Last year (OBR, Oct. 15, 2001), we projected that by year-end 2002, 27 million (range: 23 to 31 million) U.S. households would be banking online. Actual results appear to be slightly higher, with 28 million online banking households expected on Dec. 31 (range: 25 to 30 million).

Looking at the remarkable growth during the past two years, the payments area revealed the biggest upside surprise with the huge uptick in direct bill-pay at billers’ Web sites. This activity grew from an estimated 1 million users at the beginning of 2001 to 12 million at year-end 2002. Next year, we project another 50% gain to 18 million users. 

Not only is online banking penetration growing, but the level of usage is also increasing. Power Users, households that access bank accounts AND pay bills, have grown
5-fold in the past two years, from 3.5 million to 17 million (see Table 2). Next year, we expect another 5 million new power users, ending the year at 22 million. However, less than half of the power users use their bank’s pay-anyone bill-pay service, electing instead to go directly to the biller’s site to settle the bill there. Pay-anyone services continue to struggle to gain a mass audience.

For 2003, we project an overall growth of 4 million new online banking/bill pay households (range: 3 to 6 million), about one-third fewer newcomers compared to the 6 million added in 2002. Also the rate of growth will slow to 14% from 2002’s 27% (range: 8% to 20%). Online banking penetration is projected to grow to 30% of U.S. households (range: 25% to 34%).

Table 1
Online Banking Forecast Summary

U.S. households using online banking and/or epayments*

Source: Online Banking Report projections based on industry data (+/- 20%), 10/01; *see Table 4, for definition

Table 2
Online Banking¹ and Bill Payment Forecast
millions of U.S. households using online banking and/or bill payment each month

Source: Online Banking Report, 11/02                   HHs = households                   n/o = not offered

Table 2 Footnotes

1)       See account definition, in previous post

2)       Household has used at least 1 of 8 online banking/payment services during the past 6 months (+/- 15%)

3)       Household has used at least 1 of 5 statement access services during the past 6 months (+/- 20%)

4)       Includes any insured deposit account (does not include brokerage cash accounts or money market mutual funds) (+/- 20%)

5)       Includes users accessing credit and charge card accounts online even if they don’t use an online checking account (+/- 30%)

6)       Includes users of account aggregation (e.g., Yodlee, uMonitor) at any site, bank or non-bank (+/- 40%)

7)       Subset of account aggregation; a system for monitoring loan payments and balances (+/- 50%)

8)       Includes email notifications and statements (+/- 30%)

9)       Household has used any of 3 epayment services during the past 6 months; does not include online purchase using a credit or debit card (+/- 25%)

10)    Pays bills to multiple billers at a third-party site (not the biller’s site); the third party can be a bank, non-bank, Web site, Quicken, or Money (+/- 25%)

11)    Remits/sends money to any person or business using email payments, e.g., PayPal; does not include online POS payments using PayPal at a cash register (+/- 35%)

12)    Pays bills directly at the biller’s Web site, or directly with the biller in response to an email message (+/- 35%)

13)    We have less information on worldwide usage, so our estimate (+/- 35%) is less precise than for the United States (+/- 15%)

Table 3
Online banking market penetration: 2002 vs. 2007 vs. 2012

percent of U.S. households banking and/or paying bills online*

Source: Online Banking Report estimates, 11/02, +/- 15%

*Includes active users of any of the following online activities: checking/deposit account access, credit card account access/payment, electronic bill payment, or email payment

Table 4
What Others are Saying: Topline U.S. Online Banking Forecasts from Major Research Companies
millions using online banking and/or bill payment each month

Source: Companies, 9/01 through 11/02

Notes:

(1)       Month/year the most recent data was collected

(2)       Estimates from 2001 and earlier were number of individual users, 2002 and beyond are households with at least one member using online banking; the figures are relatively comparable because up until recently very few households had more than one person using online banking

(3)       Year 2000 estimate was made in Dec. 2000, other estimates from May 2002

(4)       As cited by the Wall Street Journal, 9/4/2002

(5)       Estimates are not year-end, the data is collected in late first or early second quarter of each year; we assigned its market size estimates to the prior year’s year-end, e.g., we assigned the March 2002 estimate to the year-end 2001 column

(6)       Published new online banking and lending forecast on Oct. 21, 2002; at press time these forecasts are available to Jupiter Research subscribers only

(7)       Estimates are for mid-year; includes households that had paid at least one bill online at any site (biller, bank, other) during the past month; 2010 forecast is 44 million, 39% of all households

(8)       Data from March 2000

(9)       Data from March 2001

(10)    User base as of Sept. 2001 includes: 30.3 million tracking balances online, 17.6 million transferring funds online, 32.2 million doing at least one of the two; in Feb. 2002, Digital Insight quoted Gartner as estimating that 18.3 million households banked online at year-end 2001

Table 5
Comparison of Online Banking Definitions: What’s Tracked

Source: Companies, 11/02
*Often left to the interpretation of the survey respondent; who may or may not consider these activities part of “online banking”