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