While most banks in the world charge fees for at least some aspect of online banking, the service has been almost entirely fee free in the United States, at least ever since Bank of America rolled out free bill payment in 2002.

At first glance, it seems like a great deal for consumers; however, the lack of direct revenue has hampered investment in the channel and deprived U.S. customers from the more sophisticated services common throughout the world, such as SMS alerts, multi-factor log-in controls, and so on.

We're always on the lookout for fee-based opportunities (see Online Banking Report 122/123 for a laundry list of online fee opportunities), and we are encouraged by eBay's latest innovation, SMS auction alerts with a fee of $0.25 per auction. This is the first time eBay has attempted to charge fees to bidders. The site has offered free email alerts since the beginning.   

Here's how SMS alerts work (see screenshot below):

1. Select "Get SMS alert" (see red circle in screenshot at above, click to enlarge).
2. Select mobile phone provider from drop-down list and enter mobile phone number; currently Cingular, Verizon, Nextel, Alltel, Sprint, and TCRcom participate
3. Check "Watched item ending alert" or "Outbid alert"
4. Click "Continue" which initiates a confirmation message to the user's mobile phone
5. Send a text-message reply from the mobile back to eBay to agree to the charges

SMS-alert users pay $0.25 for each auction entitling them to up to 10 alerts. Each 10 thereafter cost another $0.25. It would be unusual for the number of alerts to exceed 10. After receiving an alert, users can submit a new bid via text message by responding to the text message with their new bid amount. Bidding can be protected with an optional PIN.

Instant messaging alerts work in a similar manner (click on screenshot for closeup):

1. Select "Get IM alert" 
2. Select IM provider; eBay supports the big three: Yahoo, AOL, MSN
3. Check "Watched item-ending alert" or "Outbid alert"

There are no fees for IM alerts. After receiving an IM alert, users can submit a new bid via the provided link.

In addition to SMS-alert links in the main auction listings, successful bidders are also prompted to set up an alert on the bidder's confirmation screen (see below).

What it means for financial institutions
There is no reason why banks cannot charge for triggered alerts. Unlike account access, alerts are a value-added service with no similar "free counterpart" in the offline world. You don't see telecom giants giving away any of their specialized services such as caller-id, custom ringing, call forwarding and so on. Banks should work on developing premium service bundles. For inspiration, take a look at your local phone provider's website (see Qwest screenshot right).

Resources:

• Online Banking Report #109, "Pricing Online Banking Services"
• Online Banking Report #122/123, "2006/2007 Planning Guide"