SINCE 1994, THE EXCLUSIVE MONTHLY REPORT ON INTERNET BANKING PRODUCTS & MARKETS . Number 176 January 21, 2010 STRATEGIES FOR Online & Mobile Banking Forecast FINANCIAL The next 10 years INSTITUTIONS ______obile dominated the alt-delivery landscape for the third year in a row. But this year, the channel graduated from Internet banking Mtalk to action, as we saw real innovation and consumer adoption take hold throughout the year: • USAA became the first North American bank to truly Innovations embrace the mobile channel as it surpassed one million users, more than 15% of its customers (see #1, pp. 13-15) Epayments • WV United Credit Union and USAA launched the first iPhone feature that could not easily be replicated online, mobile remote check deposit (see #3, pp. 18-19) Email • Mobank launched the first European all-mobile financial service company, demoing at our Finovate Spring event in April (see video at finovate.com) Marketing • Bank of America doubled its mobile banking base, closing the year at about 4 million users, the largest in Online lending North America by a large margin. The bank’s mobile base alone would make it top-20 retail bank (see #1, pp. 13-15). Social media Penetration of online banking in the U.S. inched up a few percentage points just shy of an important milestone, 50% of all households (see INSIDE forecast, pp. 5-6). Mobile penetration nearly tripled, ending the year at 10 million, more than one in five online banking households.
The Past, Present, The biggest hype of the year belonged to person-to-person (P2P) & Future payments, but it will be another year or two before we know if it becomes more than just a niche offering (see #5, pp. 24-25). The Past...... 2
The Present: 2009 results ...... 3 Other major milestones of 2009: • Intuit acquires Mint (no surprise) and then moves to The Future: Ten-year Forecast .5 migrate the Quicken Online brand into Mint (big surprise; see #4, pp. 20-23) Top 40 Innovations of All Time.8 • Mobile payments at the point of sale being publically Recap of Past Top 10 Winners10 tested via Starbucks mobile app powered by mFoundry (see #6, pp. 26-27) Top 10 Innovations of 2009.....12 • Social media gets transactional: Streaming banking Honorable Mentions ...... 35 transactions via Twitter at Vantage Credit Union (see #9, pp. 32-33) Top 10 of the Decade...... 36 – Jim Bruene, Editor & Founder [email protected]
ONLINE BANKING REPORT.COM THE PAST
A Look Back
Table 1 Online Banking Timeline number of U.S. households using online banking and/or bill payment 57 million
44 million
33 million
20 million
7.0 million 100,000 1.0 million
Jan 1994 May 1996 Dec 1998 Dec 2001 Dec 2003 Dec 2006 Dec 2009 Online banking is Boston’s Web lending Eight U.S. Industry execs Mobile is back on Apple’s App built into BayBanks goes mainstream banking embrace the the radar screen Store begins to Microsoft Money creates buzz by with more than companies each online channel as phones change mobile personal finance bagging 100,000 one million card have at least one for sales, service, become commerce and software. users in 60 days. apps per month. million users. and profits. ubiquitous. banking.
Source: Online Banking Report estimates based on industry data, plus or minus 10%, Jan. 2010; not to scale
very year about this time, we develop a Table 2 10-year forecast (see Table 7, p. 5). Our Online Banking Evolution E first forecast more than ten years ago Product Primary (year-end 1997, OBR 33) predicted that 33 to 50 Phase Period Positioning Market million U.S. households would be banking Beta 1983 to Beats keying data Outliers online by 2010, with a mid-range of 42 million. Novelty 1999 into Quicken According to our latest estimate of 62 million by Beats calling an 800 number; more the end of 2010, we’ll beat even the high-end by Early adopters Version 1.0 1999 to efficient record and early prediction by more than 20% (see Table 7, p. 4). Convenience 2005 keeping and easier mainstream for routine Although online banking turned 26 last year, the transactions first 15 years it was only used by a few thousand Beats all other approaches: better computer hobbyists. Real adoption began in the Version 2.0 2005 to Half the management of Must have 2010 country late 1990s and finally hit the 50% threshold last personal finances year (50% of all U.S. households). with less effort Bank follows you Everyone with Version 3.0 Looking ahead (Table 3), we are beginning the with real-time info, a mobile Mobile 2010+ better security, phone & bank next phase as the mobile channel converges integration faster transactions account with online to provide the majority of households with powerful banking on the go. Source: Online Banking Report, Dec. 2009
Copyright 2009: ONLINE BANKING REPORT (ISSN 1095-2829) is published monthly by Financial Insite Inc., 4739 University Way NE, Suite 1002, Seattle, WA 98105, USA. Phone: +1(206) 517-5021, Fax: +1(206) 524-0351, [email protected]. Subscriptions: US$1,795 per year worldwide, includes paper and electronic editions with online archive access. Editor & Founder: Jim Bruene, [email protected]; Analysts: Andrew Dolbeck, [email protected], Chris Young, [email protected]; Business Manager: Kate Schultz; [email protected]; Marketing Director: Eric Mattson, [email protected]; Circulation: Anita Schultz, [email protected]; Webmaster: Gerry Soroczak, [email protected]; Copy Editor: Jennifer Russell Warning! Federal copyright law prohibits copying this report. Contact [email protected] for reprints or electronic rights. page 2 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE PRESENT
Online Banking: 2009 Results uring 2009, online banking grew at about the same pace it had in the prior five years, with an estimated five million net new households banking online and/or via mobile device. The D U.S. total now stands at about 57 million, half of all U.S. households, five-fold growth during the decade (see full details, Table 7, p. 5).
Table 3 Consumer Households Using Online Banking: U.S. vs. Worldwide millions of households actively using online banking and/or online bill payment Online Banking Households (millions)
375 350 325 300 275 250 225 200 Worldwide total 175 150 125 U.S. total 100 75 50 25 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 US 0.6 2.5 4.5 7 10.5 15.5 22 28 33 36 40 44 48 52 57 WW 8 15 23 32 43 55 75 100 130 160 200 235 270 310 370
Source: Online Banking Report estimates, Jan. 2010; accuracy estimated at plus or minus 10% U.S., 25% worldwide
Table 4 Annual Growth of U.S. Online Banking Households millions of net new U.S. households and percent change from previous year
2009 10% 5 4 8% 4 2007 9% 4 10% 4 2005 11% 3 9% 5 2003 18% 6 27% 6.5 2001 42% 5 48% 3.5 1999 50% 2.5 56%
1997 80% 2 1.9 320% 1995 0.35 140%
Source: Online Banking Report mid-range estimates, Jan. 2010; accuracy estimated at plus or minus 10%; see Table 7, p. 5 for details page 3 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE PRESENT
Definition Reading the trade press, you’ll see a variety of totals cited for online and mobile banking totals. Sometimes the numbers appear very different. However, usually when you drill down into the specific definitions, you’ll find that’s where most of the difference occurs.
So it’s important to understand what we are measuring. We consider anyone that manages any type of banking or credit account online or through their mobile device to be an “online banking customer.” See Table 5 below for more details.
Table 5 OBR Definition: Online Banking Household Someone in the household has done at least ONE of the following online* or mobile activities during the past six months:
• Viewed balance or transaction data for a checking account, savings account, CD, credit card, debit card, prepaid card, loan or mortgage
• Authorized bill payments or transferred funds to third parties at any bank, non-bank, portal, or card site
• Paid a bill at any financial services site such as a credit card issuer Does not include:
• Viewing and/or paying a non-financial bill online, e.g., utility bills
• Online point-of-sale purchases
*Any connection from home, work, school, or other place where data can be viewed through any device (desktop PC, smartphone, tablet, laptop, etc.)
Table 6 OBR Track Record: Accuracy of Previous Forecasts millions of U.S. households banking online
2010 Forecast (mid-range) 2010 Forecast (high-end)
Original Original Latest Original Latest Forecast Date Forecast Forecast Diff % Diff Forecast Forecast Diff % Diff
Dec 1997 (33) 42 mil 61 mil 19 mil +45% 50 mil 61 mil 11 mil +22%
Dec 1998 (44) 46 61 15 +33% 57 61 4 +7%
Apr 2000 (59) 45 61 16 +36% 55 61 6 +11%
Oct 2001 (76) 45 61 16 +36% 55 61 6 +11%
Nov 2002 (89) 51 61 10 +20% 61 61 0 none
Dec 2003 (103) 52 61 9 +17% 61 61 0 none
Dec 2004 (114) 52 61 9 +17% 61 61 0 none
Dec 2005 (125) 52 61 9 +17% 61 61 0 none
Dec 2006 (137) 52 61 9 +17% 59 61 2 +3%
Dec 2007 (150) 59 61 2 +3% 67 61 (6) (9%)
Dec 2008 (162) 60 61 1 +2% 67 61 (6) (9%)
Source: Online Banking Report, 1997 to 2008 Diff = difference between original forecast amount and latest prediction for year-end 2010
page 4 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE FUTURE
10-Year Forecast: 2010 Through 2019 nline banking has reached the point in the For 2009, we project single-digit growth with net adoption curve where overall market growth of 4 million to 5 million new households. O growth is relatively flat. During the past At least 20% of the growth, or 800,000 to 1 million four years, the total market has grown households, will be new adopters because of the three to five million new households per year, a mobile channel, their sole way of using online compound growth rate of 10%. banking.*
Even though growth has slowed, over the past four *Mobile usage is included in the online banking totals, but is also years more than 14 out of every 100 households broken out in a separate line in Table 8 on the next page. have added online banking, a significant number of Ö new users.
Table 7 Online & Mobile Banking Forecast Summary U.S. households using online or mobile banking and/or payments*
Mid-range Low-end High-end Year End Number Growth Number Growth Number Growth 1995 600,000 140% 500,000 150% 750,000 150% 1996 2.5 mil 320% 2.2 mil 340% 2.8 mil 270% 1997 4.5 mil 80% 4.0 mil 82% 5 mil 79% 1998 7.0 mil 56% 6.5 mil 63% 7.5 mil 50% 1999 10.5 mil 50% 9.5 mil 46% 11.5 mil 53% 2000 15.5 mil 48% 14.5 mil 53% 17 mil 48% 2001 22 mil 42% 20 mil 38% 24 mil 47% 2002 28 mil 27% 25 mil 25% 30 mil 25% 2003 33 mil 18% 31 mil 16% 35 mil 17% 2004 36 mil 9% 35 mil 13% 38 mil 9% 2005 40 mil 11% 39 mil 11% 42 mil 11% 2006 44 mil 10% 42 mil 8% 47 mil 12% 2007 48 mil 9% 45 mil 7% 52 mil 11% 2008 52 mil 8% 48 mil 4% 57 mil 10% 2009 57 mil 10% 51 mil 6% 63 mil 11% 2010 61 mil 7% 53 mil 4% 69 mil 10% 2011 65 mil 7% 55 mil 4% 74 mil 7% 2012 69 mil 6% 57 mil 2% 79 mil 7% 2013 73 mil 6% 59 mil 2% 83 mil 5% 2014 76 mil 4% 61 mil 2% 86 mil 2% 2015 79 mil 4% 62 mil 2% 88 mil 1% 2016 81 mil 3% 63 mil 2% 89 mil 1% 2017 83 mil 2% 64 mil 2% 90 mil 1% 2018 84 mil 1% 65 mil 2% 91 mil 1% 2019 85 mil 1% 66 mil 2% 92 mil 1% Period Growth CAGR Growth CAGR Growth CAGR ’99 v. ‘09 45.5 mil 18% 41.5 mil 18% 51.5 mil 19% ’09 v. ‘19 28 mil 4.1% 15 mil 2.6% 29 mil 3.9% Source: Online Banking Report projections based on industry data, Jan. 2010 Accuracy estimates: 1994 to 2009: +/- 10%; 2010 to 2019: +/- 15% *See Table 5, p. 4, for definitions. page 5 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE FUTURE
Table 8 Consumer Online Banking, Mobile Banking,1 and Bill Payment Forecast millions of U.S. households using online banking and/or bill payment during past 6 months
Historical Estimates Now Future Projections
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Mid-range Forecast (U.S.)
Use any service2 0.25 0.6 2.5 4.5 7.0 10.5 15.5 22 28 33 36 40 44 48 52 57 61 65 69 73 76
Household penetration 0.3% 0.6% 2.5% 4.5% 6.9% 10% 16% 21% 26% 31% 33% 37% 40% 42% 45% 49% 52% 55% 58% 60% 62% Services Used
Any account access3 0.2 0.5 2.3 4.2 6.7 10 13 19 25 30 33 37 41 45 49 54 57 60 63 66 68 Checking/debit4 0.2 0.5 2.0 3.7 5.7 9 12 16 21 25 27 31 35 39 43 48 51 54 57 60 63
Loan/credit card5 0 0.1 0.3 1.0 2.5 3.5 5.0 8 15 20 25 28 32 36 39 42 45 48 51 54 56 Account aggregation6 n/o n/o n/o n/o n/o 0.01 0.2 1 2 3 4 6 7 8 10 12 14 17 20 23 26
Mobile access n/o n/o n/o n/o n/o n/o 0.05 0.05 0.05 0.05 0.05 0.1 0.2 0.6 3.5 10 15 20 25 30 35
Memo: Mobile only n/o n/o n/o n/o n/o n/o ------0.1 0.5 1 2 4 6 8
Any epayment8 0.2 0.5 1.0 2.0 2.6 3.2 4.2 10 16 23 28 31 35 39 45 50 55 59 62 65 67
Bill pay (pay anyone)9 0.2 0.5 1.0 2.0 2.5 2.7 3.5 5.5 8 11 14 18 21 24 25 26 27 28 29 30 31
Direct online pay10 n/o n/o n/o n/o 0.2 0.7 1.0 8 12 17 22 25 28 33 39 44 49 53 56 59 61
Low-end Forecast (U.S.)
Total online banking HHs 0.2 0.5 2.2 4.0 6.5 9.5 14.5 20 25 31 35 39 42 45 48 51 53 55 57 59 61
Household penetration 0.2% 0.5% 2.2% 4.0% 6.4% 9% 14% 19% 24% 29% 32% 36% 38% 40% 42% 44% 45% 46% 48% 49% 50%
High-end Forecast (U.S.) Total online banking HHs 0.3 0.75 2.8 5.0 7.5 11.5 17 24 30 35 38 42 47 52 57 63 69 74 79 83 86
Household penetration 0.3% 0.8% 2.8% 5.0% 7.4% 11% 17% 23% 28% 33% 35% 39% 42% 46% 50% 54% 58% 62% 66% 69% 70%
Total U.S. households 96 98 100 100 101 102 103 105 106 107 108 109 111 113 115 117 118 119 120 121 122
Worldwide Forecast (HHs)11 4 8 15 23 32 43 55 75 100 130 160 200 235 270 310 370 440 500 580 650 730
Source: Online Banking Report, Dec. 2009 HHs = households n/o = not offered -- = negligible Accuracy estimates U.S.: 1994 to 2005: +/- 12%; 2006 to 2008: +/- 15%; 2009 to 2016: +/- 20%; WW: +/- 30%
page 6 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE FUTURE
Table 9 Small Business Online Banking13 Forecast millions of U.S. small businesses using online banking
Historical Estimates Now Future Projections
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
12 Use any service 0.05 0.15 0.75 1.5 2.5 3.5 5.0 7.0 8.5 10 11 12 13 14 15 16 17 18 19 20 20.5
13 Num of small businesses 20 20 20 21 21 22 22 23 23 24 25 26 27 28 29 29 30 30 31 31.5 32
Penetration 0.3% 0.6% 2.5% 4.5% 6.9% 10% 16% 21% 26% 31% 33% 37% 40% 43% 46% 50% 53% 56% 58% 60% 61% Source: Online Banking Report, Oct. 2009 (OBR 172/173) Accuracy estimates: 1994 to 2009: +/- 12%; 2010 to 2014: +/- 20%
Footnotes for Tables 8 & 9 1) See account definitions, Table 5, p. 4 2) Has used at least one of the six listed online banking or payment services during the past 6 months (+/- 15%) 3) Has accessed at least one of the four account types during the past 6 months (+/- 15%) via online or mobile connection, 4) Includes any insured deposit account (does not include brokerage cash accounts or money-market mutual funds) (+/- 15%) 5) Includes users accessing credit and charge-card accounts online, even if they don’t use an online deposit account (+/- 25%) 6) Includes users of account aggregation (e.g., Yodlee, uMonitor) at any site, bank or non-bank (+/- 30%) 7) Includes SMS queries to retrieve balance or transaction info 8) Has used either of the two listed epayment services during the past 6 months; does not include online purchases using a credit or debit card (+/- 20%) 9) Pays bills to multiple billers at a third-party site (not the biller’s site); the third party can be a bank, non-bank, Quicken, or Money (+/- 20%) 10) Pays bills directly at a financial services biller’s website, or directly with the financial services biller in response to an email message (+/- 25%) 11) We have less information on worldwide usage, so our estimate (+/- 30%) is less precise than for the United States (+/- 15%); includes mobile-only users (as does U.S. totals) 12) Includes online access for any checking, credit card, or loan account used to process business transactions (can be a personal account if used for business purposes) 13) We use a broad definition of small businesses, including any individual or entity producing $50,000 or more in annual revenues, includes self-employed contractors and sole proprietors (see OBR 172/173 for more information)
page 7 © ONLINE BANKING REPORT Number 176 January 21, 2010 INNOVATIONS
A History of Banking Innovations Following are the 40 most important online banking innovations of all time. The list expanded from 37 listed last year. The newcomers are indicated by NEW below. The second rank column includes only those innovations which debuted in the previous decade (2000 to 2009).
Table 10 Top 40 Online and Mobile Banking Innovations of All Time (North America)
Rank Launch
All Lst 10 Date Innovation 1 -- May 1995 Wells Fargo is first in the world to offer Web-statement access 2 -- Oct 1995 Security First Network Bank launches first full-service Internet bank brand (disbanded 2002) 3 -- Mar 1996 BayShore Trust (Canada) is first in the world with real-time online loan approvals (bought by Trimark) 4 -- Mar 1997 Bank of Montreal launches first real-time, mortgage-loan approval 5 -- Dec 1997 NextCard launches first credit card optimized for the Internet (liquidated 2002) 6 -- Nov 1999 PayPal launches first online optimized payment system (bought by eBay in 2003) 7 -- Oct 1998 CompuBank is first with multi-factor authentication: an extra password for interbank funds transfer 8 -- Jan 1997 Beneficial Finance is first in the U.S. with real-time mini-app loan approvals (bought by Household) 9 1 Apr 2007 Citibank and BancorpSouth are first to offer downloadable mainstream mobile phone app 10 -- July 1996 Britton & Koontz First National Bank launches first triggered email-alert system 11 -- July 1997 E-Loan launches first major Net-only online mortgage brokerage 12 -- Oct 1998 CompuBank launches first Web-based interbank funds-transfer system (bought by NetBank) 13 2 Sep. 2000 NEW ING Direct launches savings-online Internet bank, ushering in the era of high-yield savings 14 -- June 1998 LendingTree launches first retail loan-auction marketplace (bought by IAC/InterActiveCorp. in 2003) 15 -- Dec 1998 OneCore launches first Internet-only bank optimized for small business (banking disbanded 2001) 16 -- Aug 1997 River City Bank
Table 11 Top 40 Online & Mobile Banking Innovations of All Time (North America)
Rank Date Innovation 1995 1 May Wells Fargo is first in the world to offer Web-statement access 2 Oct Security First Network Bank launches first full-service Internet bank brand (disbanded 2002) 1996 3 Mar BayShore Trust (Canada) is first in the world with real-time online loan approvals (bought by Trimark) 20 Mar AT&T is first credit card to offer cardholders specific online fraud protection 10 July Britton & Koontz First National Bank launches first triggered email-alert system 1997 8 Jan Beneficial Finance is first in the United States with real-time mini-app loan approvals (bought by Household) 4 Mar Bank of Montreal launches first real-time mortgage-loan approval 11 July E-Loan launches first major Net-only online mortgage brokerage 28 Aug PeopleFirst Finance pioneers blank-check auto lending (bought by Capital One) 20 Aug QSpace introduces first online credit-bureau report (bought by Experian) 16 Aug River City Bank
page 9 © ONLINE BANKING REPORT Number 176 January 21, 2010 INNOVATIONS
Table 12 The Top 10 Annual Innovations: 2001 to 2008
2008 2007 2006 2005 2004 2003 2002 2001 1 Mobile banking Peer-to-peer Big players Emigrant Bank Phishing and Premium online Late bloomer Biller-direct bill is the new lending moves (Citi, HSBC, ups the ante in fraud cause real banking from Charter One payment online banking: to the next level WaMu) join the direct banking headaches Online Bank pulls model pulls redux: App online direct Resources ahead ahead … way Store shows banking market ahead potential
2 Online personal Mobile is the Banks begin Bank of Free bill Phishing Credit card Net-banking finance (PFM) new online Web 2.0’ing America payment undermines issuers become usage soars, mania banking their sites with endorses undermines trust (for now) major drivers of again blogs and feeds PassMark 2x2 online revenue, online usage multi-factor especially in authentication U.S.
3 SmartyPig Online personal Bank of Billeo Multi-factor Banks move to Credit report Major banks invents new finance startups America introduces authentication boost security monitoring & ID launch category: take aim on launches full- toolbar interface debuts for retail perceptions theft prevention account friends & family Quicken featured for bill payment customers optimized for aggregation savings personal the Web financial management
4 True reverse Finance gains a Online banking Citibank Remote deposit Citibank PayPal’s PayPal auctions from foothold on begins to feel introduces capture launches AuctionFinder dominates MoneyAisle Facebook safer security marks launched interbank demonstrates email (P2P) creates new for email transfers (A2A) power of payments way to gather screen-scraping deposits online
5 Free (ad- Direct banking Mobile banking Provident Bank Interbank Press turns Online banking It was the best supported) takes one giant begins its launches transfer (A2A) positive toward usage soars, and worst of credit reports step rebirth premium online rolls out across online financial again times for credit available online backwards, six banking option the U.S. activities card pioneer steps forward NextCard
6 Peer-to-peer BancVue powers USAA launches E*Trade Triggered Bank of ING Direct LendingTree’s lending survives high-yield in-home remote provides seven account alerts America hits proves the growing SEC scrutiny, checking at deposit capture years of online go mainstream seven million validity of the popularity positioned to hundreds of account users Net-only model legitimizes the prosper long- financial archives online loan term institutions marketplace
7 New financial Security fears billQ Zopa launches Branchless The decline of Online share of Online share lead-gen sites fade as reengineers bill P2P market in banking hot paper mortgage of mortgage proliferate multifactor pay info UK again statements originations refinances authentication delivery with a begins surpasses 10% surpasses 5% takes hold Web 2.0 spin
8 Alternative Wesabe Prosper
9 Security 2.0: Mortgagebot Credit report Everbank Account Real-time credit Bank websites Simple credit Partitioning off launches user- monitoring develops aggregation for remote become far card balance the online friendly bundled free understandable fully integrated deposits easier to use transfers banking session marketplace, with checking equity-indexed into online debut at from the rest of Mortgage accounts CDs banking several the computer Marvel lenders
10 PNC Virtual ING Direct adds Branch banking Wells Fargo PayPal Identity Theft Splash screen Major Net- Wallet launches NetBank, peaks in the introduces launches 911 provides a and popups for oriented bank integrated Sharebuilder, United States MySpending revolving credit credible source sales & service brands wind bank/PFM for grows by 1 million Report option to fight ID theft boost ROI down Gen Y and younger
Ref OBR 162 OBR 150 OBR 137 OBR 125 OBR 114 OBR 103 OBR 90 OBR 79 pp. 12-34 pp. 12-25 pp. 12-28 pp. 15-21 pp. 13-18 pp. 14-18 pp. 6-10 pp. 6-10 Source: Online Banking Report, 2001 to 2008
page 10 © ONLINE BANKING REPORT Number 176 January 21, 2010 INNOVATIONS
Table 13 The Top 10 Annual Innovations: 1996 to 2000
2000*
Innovations Events 1999 1998 1997 1996 1 Citibank is first with Net banking usage Financial statement The online loan Bank of Montreal BayBanks goes from account aggregation soars aggregation appears marketplace arrives (with AMS) launches 0 to 100,000 online at a trusted site (at non-banks) real-time mortgage banking subscribers approvals on the in 60 days Web
2 PayPal pay-by-email Banks trip over Internet person-to- Online credit Signet Bank (using Web/online usage system takes eBay themselves to person payments application volume Edify) launches email goes mainstream by storm embrace account invented (PayPal and increases 20-fold and fax triggered with more than 30 aggregation X.com) alerts million users at year- end
3 Juniper Financial Net finance market New breed of Net- NextCard became Beneficial Finance Integrion formed takes over where caps plummet only banks debut first Net banking offers two-minute Wingspan left off as (Wingspan/X.com/On startup to gain loans (approval time) the first email- and Money) significant volume plastic-focused bank
4 LendingTree Net-only bank brands Scan-and-pay bill Venture capital Microsoft and First BofA and Wells develops critical regroup presentment flows to online Data form MSFDC Fargo offer full- mass in a new invented (Cyberbills, banking & lending (later called service, Web-based financial market: the PayTrust, Transpoint), a joint online banking online loan auction PayMyBills) bill-pay venture focused on bill presentment
5 DeepGreen Bank is Turnkey interbank Market caps soar Web-based Integrion flexes its Intuit’s popularity as the first Net-only funds-transfer ecommerce muscles, launches an online banking bank to offer a systems become services for small major electronic bill- front-end grows compelling loan widely available business debut pay initiatives product (OneCore)
6 NetBank and The “bill presentment Bill payment evolves Blank-check car OFX gets legs National City NextCard are the first at bank sites” fantasy into bank-less loans invented launches first full- pure-plays to achieve fades away service (Yahoo) (PeopleFirst) scale (online) bill scale and near- presentment program profitability
7 NextCard is the first One million hours Startups target small Banking comes to E-Loan launches Online discount to offer a full suite of wasted in wireless business (eBank, the portals state-of-the art brokerage price war triggered email alerts strategy meetings OneCore, Internet mortgage breaks out CompuBank) brokerage
8 X.com and OneCore Net banking Credit cards morph Third-party Four banks each Digital Insight puts offer integrated becomes far easier into shopping portals statement have more than 100 credit unions on interbank to use consolidators 250,000 (online the Web connectivity for funds appear (MaxMiles) banking) subscribers transfer
9 Worthknowing Y2K taskforces Online Free tax prep and River City Bank Intuit/AOL offer one- integrates credit redeployed to other brokerage/bank online filing on bank builds basic PFM screen online bureau access with projects combinations Webs functions into its Web banking preapproved credit (E*Trade/ offers Telebank)
10 Direct banks use Fraud made a bad Clicks-and-mortar The million- Treasury Bank creates Microsoft introduces third-party brick-and- situation worse for business model subscriber mark is a new business: the direct statement mortar locations online retailers takes center stage achieved by a non- online international downloading from Web broker (AmEx) deposit broker into MS Money 97
OBR 67 OBR 67 OBR 57/58 OBR 44 OBR 33 OBR 21 pp. 6-7 pp. 4-5 pp. 8-9 p. 3 p. 3 p. 4 Source: Online Banking Report, 1996 to 2000 *Due to high activity levels, two lists were prepared in 2000.
page 11 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009 The 10 Most Significant Innovations & Trends of 2009 What’s Coming in 2010 As the banking industry continued its long climb back to profitability, new initiatives were primarily limited to those with quick paybacks and/or direct cost savings. That meant fewer innovations and product introductions at the big players. Fundamentally, we believe the recent problems will ultimately hasten the demise of capital-intensive branch- banking strategies, moving more investment to alt-delivery.
Below are the most significant innovations and trends from the past year.
Table 14 The Top 10 Innovations in 2009
Innovation Notable U.S. Examples Pages
1. Mobile usage soars Bank of America’s mobile banking bases passes 13-15 three million; USAA passes 1 million
2. App stores take hold iTunes App Store passes 100,000 available apps 16-17
3. New apps for that WV United and USAA allow customers to deposit 18-19 paper checks through the iPhone
4. Consolidation in personal financial Intuit buys Mint: The anti-Quicken becomes the 20-23 management new Quicken
5. Banks make another run at P2P Powered by PayPal from Mercantile Bank of 24-25 payments Michigan; CashEdge’s POPmoney launched by First Hawaiian and PNC Bank
6. Prepaid goes mobile Starbucks prepaid card is AdAge’s second best 26-27 app of the year
7. Alt-pay gets a big-bank backer SunTrust to distribute Moneta; American Express 28 gobbles up Revolution Money
8. Peer-to-peer lending rises again Prosper’s back online after nine months on the 29-31 sidelines; Lending Club is volume leader in U.S.
9. FIs use Twitter for customer service, Vantage Credit Union earns OBR Best of the 32-33 marketing, and even online banking Web by tapping Twitter for Transactional Banking
10. Private-branded PFM sites powered Stanford Federal Credit Union to launch Geezeo- 34 by third parties powered MyMo PFM
Honorable mentions 35
Source: Online Banking Report, Jan 2010
page 12 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
ONE
Déjà vu All Over Again: Mobile Banking is the New Online
or the third consecutive year, mobile banking took the top spot in our list of the ten most important developments of the prior year. While mobile hype was rampant in 2007 and F 2008, consumer adoption really took off in 2009 with an estimated 6.5 million new households, nearly tripling the total from a year ago. That growth rate is similar to online banking in the late 1990s (see Table 8, p. 6).
Last year, we were the first to predict that U.S. mobile banking would relatively soon surpass online banking in usage, with the crossover some ten years out (see Table 14 below). Recently our bullish forecast was trumped. In a study financed by Visa, Mercatus predicted that mobile usage would surpass online within six years (2015). While that’s possible, we still believe it will be closer to the end of the decade before the crossover.
Worldwide, with so may more users having access to mobile banking compared to online banking, the crossover may be only two or three years away.
Table 15 U.S. Mobile Banking Forecasts by Major Researchers
Num of Forecast Period Company Date Published Households Num Users Area (year-end)
OBR Jan 2010 10 million1 -- U.S. 2014
ABI Research Jan 2009 -- 500 million worldwide 2013
Javelin Strategy Late 2009 -- 99 million2 U.S. 2014
Juniper Research Jan 2009 -- 150 million worldwide 2011
Mercatus Dec 2009 -- 100+ million3 U.S. 2015
TowerGroup Late 2009 -- 53 million U.S. 2013 Source: Companies, 2009 (1) Used in past 6 months (2) Used in past 12 months (3) In a December 2009 report, Mercatus predicted that more than half of U.S. consumers would be using mobile banking by 2015, a number that will be higher than those using online banking
page 13 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
2009 Results It’s been a busy two years. In January 2008, there were fewer than 1 million mobile banking users in the United States. That total had grown 10-fold to 10 million. Last year, mobile penetration surpassed 20% of online banking users and is expected to be about 25% by year end 2010 (see Table 15, below).
Table 16 Mobile Banking vs. Online Banking Usage: 2025 vs. Today (U.S.)
Projected Actual
Change ’09 vs ’08
Type 2025 2015 2009 2008 Num % 2007 Online banking households* 75 to 85 mil 65 to 70 mil 57 mil 52 mil 5 mil 10% 48 mil Mobile banking households 80 to 95 mil 35 to 45 mil 10 mil 3.5 mil 6.5 mil 3x 600,000
Penetration (mobile/online) 100%+ 55% to 70% 18% 6.7% -- -- 1.3%
Source: Online Banking Report estimates, Jan. 2010, +/- 10% for online banking, +/- 25% for mobile *Excludes households that use only mobile banking
Bank of America makes it easy for users to download: (1) choose phone; (2) input mobile number and the bank automatically sends a text-message with a link to download the application.
2010 Outlook Extremely bright Mobile banking will become ever more visibleB during the next few years as customers and industry representatives continue to extol its virtues.
We expect it to retain its position as most important trend of the year, ending 2010 at about 15 million households, about 13% of all U.S. households and 25% of online banking households. page 14 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
Table 17 2009 Innovations Calendar: Mobile Banking date of Netbanker post
Jan 20 Bank of America launches new version of iPhone app with location-based ATM/branch finder 21 Bank of America launches blog that supports mobile banking awareness Feb 4 Bank of America says that 40% of mobile banking users access via iPhone or iPod Touch 6 Mobank (U.K.) demonstrates the future look of a mobile-optimized banking entity 12 PNC Bank launches native iPhone app Mar 2 Citibank launches native iPhone app 3 Blaze Mobile Wallet plus RFID sticker turn mobile phone into payments device 11 RIM launches Blackberry App World with Wells Fargo, E*Trade, Fidelity and Bank of America 19 ING (Netherlands) releases Android ATM finder-app using augmented reality April 2 Apple announces iPhone OS 3.0 which will include push notifications 10 MasterCard launches ATM Hunter iPhone app 16 Apple runs full-page ad showcasing personal finance apps; includes Mint but no financial institutions 28* Mobank makes debut at Finovate Spring, announces pending expansion in U.S. May 2 Intuit’s Quicken releases native iPhone app 12 Wells Fargo launches native iPhone app 22 Technology Credit Union and TDECU are first credit unions with native iPhone apps June 5 USAA announces coming availability of remote deposit capture via iPhone app (released in August) July 12 WV United FCU is first to launch mobile remote deposit capture; earns OBR Best of the Web 21 Addison Avenue Credit Union uses mobile channel to deliver extra security, powered by VeriSign 30 1000th Finance app added to Apple App Store Aug 10 USAA hits 1 million mobile users Sep 4 ING Direct (Australia) launches home loan toolkit for iPhone 10 Citibank repositions mobile banking to prominent homepage position 11 BB&T, Eastern Bank, Fifth Third Bank, Northeast Bank, USAA, Wells Fargo earn A grades in mobile banking awareness from ABI Research 29** mShift debuts mobile remote deposit capture at Randolph-Brooks FCU at Finovate Fall 29** Bling Nation debuts Bling Tag mobile payments at the point of sale at Finovate Fall Oct 5 Vantage Credit Union launches mobile delivery via Twitter feed, earns OBR Best of Web 6 Mercedes-Benz launches auto finance iPhone app 22 Bank of America app featured on Sprint’s Android microsite Nov 12 Wells Fargo releases second iPhone app: CEO Mobile 24 Chase adds second iPhone app: Gift Planner, a utility to track gift purchases Dec 6 Citibank ends three-year test with Obopay 11 Mercantile Bank of Michigan is first bank to promote its upcoming Powered-by-PayPal P2P payments product (coming early 2010) Source: Online Banking Report, Jan. 2010 *Posted 07 May 2009 **Posted 30 Sep. 2009
page 15 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
TWO
App Stores are the New Amazon.com
hen it comes to shopping for mobile smartphone services, it’s W all about the app stores. Financial institutions were slow to jump on the bandwagon, understandably hampered by the roiling financial markets of late 2008 and early 2009. At mid-year there were 65,000 apps in the app store, with 1.5 billion cumulative downloads, but only about a dozen apps from financial institutions.1
2009 Results At the beginning of the year, the iTunes store offered only 5 financial institution apps. And even by the end of third quarter, they still numbered less than 20. But in fourth quarter, especially December, the number of financial institutions with iPhone apps spiked, ending the year at 35 (see Table 18 below).
Above are the four most downloaded app in the Finance During the year, two additional app stores category as of Jan 18, 2010 at
Table 18 Financial institution apps in major smartphone app markets
Actual Projected
App Stores 2008 2009 2010 2015 2025
Apple iTunes 5 35 250 to 300 Not enough info1 Google Android 1 3 50 to 70 Blackberry World na 5 25 to 30
Total apps2 6 43 325 to 400 5,000 to 7,500 20,000 to 30,000 Total unique financial 5 30 200 to 300 1,500 to 2,000 4,000 to 6,000 institutions participating2 Apps per financial institution 1.1 1.4 1.5 3 to 4 4 to 5 Source: Online Banking Report, Jan. 2010 (1) The number of apps in later years will depend on the success of the platform. (2) Each financial institution can and will have more than one app, e.g., 7,500 total apps in 2015 might only represent 1,500 financial institutions, each with 5 or 6 apps in the various stores.
1 We are working on a new report that will track app-store usage; look for it in Feb. page 16 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
iTunes, with 130,000 total applications available, has seven times as many apps as Google’s Android market.
Google’s Android Market has a minimal web presence; only nine Finance apps are showcased online. Users must access the market via their phones for a full listing of more than 500 available finance apps.
2010 Outlook Very bright App stores are expected to maintain their hold on mobile discovery and downloading. Every financial institution with online banking will eventually want an app in at least the iPhone store.
Most larger financial institutions will have multiple apps in all
three stores. By the end of next year, we expect that the iPhone app store will have more than 300 financial institution apps page 17 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
THREE
Mobile Financial Apps Learn New Tricks
uring 2007 and 2008, mobile banking was pretty much just a dumbed-down website. That changed in 2009 as financial apps added features that went beyond what desktop D online banking could do. For example: • Location-based services allowed users to search for ATMs and branches using the phone’s built-in GPS or LBS capabilities • The phone’s camera was used by banks to make remote check deposits (see inset), insurance companies to upload photos of accident scenes and damages (see screenshot next page), and by personal financial management programs to upload receipts • Starbucks demonstrated that mobile phone-generated barcodes could successfully be used at the point of sale • Third-party databases were integrated to help user shopping experience prior to financing the purchase; for example ING Direct Australia’s Home Loan Toolkit with average home prices (see screenshot below)
ING Direct Australia’s iPhone app is designed to help buyers shop for a home AND mortgage. page 18 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
Nationwide Insurance bundled numerous helpful features into its iPhone app (above and right) -- Accident toolkit -- Start an auto claim -- Find an agent -- Find a repair shop -- Accident history -- Flashlight
2010 Outlook Bright Ultimately bank and personal financial management are relatively low-tech activities. So there are limits to the number of dramatic new activities to expect.
However, there is one big item left to crack: mobile payments at the physical point of sale. While there won’t be much consumer adoption in 2010, developments such as Square and other smartphone add-ons, should provide some indications of where mobile payments will head in 2011 and beyond.
page 19 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
FOUR
Consolidation in the Personal Finance Space: Intuit Buys Mint
t’s an age-old business cycle: an opportunity appears, dozens of firms go after it, and a few remain as the primary providers at the end. The industry I consolidation in online personal finance management began in third quarter when the largest of the upstarts, Mint, was acquired by the biggest incumbent, Intuit, in a transaction valued at $170 million. The deal, which we predicted on these pages last year (OBR 162, p. 15), closed Nov. 2.
The only other acquisition in the space was the sale of Thrive to Lending Tree in Feb. 2009. TheStreet.com’s option to buy Geezeo for $12 million2 by Q2 2009 was not exercised.
2009 Results The field remained crowded with thirty online personal finance companies vying for traffic in the United States. With the consolidation of Mint and Quicken Online, their combined 1.5 million visitors are more than the five times the combined traffic at the other 27 companies (see Table 21, p. 23). Mint continued to lead the category in both total traffic and traffic gain, growing more than 400,000 monthly visitors to 1.3 million in December, a 46% gaining over the previous year. The biggest percent gainer in the category was Expensify which jumped 10-fold to 5,600 visitors (see Tables 18, p. 23).
However, most providers lost ground in 2009. According to Compete estimates of monthly unique visitors, only eight of the 27 companies we were tracking a year ago gained traffic in Dec. 2009 compared to a year earlier. The biggest drop was Geezeo which saw traffic decline by more than 90% after it lost its homepage link at TheStreet.com and discontinued its standalone offering. Wesabe, one of the pioneers, also dropped substantially, to 36,000 monthly visitors compared to 140,000 a year ago. It too is focusing more on white-labeling for financial institutions rather than driving traffic to its site.
Table 19 2009 Website Traffic: Mint vs. Quicken Online*
Source: Compete, Jan 2010 *Traffic to Quicken’s online login page, does not include visitors to marketing pages.
2 The 12-month option to purchase Geezeo was part of TheStreet.com’s April 2008 $1.2 million investment in Geezeo.
page 20 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
The Mint brand has already begun to take over at Intuit’s Quicken Online site. Here’s a Jan. 17 screenshot which has the Mint name and colors dominating the page.
In comparison, the Intuit name has been completely removed from the Mint site, except for a single press release in the Press section.
Mint does leverage the Intuit TurboTax product on its homepage.
2010 Outlook Bright The online specialists will increasingly partner with financial institutions to gain trust and users (see number 10, p. 34). Expect considerable consolidation in 2010. The standalone PFM is still struggling to find a business model in an era of decreased payments for financial product leads. But gaining Mint-like appeal is still an appealing goal given its exit value and that the startup alluded to being profitable, at least on an operating basis.
page 21 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
Table 20 2009 Innovations Calendar: Personal Financial Management date of Netbanker post
Feb 9 Mint hits one million unique monthly visitors 20 Mint shares registered user growth: 100,000 per month for past 3 months
Mar 5 Mint helps users identify fraudulent card charges 18 Wesabe announces white-label program to power bank-branded PFMs 31 Xpenser masters mobile expense input April 16 Apple features personal finance apps in full-page iPhone print advertisements 28* Cooler.com launches system to calculate carbon footprint from financial data at Finovate Spring 28* GreenSherpa opens to the public at Finovate Spring 28* Mint launches Financial Fitness module at Finovate Spring 28* Jwaala debuts Better Online Banking (BOB) platform and integrated credit score (Michigan First Credit Union) at Finovate Spring 28* SimpliFI.net debuts its PFM focused on long-term financial planning and wins Best of Show at Finovate Spring 28* Wesabe announces first private-label client, Delta Community Credit Union, at Finovate Spring May 2 Intuit launches native iPhone app for Quicken Online 20 PFM black eye avoided: Rudder glitch sends wrong account info to users, but does great job recovering June 2 LowerMyAssessment.com launches tool to save on property taxes 10 Microsoft discontinues Microsoft Money Aug 21 PocketSmith and CashFlow Insite launch online PFMs Sep 14 Mint acquired by Intuit for $170 million 29** Digital Insight (Intuit) wins Best of Show at Finovate Fall for its TurboTax integration 29** Mint debuts Yahoo integration at Finovate Fall 29** Outright.com launches PayPal integration in its small-biz accounting program at Finovate Fall 29** SimpliFI debuts long-term planning and GPA (goal point average) progress system at Finovate Fall 29** Strands debuts coupon integration with Savings.com at Finovate Fall 29** Tile Financial launches youth-oriented PFM at Finovate Fall 29** Yodlee wins Best of Show at Finovate Fall for its new FinApp store Oct 14 Intuit offers low-cost and free online accounting options Nov 23 Zions Bank replaces Holiday Gift Planner, a 2008 OBR Best of Web winner, with eZ Budget site 24 Chase launches specialized iPhone app aimed at tracking gift purchases Dec 10 Mint branding is used all over Intuit’s Quicken pages 16 Blippy allows users to publicly stream their card purchases 18 Stanford Federal Credit Union readies launch of Geezeo-powered MyMo PFM Source: Online Banking Report, Jan. 2010 *Posted 07 May 2009 **Posted 30 Sep. 2009
page 22 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
Table 21 Traffic at Online Personal Finance Companies Dec. 2009 vs. Dec. 2008 traffic
Dec 2009 Dec 2008 Dec 2007
Company (parent) Num % Chg ∆ Rank Rank Num Rank Num 1. Mint.com 1.3 mil 46% -- 1 890,000 1 120,000 3 2. Quicken Online 230,000 44% +1 3 160,000 NEW -- 4 3. Yodlee.com 90,000 (10%) +2 5 100,000 2 76,000 4. Mvelopes.com (In2m) 63,000 (11%) +2 6 71,000 3 49,000 5. Wesabe.com 36,000 (74%) (1) 4 140,000 4 36,000 6. Strands (Expensr) 22,000 6x +8 14 3,700 NEW -- 7. ClearCheckbook.com 13,000 44% +4 11 9,000 7 3,900 8. PearBudget.com 8,500 12% +4 12 7,600 9 2,100 9. BudgetTracker.com 8,300 (41%) -- 9 14,000 6 6,400 10. Thrive 8,200 (41%) -- 10 14,000 NEW -- 11. Pocketsmith.com 7,200 4x +8 19 1,800 NEW 12. Simplifi.net 6,400 -- -- NEW ------13. Expensify 5,600 10x +12 25 560 NEW -- 14. Buxfer.com 5,000 (67%) (6) 8 15,000 8 2,500 15. Bill Monk (Obopay) 4,200 14% +1 16 3,700 13 980 5 16. Geezeo.com 3,500 (98%) (14) 2 170,000 5 17,000 17. MySpendingPlan.com 3,400 (11%) (4) 13 3,800 11 1,500 2 18. Rudder 2,700 (96%) (11) 7 61,000 NEW -- 19. GreenSherpa 2,100 -- +7 NEW nm -- -- 20. Moneytrackin.com 1,100 (69%) (3) 17 3,500 10 2,000 21. Justbudget.com 790 (51%) (1) 20 1,600 14 300 22. Rate Surfer 430 (88%) (7) 15 3,700 NEW -- 23. Scred 380 (40%) -- 23 630 NEW -- 24. iThryv 320 (85%) (6) 18 2,100 NEW -- Banzai nm -- -- 21 1,500 12 1,400 Foonance.com nm -- -- 22 1,500 16(tie) nm Dimewise.com nm -- -- 24 580 14 200 Tile Financial nm -- -- 26 530 fnCentral.com (Jexp) nm -- -- 27 140 16(tie) nm Cashflowinsite.com nm -- -- NEW -- 1 Total 1.8 mil 8.4% -- 1.7 mil Source: Online Banking Report, Jan 2010; traffic from Compete, Jan 2010; Traffic numbers are estimated from a large sample of clickstream data, accuracy limited for smaller sites. *Users of secure site. Does not include traffic to Quicken informational area nm=not measurable 1. Sum of the monthly unique visitors from all PFM companies, visitors that went to more than one PFM provider are not eliminated from the total, so there is double counting in the totals. Data source is Compete, pulled the week of 11 Jan 2009. 2. Rudder was previously Spendview, 3. Active users only at quickenonline.intuit.com. Those just checking out the site visit quicken.intuit.com which had 1.0 million unique visitors in Dec. 2009, up 84% year-over-year. But those visitors are also there checking out the packaged software options, so are not included above. 4. Would be number 1, if traffic at its white-labeled sites was included. Bank of America’s Yodlee-powered site alone drew 930,000 unique visitors and 2.4 million visits in December. 5. Geezeo is discontinuing its consumer direct site to focus on white-labeling.
page 23 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
FIVE
Bank-Powered Person-to-Person Payments Gain a Foothold
t’s not often that banks reach back 10 years and resurrect a technology that failed the industry. But that’s exactly what happened in 2009 with I person-to-person payments, a product that was tried and abandoned by Citi, Wells and Bank One in 2000 and 2001.
Why do banks think it will work now? The burgeoning use of smartphones makes it much more likely that friends, family, neighbors and co-workers will settle informal IOUs with the use of technology rather than paper checks or good old-fashioned currency.
CashEdge, the dominant provider of account-to-account transfers, first announced its POPmoney initiative in July. The first two clients, PNC Bank and First Hawaiian went live at year-end, and the third, FNBO Direct, went live this week (18 Jan 2010).
But it was PayPal that really grabbed the industry’s attention when it showed up at Retail Delivery with not one but three bank tech partnerships under its belt (FIS, S1, and First Data). The first implementation, at Mercantile Bank of Michigan, was announced in December (see inset).
While we don’t see hockey stick adoption of bank-branded P2P, it should grow nicely reaching 15 to 20 million users by the end of the decade (see Table 22 below). Refer to our previous report (OBR 174/175) for a full look at the product and options available to financial institutions.
Table 22 U.S. P2P Payments Forecast by Predominant Fee-Level
Predominant Pricing (for $50 P2P payment funded from checking account)
1% or $0.50 2% or $1 3% or $1.50 4% or $2 Type Expected Free each each each each
Pricing probability -- 35% 30% 20% 10% 5%
Forecast
2015 users 8 to 11 mil 12 to 15 mil 7 to 9 mil 5 to 7 mil 4 to 5 mil 3 to 4 mil
2020 users 15 to 20 mil 20 to 25 mil 14 to 18 mil 8 to 10 mil 6 to 8 mil 4 to 6 mil
2025 users 20 to 25 mil 35 to 40 mil 20 to 24 mil 12 to 15 mil 8 to 10 mil 6 to 8 mil
Source: Online Banking Report estimates, Dec. 2009 (originally published in OBR 174/175), Accuracy estimated at +/- 10% for online banking, +/- 20% for mobile, +/- 33% for P2P
page 24 © ONLINE BANKING REPORT Number 176 January 20, 2010 THE BEST OF 2009
Table 23 2009 Innovations Calendar: Payments date of Netbanker post
Mar 12 University of Washington Credit Union adds easy-to-use online external money transfer service 27 BillMyParents launches a service that lets kids redirect billing at the online point of sale to their parents Apr 28* CircleUp debuts group pay system at Finovate Spring 28* HomeATM debuts hardware-based P2P payments at Finovate Spring 28* Micronotes debuts service at Finovate Spring to provide discount offers within online bill pay 28* Tempo Systems debuts decoupled debit card at Finovate Spring 28* Transparent Financial Services (TransFS) debuts system at Finovate Spring for small businesses to compare merchant-processing providers Aug 12 PayPal launches drop-dead-simple prepaid card for teens Sep 23 Starbucks launches first dedicated mobile app for stored-value cards and tests barcode-based POS 24 payments at 16 locations 29** CashEdge debuted its POPmoney P2P service at Finovate Fall Nov 3 SunTrust partners with Moneta to test new alt-payments brand at the online point of sale 19 PayPal turns 10 years old 19 American Express announces acquisition of Revolution Money, providing a platform to create new payment products Dec 9 First CashEdge P2P payment client, First Hawaiian, posts info on its website about POPmoney service 11 Mercantile Bank of Michigan advertises its new powered-by-PayPal P2P payment service on its homepage 21 Costco showcases BillMeLater (PayPal) option in holiday emailing *Posted 07 May 2009 at Netbanker.com **Posted 30 Sep. 2009 at Netbanker.com
2010 Outlook Mixed
Short-term, moderate Long-term, good
It’s still too early in mobile adoption for a large number of customers to want to pull up an app to transfer money to a sib for half of the mother’s day flowers. Consumers have to first get comfortable with basic mobile finance functions and the security protections before they start zapping money
amongst themselves.
But long-term, this is a payment service that mobile users will likely be attracted to.
page 25 © ONLINE BANKING REPORT Number 176 January 20, 2010 THE BEST OF 2009
SIX
Reloadable Prepaid Goes Mobile
or the most part, reloadable prepaid cards are checking accounts without the paper. They are the ideal solution for kids, young adults and anyone who has been plagued with NSF fees. We F expect to see strong growth in the product. But the lack of a tracking mechanism is one drawback to a card-based account for the end-user. With no check register or monthly statement, it’s difficult to track how much money remains on the card and what it’s been spent on.
That’s where mobile comes in. The mobile phone is an ideal tracking mechanism and balance checker for prepaid use. Text/SMS can be used by any mobile phone user to track balances and monitor the flow of transactions. More importantly, smartphone users can tap an app to check an account balance before presenting it to the clerk. The app can also be used to manage the account and track spending and budget categories.
And eventually, when the mobile phone takes the place of plastic via NFC or other technology (see Starbucks below), the prepaid card and the mobile phone will become an integrated payment vehicle.
Starbucks mobile card app The first good example of a dedicated prepaid card mobile app was launched by Starbucks in September. Finovate alum, mFoundry, was involved in the development. The app, which Ad Age named the number-two best banded app of the year (AdAge, 14 Dec. 2009, p. 25), was elegant and simple to use (see inset and screenshots next page).
And if that wasn’t enough, Starbucks became the first retailer to experiment with mobile POS payments by rendering a barcode on the iPhone screen that can be used in lieu of plastic to make purchases at a few dozen locations in Seattle and Silicon Valley.
2010 Outlook Good Expect prepaid mobile card options to expand as larger banks follow Starbucks lead.
The future of barcode payments is less clear. It depends on developments in mobile phone hardware and POS systems, so don’t expect much to happen in 2010. There are too many other priorities for retailers to wrestle with during the decline in consumer spending.
page 26 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
The Starbucks mobile card application is attractive, easy-to- use, and functional. It’s not only a great extension of the Starbucks brand, but it should be a money- maker through increased card loading and usage.
The application even renders a bar code that can be used at 16 Silicon Valley and Seattle locations.
page 27 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
SEVEN
Alt-Payments Get a Big-bank Booster
here are always dozens of companies noodling away at ways to make a serious run at the big four payment companies: Visa, MasterCard, Discover and American Express. The last major T successful new payment mark was Discover Card, launched by Sears 25 years ago. And you could add PayPal to that list, but it’s more of a hybrid: part merchant-acquirer and part payment-mark.
Revolution Money seemed poised to make a run at the big four. It had the high-flying founders, big-name backers, a sizeable war chest, and a seemingly good strategy. But apparently it lacked staying power and was acquired by American Express at a modest return on investment for its original backers.
Getting a new payment vehicle into the hands of users is especially daunting in these days of diminished returns for direct marketing, and massive credit losses even for risk-averse mega brands. It’s probably going to take a joint effort with one or more mega banks to make it happen.
And the first new player to get the big-name backer is Moneta, a company that impressed us last year when we first met them at Retail Delivery 2008. The startup has partnered with SunTrust for a substantial test of its online alternative- payment brand.
2010 Outlook Hazy with sun breaks The landscape is littered with failed attempts to build a new payments brand. While the Internet provides a fertile new habitat to grow a new payment brand, it’s too early to tell if SunTrust’s effort will bear fruit.
It will likely be a few years before we can tell if this idea is gaining real traction.
page 28 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
EIGHT
Peer-to-Peer Lending is Back in Business
t’s been a rocky two years for the P2P industry. If being forced to close for six months wasn’t enough of a roadblock, the implosion of unsecured consumer credit quality could I have been the final nail in the coffin. But Prosper finally made it back online in July and has been slowly growing its business again, although it is still far below the levels of 2007.
On the other hand, Lending Club, which had a nine-month head start on relaunching as an SEC- regulated entity, is now the volume leader in the U.S. and tied with Zopa (UK) for first in the world.3 For the year, total U.S. lending was down by more than 30% to $62 million. The number of loans fell even further, down nearly 50% to 7,400 (see Table 24 below). In December, Lending Club’s was outlending Prosper more than 3 to 1 (in dollars, see Table 23 & 25).
Table 24 Prosper vs. Lending Club Loan Volumes 2008, 2007 and 2006 (U.S.)
Since Inception 2009 2008 2007 2006
Company Num $ mil % Tot Num $ mil % Tot Num $ mil % Tot Num $ mil % Tot Num $ mil % Tot
Prosper 31,000 $187 71% 2,047 $8.9 15% 11,600 $70 78% 11,500 $81 94% 5,900 $28 100% launched Feb 2006
Lending Club 8,277 $77 29% 5,297 $53 85% 2,380 $19 22% 600 $5 6% ------launched May 2007
Total 39,300 $264 100% 7,344 $62 100% 13,900 $89 100% 12,100 $86 100% 5,900 $28 100% Source: Compiled by Online Banking Report, Jan 2010 from company info
But the future is promising as the companies continue to refine their underwriting standards and marketing approaches. Lending Club’s annual run rate in Dec. was $85 million. If Prosper can get back to that level by mid-year and Lending Club continues to grow, we could see $150 to $200 million in loans next year, a 3-fold to 4-fold increase over 2009.
Table 25 Lending Club Loan Origination Results: Dec. 2009 vs. Dec. 2008
Change
Metric Dec 2009 Dec 2008 Num % Dec 2007 Number of loans originated 658 238 420 2.8x 167 Dollars originated $7.13 mil $2.28 mil $4.85 mil 3.1x $1.77 mil Number of loan applications 4,363 2,798 1,565 +56% 1,575 Approval rate 15.1% 8.5% 6.6% +78% 10.6% Dollar value of all applications $47.8 mil $24.2 mil $23.6 2x $14.4 mil Average loan size approved $10,800 $9,600 $1,200 +13% $10,600 Average loan size declined $11,000 $8,600 $2,400 +28% $9,000 Site traffic (unique visitors) 290,000 78,000 210,000 3.7x 58,000 Source: Loan volume from Lending Club; site traffic from Compete; calculations by Online Banking Report, 8 Jan. 2009
3 According to a Dec. 29 post on its company blog, Zopa originated “more than £32 million” in 2009. At today’s exchange rate, that’s $52+ million U.S. We’ll call that a tie with the $53 million logged at Lending Club. page 29 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
Table 26 Lending Club Loan Originations by Month
Source: LendingClub Stats
Table 27 Prosper Loan Origination Results: Dec. 2009 vs. Dec. 2007
Change
Metric Dec 2009 Dec 2007* Num % Dec 2006 Number of loans originated 487 849 (362) (43%) 965 Dollars originated $2.3 mil $6.2 mil ($3.9 mil) (63%) $4.5 mil Average loan size $4,700 $7,300 ($2,600) (36%) $4,700 Site traffic (unique mo. visitors) 220,000 630,000** (410,000) (65%) 300,000** Source: Prosper, Jan 2010 *Note: The market was not operating in Dec. 2008; site traffic in Dec. 2008 was 900,000 **Traffic is from Nov. 2007 and Nov. 2006, per Compete estimates
Table 28 Prosper Loan Originations by Month
Source: Eric’s Credit Community
Table 29 2009 Innovations Calendar: Peer-to-Peer Lending date of Netbanker post
Jan 19 Lending Club and partners launch Uncrunch America to promote P2P lending (closed by year end) Feb 15 Pertuity Direct launches financial mashup: P2P lending mated to mutual fund with social aspects (closed four months later) Mar 3 Cology’s TuitionU.com acquired student P2P lender, GreenNote 25 Lending Club launches self-directed IRA option April 28 Prosper wins Best of Show award at FinovateSpring 28 Prosper reopens after receiving California state approval; shut down a few days later after SEC objected 28 People Capital announces student loan P2P platform at Finovate Spring (07 May 2009post) 28 ZimpleMoney debuts P2P platform at Finovate Spring (07 May 2009post) July 13 Prosper is back in business after receiving full SEC approval Aug 4 Lending Club offers new lenders $50 to get started Oct 22 P2P Marketplaces join forces to form lobbying organization, Coalition for New Credit Models Source: Online Banking Report, Jan. 2010
Table 30 Actual & Projected U.S. P2P Loan Volumes, 2006 through 2019 2010 Outlook ½
Expected Forecast Num of Cautiously optimistic
Period Number Avg Size $ Marketplaces With two markets in 2006 actual 5,902 $4,800 $28 mil 1 operation for a full year, the 2007 actual 12,100 $7,100 $86 mil 2 first time that’s happened, 2008 actual 13,900 $6,400 $89 mil -- we expect growth of 2x to Q1 actual 4,048 $7,400 $30 2 3x in 2010. Investors will Q2 actual 4,831 $6,000 $29 1 continue to experiment with Q3 actual 3,898 $5,400 $21 1 lending on the platforms. Q4 actual 1,101 $7,500 $8.2 1 But it will continue to be a 2009 actual 7,300 $8,400 $62 mil -- challenge to find enough Q1 actual 911 $9,100 $8.3 1 solid borrowers to meet Q2 actual 1,111 $9,000 $10 1 investor ROI goals. Q3 actual 1,949 $8,200 $16 2 In addition, we expect one Q4 actual 3,288 $8,200 $27 2 or two new marketplaces to Forecast open by year-end. 2010 20,000 $8,000 $160 mil 3 However, their origination 2011 40,000 $8,200 $330 mil 5 volumes will be negligible 2012 80,000 $8,500 $680 mil 7 in 2010 as they cautiously 2013 130,000 $8,900 $1.2 bil 8 get off the ground. 2014 190,000 $9,300 $1.8 bil 9 2015 260,000 $10,000 $2.6 bil 10 2016 340,000 $10,400 $3.5 bil 10 2017 430,000 $10,800 $4.6 bil 10 2018 530,000 $11,200 $5.9 bil 10 2019 640,000 $11,600 $7.4 bil 10 CAGR (’19 vs. ’09) 56% 3.3% 61% -- Source: Online Banking Report estimates, Jan. 2010, estimated accuracy +/- 50% (highly speculative) page 31 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
NINE
Twitter Finds a Home in Financial Services Creative financial institutions use Twitter for customer service, marketing, and even online banking
he biggest Internet wunderkind of 2009 was Twitter. While the service had gathered a loyal following in 2008, growth skyrocketed the first half of 2009. And unlike other social T networking tools (blogging, Facebook, etc.) that have languished on the drawing board, financial institutions really found their online voice with Twitter. Why? • Zero IT infrastructure: A basic Twitter account is free, hosted by Twitter, and requires zero technical knowledge beyond using a keyboard or mobile phone • Simple to use: While finding the proper mix of marketing vs. orientation can be tricky, it takes almost zero effort to actually start sending messages out over the platform • Brevity: Unlike blog entries and other website content that require endless reviews, back and forth discussions, and multiple edits, the 140-character limit of a tweet makes them relatively simple to push out, even for large companies
One financial institution, Vantage Credit Union, earned one of only two OBR Best of the Webs in 2009, by tapping Twitter’s direct messaging capabilities to deliver transactional banking via online or mobile channels. See our Oct. 5 Netbanker post for more info on how it works. The CU says it has 150 users as of mid-January 2010 despite no promotional efforts outside its blog and Twitter stream.
Vantage CU shows how a member can transfer funds via Twitter direct message to @myVCU. It may not be pretty, but for a Twitter user, it’s simple to use and convenient.
page 32 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
Table 31 2009 Innovations Calendar: Twitter and Blogs date of Netbanker post
Jan 6 Bank of America launches first blog, from its Center for Future Banking at MIT (blog discontinued by Dec.) Feb 3 E*Trade has it’s now-famous talking baby Tweeting in support of the company’s Super Bowl ad campaign Mar 13 We document 46 financial institutions worldwide using Twitter; by year-end the number is over 700 April 9 Intuit uses real-time Twitter feed in online banner ad for TurboTax 13 UK bakery demonstrates how to connect to bricks & mortar with Twitter May 22 Tech CU is first financial institution to include blog feed in its native iPhone app
Oct 5 Vantage Credit Union taps Twitter direct message capabilities to deliver transactional banking services and earns an OBR Best of the Web award 13 DonorsChoose.org integrates Twitter with online cart so donors can automatically Tweet Nov * Mint launches Twitter aggregation site, Money Tweets Dec 16 Blippy, a Twitter-like site for streaming credit card purchase data, is unveiled Source: Online Banking Report, Jan. 2010 *Posted Jan 8, 2010
2010 Outlook Bright Twitter provides a low-cost way to interact with customers online. And since it’s what the cool kids are doing, there’s little downside to ING Direct (USA) became first financial institution in using it, at least in the most basic way (e.g., the world with more than 10,000 followers. tweeting branch hours and answering customer questions).
We expect financial institution use of Twitter to double in 2010, growing from nearly 1000 institutions worldwide to approximately 2000.
page 33 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
TEN
Third Parties Power PFMs at Banking Sites
oth Geezeo and Wesabe altered their business models to aggressively court financial institutions to offer private or co-branded versions of their platforms. Geezeo took the new B strategy to the extreme, announcing that it will shutter its standalone site to direct 100% of its energy to client sites. The first, MyMo from Stanford Federal Credit Union, is scheduled to go live in January (see below).
Wesabe launched its new Springboard platform at Finovate Spring. The startup is using flat-rate and transparent pricing policy, posted on its website to attract new clients.
In the meantime, Jwaala, who’s been solely focused on white-label installations since its inception, announced 10 new credit union customers this month: United FCU (St. Joseph, MI), Tinker FCU (Oklahoma City, OK), Spire FCU (Roseville, MN), IBM Southeast Employees FCU (Boca Raton, FL), Summit Credit Union (Madison, WI), Advantage FCU (Rochester, NY), Credit Union 1 (Anchorage; AK) Red Canoe Credit Union (Longview, WA), Valley First Credit Union (Modesto, CA), and San Francisco Fire Credit Union (San Francisco).
And Intuit’s Digital Insight, the company with the most online PFM clients by far, has more than 200 banking clients rolling out its Personal FinanceWorks powered by Quicken. The company announced new online banking/TurboTax migration at Finovate Fall 2009, which should propel it to even more banking clients this year.
2010 Outlook Good
Interest in personal financial management continues to grow. The Great Recession has altered, at least temporarily, the mindset of the majority of consumers who are looking to cut debt and spending levels. PFM tools are a perfect match to this mindset and have the potential to cement customer relationships and encourage account consolidation.
However, budget constraints will still keep many PFM initiatives on the sidelines in 2010. So look for moderate growth in this area.
page 34 © ONLINE BANKING REPORT Number 176 January 21, 2010 THE BEST OF 2009
Table 32 Top Innovations of 2009: Honorable Mentions (alphabetic order)
NetBanker Innovation/Development Posts Addison Avenue Credit Union offers VIP Access powered by VeriSign 21 July Allpoint launches surcharge-free ATM finder in iTunes App Store 04 Mar Apple’s iPhone App Store adds 1,000th app in finance category 30 July BancVue launches Kasasa, new national checking account brand* 30 Sep Bank of America offers free 1 Year subscription to McAfee virus protection 21 Oct Bank of America announces the end of wire transfer initiation in branches, moves all activity to online banking 17 Aug Billeo launches “offer assistant” integrating discount offers within Google and Bing searches* 29 Sep BillMyParents launches 27 Mar BillShrink launched Savings/CD savings tool* 30 Sep Blippy automatic tweeting of credit/debit card transactions 16 Dec Centro launches KnowBeforeYouApply, a source of free credit scores for consumers** 07 May Chase launches second iPhone app: Holiday Gift Planner 24 Nov Cooler.com launches system to calculate carbon footprint from financial data** 07 May Credit Karma launches debit-manager module** 07 May E-statement marketing heats up; everyone wants paper turned off, but few provide tangible benefits for doing so. 27 Jan, 24 April E*Trade leverages the popularity of its Super Bowl talking-baby ads across social media 01 Feb Fifth Third bundles free credit report access into certain checking accounts 02 Sep GlobeFunder launches IOUSOS, a semi-automated system for health-care providers to make settlement offers** 07 May GoalSpring launches DebtGoal.com to track and manage consumer debt** 07 May Google tests integrated mortgage rate info into its search results 27 Aug Home-Account launches fee-based mortgage advisory service for consumers** 07 May Home-Account teams with the Mortgage Professor Jack Guttenberg* 30 Sep ING (Netherlands) launches ATM finder with augmented reality feature 19 Mar ING Direct (USA) and Service Credit Union offer Black Friday promotions 25 & 27 Nov Intuit launches Quicken app in iTunes app store 02 May Jwaala integrates credit score into online banking at Michigan First CU** 07 May kaChing announces 300,000 registered investors** 07 May Kapitall integrates its investment info service with TD Ameritrade* 30 Sep Lending Club launches self-directed IRA option for P2P investors 25 Mar LowerMyAssessment.com offers timely personal finance tool to save on property taxes 02 June Mercantile Bank fee-based positive pay? 26 May Micronotes launches system that offers discounts within bill-pay module** 07 May Mint hits 1 million monthly unique visitors 09 Feb Mint adds Financial Fitness module** 07 May MoBank (U.K.) could be first of a new wave of banking & payments companies optimized for mobile delivery** 06 Feb MoneyAisle’s deposit auction hits $100 million mark 28 Jan myFICO forum wins Forrester Groundswell award 29 Oct On Deck Capital launches interactive online application for small businesses that provides extensive feedback to 30 Sep applicants on where they stand cash-flow wise* Pennsylvania State Employees Credit Union is first to add free FICO credit scores to online banking 15 Jan People Capital announces Human Capital Score, a better way to gauge credit worthiness of recent college grads** 07 May Perkstreet Financial launches with focus on debit card rewards 02 Dec RIM launches Blackberry World app store 11 Mar SimpliFI incorporates longer-term planning into PFM** 07 May SmartyPig reaches $100 million mark 25 June Technology CU and TDECU are first credit unions with iPhone apps 22 May Tile Financial launches youth-oriented PFM* 30 Sep TransFS launches system for small businesses to compare credit card merchant services providers** n/a US Bank integrates self-service collection module into online banking 31 July Wells Fargo launches iPhone app 18 May Yodlee launches App Store within its PFM program* 30 Sep Source: Online Banking Report, Jan. 2010 *These companies debuted their innovation at *FinovateFall or **FinovateSpring page 35 © ONLINE BANKING REPORT Number 176 January 21, 2010 BEST OF THE DECADE Top 25 Innovations of the Decade
Rank Launch Innovation 1 Nov 1999* PayPal launches first online optimized payment system (bought by eBay in 2003) 2 Apr 2007 Citibank and BancorpSouth are first to offer downloadable mainstream mobile phone app 3 Sep. 2000 ING Direct launches savings-online Internet bank, ushering in the era of high-yield savings 4 July 2000 Citibank launches first bank-branded, financial account-aggregation service (powered by Yodlee) 5 Aug. 2003 Online Resources launches the first prepackaged premium online banking channel 6 Aug. 2000 DeepGreen launches first online home equity loan with real-time approval (folded back into Third Fed) 7 Aug 2002 CharterOne introduces the first suite of triggered alerts with voice, email, fax, or wireless options 8 Sep 2007 Chase is first major bank to use SMS for account info query 9 Dec 1999* X.com is first with seamless integration of banking and value investing (merged with PayPal) 10 July 2008 Bank of America includes iPhone app at the launch of Apple’s iTunes App Store 11 June 2008 neoSaej launches MoneyAisle, the first reverse auction for retail deposits 12 Feb 2006 Prosper launches first person-to-person loan exchange in North America (Zopa opened in UK in 2005) 13 Dec 2004 Verity Credit Union is first financial institution with a company blog 14 Feb 2001 NextCard launches real-time balance transfer for existing cardholders (liquidated 2002) 15 July 2006 billQ launches first Web 2.0 financial service, allowing users to subscribe to transaction via RSS feeds 16 Dec 2007 Wesabe launches first banking application with widget interface 17 May 2005 Bank of Montreal is first to use RSS feeds to deliver general website content 18 May 2008 Trusteer launches secure sandbox for online transactions at ING Direct 19 Feb 2008 Credit Karma launches first completely free (ad supported) credit score 20 Nov 2007 mShift and KeyPoint Credit Union launch first banking application on a social network (Facebook) 21 July 2009 Vantage CU and USAA launch remote check deposit via mobile phone 22 Dec 2006 USAA launches first remote deposit capture service for consumers using home scanners 23 Nov 2001 PSECU provides real-time credit for mailed-in deposits 24 Oct 2009 Vantage CU launches banking via Twitter 25 Feb 2005 Billeo launches bill-payment service using toolbar as user interface
Source: Online Banking Report, Jan. 2010 *Close enough to be considered past decade
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