well versed on the risks of margin loans, and instead offer home-equity loans and cash-out refinances with similar rates and no risk of a potentially disastrous margin call.


E*Trade Looks for Investment Funds at Logout

The best time to grab the attention of your online banking customers is immediately after they log in. Many financial institutions post offers and important information on a "splash screen" shown to customers before they see their account info. PayPal has been especially active in this area, placing new info in front of users every month or so for the past four years.

Etrade_logoff_offersWhere’s the second-best place to position an offer to online banking customers? In our view, it’s the screen displayed after successfully logging out. At that point, customers have completed their tasks, but you still have their attention as they wait to see that they’ve successfully ended their session. Last month, we looked at Bank of America’s preapproved credit card offer at logout (NetBanker Feb. 23).

E*Trade is another financial institution using the logoff-screen real estate effectively. Today, they displayed two offers designed to attract additional customer assets to the bank (click on inset for a closeup):

  1. Free one-year subscription to MorningStar’s stock-information service ($135 value) for transferring $20,000 or more into a new E*Trade Complete Investment Account (see the landing page below)
  2. 4.4% teaser rate (good for three months) for deposits into the bank’s Money Market Account. New customers earn the rate on any deposit amount, existing customers must deposit $25,000 or more to earn the special rate. After three months, rates revert to the normal, 3.6% for $50k or more or 2.75% for $5k to $25k (see the landing page below).Etrade_morningstar_offer

MorningStar offer landing page >>>

4.4% APY offer landing page>>> Etrade_logoff_mmda


E*Trade’s Intelligent Investment Analyzer

Etrade_intelligent_investorToday E*Trade added yet another new feature to its website, the Intelligent Investment Analyzer. It sounds a lot sexier than it is, an eight-question asset-allocation worksheet. But that’s the point. E*Trade is using classic marketing techniques to identify customer needs and concerns and design the solutions to address them.

The company’s core messages touch on security, maximizing investment returns, minimizing loan rates, and so on. And the messages are delivered with an understated flair. For example, look at the homepage graphic above. It delivers the message in a number of ways including good color, an effective image of an open laptop displaying a colorful pie chart, and copy that emphasizes key benefits:

  • Fast: "recommendations in minutes" and "one-click investing"
  • Smart: "diversified," "optimizer," and "intelligent"
  • Personalized: "custom recommendations"

Etrade_intelligent_investor_questionaireWho wouldn’t be tempted to click through to see what’s behind the optimizer? Unfortunately, the questionnaire, powered by Thomson Financial, isn’t particularly appealing (click on inset left for a closer view). And once completed, users are required to log in to their E*Trade account to view the "All Star" mutual fund recommendation designed to fit your self-described investment needs. But all in all, it’s an excellent lead into the company’s mutual fund area.

For more on E*Trade’s string of innovations, select "E*Trade" in the topics reachable via the top navigation bar, or click here.


E*Trade Bags Millions in Free Publicity

Etrade_protectionguaranteeWow. It’s not often a press release rates an article in BOTH The Wall Street Journal and The New York Times. But that’s exactly what happened today when E*Trade made the relatively innocuous announcement that it wouldn’t hold its brokerage customers responsible when their accounts were defrauded.

Etrade_securityarea_1Consistent with previous innovations, the online brokerage and banking powerhouse wrapped its new message with impressive graphics and copy (see inset above-left for graphic displayed on its homepage today). Clicking on Learn More leads to an impressive security area where E*Trade touts four main protective measures (click on inset above-right for a closeup)*:

  1. Security tokens
  2. Electronic statements with paper turnoff
  3. Email alerts
  4. Antiviral and firewall software, which can be purchased through a link to Norton (60-day free trial offer); users can also run a real-time scan to check for vulnerabilities

It just goes to show you how skittish the public has become about online security. I’d wager that most brokerage customers are sophisticated enough to realize they will eventually get their money back if it’s stolen from their account. So this is a non-event from a financial standpoint. E*Trade even admits that online fraud cost it only $2 million last year, less than the cost of one of their famous Super Bowl ads. The brokerage also said there were "fewer than 50 incidents," implying a fraud loss of approximately $40,000 per incident.

Evidently E*Trade’s marketing department prevailed over its legal counsel and actually put the company’s fraud-protection policies in writing. It’s amazing that makes headlines in 2006 and may say more about the growing need to cover your behind to fend off the class-action bar even if it means scaring off customers.

We hope this prompts other financial institutions to take similar action. One of the main functions of financial institutions is safeguarding assets. Customers, online or otherwise, shouldn’t have to guess whether certain types of fraud are covered. As any good lawyer would say, "Put it in writing."


*The screenshot displayed here is only the top portion of the security area, to download a screenshot of the entire page, click here.

Holiday Stock Picking Contest

Umb_stockpicking_sweepsUMB Bank <> ran an eye-catching sweepstakes in mid-December (click on inset for closeup). Users were invited to register online to participate in a week-long stock-picking contest. The contest had its own URL <>.

The contest ran from Dec. 12 to Dec. 15. Top prize was a $1000 Target gift card with second receiving $750 and $500 going to the third-place finisher. Users were required to choose winning stocks from a list provided by the bank. Users could log in anytime during the week to see where they stood. The contest was open only to residents of Missouri, Kansas, Colorado, Oklahoma, Illinois, Nebraska or Arizona. An identical second contest ran simultaneously that was open only to UMB employees.

Stock-picking contests are a tried-and-true way to gain Web traffic, email addresses, and add excitement to your website, and in UMB’s case to reward employees in a separate sweeps. The bank ponied up for a decent prize pool of $2250 for customers and another $2250 for employees; the graphics were superb; the "stocking stuffer" theme played well around the holidays; and the contest was interactive with the ability to log in and check standing in near-real time.

However, the one-week duration caused a substantial decrease in its overall marketing value. Usually these stock-picking contests run for several months, with leaders posted at various intervals. The holiday theme used by UMB created a natural year-end deadline, so it should have started in early- to mid-November for maximum impact.


Marketing Database –

If you’d like to learn more about the latest financial interactive marketing campaigns, check out the Interactive Financial Marketing Database from our sister publication, the Online Banking Report.

Charles Schwab’s Rich New Customer Offer

Schwab_offer_homepage_10_27_05_1Yesterday, I noted that TD Waterhouse was giving away iPod nano’s for new accounts. Well, it turns out that is nothing in the high-stakes game of bagging higher-balanced brokerage accounts.

In the middle of its homepage, Charles Schwab <> is offering a night on the town in NYC, including 2 or 4 Broadway show tickets, dinner, and even a night in a luxury hotel. What’s theSchwab_offer_details_1  catch you ask?

Just $100k, $250k, or $750k in new money depending on just what level of "free" you’d like (click on inset for details). The deposit does NOT have to made to a new account, but like TD, all retirement and institutional account are excluded. (Click to view the homepage screenshot, links do not work)

Start saving your pennies, you’ve got until March 15, 2006 to qualify.