As we discussed last month , there’s a real void in the marketplace when it comes to premium online banking services. In today’s retail environment, where you can choose from hundreds of varieties of every product on the shelf, it’s shocking that Bank of America provides just a single flavor of online banking to its 11+ million subscribers. Granted, users choose which features to use, so the service isn’t truly identical for all.

But surprisingly, everyone still pays a single price: $0. For Bank of America, that price point has been an important and highly visible component of its strategic branding message. However, we view 100%-free online banking as a temporary aberration. U.S. banks have had their hands full during the past few years complying with new regulatory initiatives and fighting fraudsters from around the globe.

And it’s a relatively recent phenomenon that online banking penetration has surpassed 20% at many banks. Below that point, there aren’t enough customers to make a segmented offering profitable. So even though it will require extensive buyer education, we believe that by this time next year, at least one, and possible two or three, top-10 U.S. banks will offer premium online banking options.

The pioneer in this area is Online Resources, which began offering MoneyHQ, a premium online banking option, late last year. Early results are mixed. While Online Resources admits that client adoption has been slower than expected, it is pleased with consumer adoption, which stands at 9% of bill pay customers across the 45 clients who’ve been live for at least four months. In total (as of Sep. 29, 2004), 120 clients are signed, with 90 operational, representing 33% and 25% respectively of eligible clients.

Strategically, we have no doubt that MoneyHQ is the right direction, and the 9% initial adoption rate is encouraging. However, it’s difficult for ORCC’s community bank and credit union clientele to successfully educate the market on the benefits of premium online banking. It may take the multi-million dollar advertising budgets of the big players to really jump-start the service. We should know a lot more as 2005 unfolds.

Jim Bruene, Editor & Founder