When we entered this century, pioneers looked to banks to safeguard their precious metal assets and make commerce on the frontier safe, reliable, and efficient. Now 100 years later, cyberspace pioneers want much the same: peace of mind they won’t lose hard-earned digital assets, and a convenient, reliable, and secure means of buying and selling goods and services online.

The American Bankers Association in a program with Digital Signature Trust, a subsidiary of Zions First National Bank, offers a digital certificate-based site verification program.

Banks can continue to be the dominant providers of secure ecommerce services if they quickly reorient their thinking from steel vaults and human security guards to data encryption and digital certificates. Here are some of the issues on the minds of your users. You might want to arrange a focus group, on or off-line, to explore the security concerns of your profitable customers.

eCommerce Safety Concerns

•  purchases at Web merchants and/or from individuals are free of fraud
•  checking account and credit card numbers do not fall into the wrong hands
•  all financial records remain confidential and kept from prying eyes of bank employees and others
•  bank deposits are safe
•  loan repayment records are not lost
•  credit report info is accurate and kept private
•  no one steals my identity, on or off-line
•  account records at all Web sites remain confidential
•  emails remain private
•  financial records stored on local hard drive are not stolen, lost, damaged, or hacked
•  Y2k and other catastrophic failures

Source: Online Banking Report, 4/99

Trust is a significant barrier to entry in financial services

During the past three weeks we’ve met with four start-up banking companies all looking to grab a significant share of the Net-based financial services market. We have varying impressions of their prospects, but we think all four underestimate the degree to which consumers distrust unknown financial services companies and unknown Internet companies. The combination of the two, a new Internet financial services company, will require a huge investment in brand and credibility building in order to make a go of it.

The best evidence for this is to look at account growth at the two pure public Net banks, SFNB (now part of Royal) and Net.B@nk. (Telebank is not included because it started as a telephone bank.) For comparison, we show account growth at the two soon-to-be-public Net-only loan providers, NextCard and E-Loan:

Net-Only Depository and Lending Companies

Source: company reports, 4/99

Notes:

(1) 3.5 years after launch

(2) 2.5 years after launch, through 4/30/99; of the 29,000 account total, 4,900 (17%) were generated in April 1999

(3) loans closed

(4) OBR projection of total loans closed through 6/30/99 based on actual production of 7,500 loans through 3/31/99