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 (except for the phishing problem).
• The marked rise in awareness (by financial services execs) of the online
  channel’s upside potential.

On the innovations front, it may not have been 1997 again, when seven of the
20 all-time top financial innovations debuted, but there were several
significant developments including:

• OBR’s Innovation of the Year, premium fee-based online banking (Money
  HQ from Online Resources)
• Real-time credit of online deposits, both electronic (E*TradeBank)
  and an “honor system” for mailed paper items (PESCU and Pentagon
  FCU)

The next few years promise a whirlwind of activity as financial institutions
implement fixes to email-security concerns, expand the level of email-alert
services, dramatically increase online cross-selling and self-service, and see
tangible benefits from the investments of the past six or seven years. Online
banking initiatives will once again be prominent on the radar screens of top
execs. Enjoy the spotlight.

— Jim Bruene, Editor & Founder