During the past 12 months, investors’ blind enthusiasm for anything Net-banking has reversed. It’s been lumped with e-tailing as a losing sector. We couldn’t disagree more¹. Net banking is not a digital catalogue like eToys or CDNow. It’s not reliant on advertising revenues like DrKoop.com or TheGlobe.com. It’s more an infrastructure product, supporting payments, purchasing, and security.

NetBank’s stock, the bellweather of the Net banking sector, has been in a free fall, despite little fundamental change in the company (although intererest rates have been on the upswing.)

¹Disclosure: OBR’s editor is currently long (and seriously underwater) on many of his favorite online banking stocks including NetBank.

 

In high-tech parlance, online banking is an “enabling technology.” In other words, a service that runs in the background, greasing the wheels of ecommerce. A weakness with many first generation bank Web sites is that they’ve been built as destinations. Banks hoped to lure customers using account data as bait, then assumed users would become so enchanted with this “convenience” they would magically reappear time and time again.

The problem with the bank-as-a-destination model is that it overlooks an important element of consumer behavior, NO ONE WANTS TO VISIT A BANK WEB SITE. People want to accomplish tasks, make or save money, communicate, learn, or be enter-tained. Net banking is only convenient if it helps get those things done better/faster/cheaper. Or, as cyber-pundit Esther Dyson put it, “(banking) is sort of like vacuuming. (it’s vital) but people try to reduce their vacuuming time. They don’t try to make it fancy or more enriching. Like electronic banking, you really want it to vanish.”

X.com for one, appears to understand this. Its goal is to become the preeminent “transaction” service on the Net. In just four months, the startup has grown to more than 1 million customers, a presence on more than 800,000 eBay lots (chart below), and combined with PayPal, more traffic than the next seven banks combined (Wells, BofA, Citi, First Union, Bank One, Wingspan, Chase).

 

What to Do Now

Making payments by email is something most of your online customers will use now and again. If they have to go to another company, especially an aggressive VC-backed startup such as X.com, you risk losing transaction business. To fight back, follow these steps:

1. Hook up with a vendor to “email payments enable” your checking accounts.

2. Make it free (for now).

3. Develop checking account alerts so users can better track epayment activity.

4. Get your customers using your program so that it spreads virally across your market(s).

EXTRA CREDIT: Develop a metapayments
engine that allows users to use and track any
online payment system directly from the
password-protected safety of your bank.