Over the years, E*Trade has been consistently innovative in both product development and marketing, two areas that provide natural synergies. The company didn't disappoint with its latest missive to existing customers. 

An email arrived yesterday afternoon (Thurs., 11 June 2009) and immediately grabbed my attention with its clever and timely subject line:

Re-plan Your Retirement with E*TRADE and Get Up to $500

Analysis
One thing I've heard consistently from my friends, no matter how secure their jobs, is that they will "be working forever" now that the Great Recession has slammed their net worth with the double whammy of a bear market and home-price declines.

So this is a great time to get in front of customers with new efforts to help them re-plan retirement with new investment ideas, asset rebalancing and just a general reboot of their portfolio. And it's also an excellent time to discuss 401(k) rollovers, as E*Trade did in this message, with an "up to $500" (see note 1) incentive to roll over a retirement account to the company (see landing page, third screenshot below). As Americans change jobs by necessity, there will be millions of retirement accounts in play. 

Security features in email
E*Trade also demonstrates another best practice to improve trust in customer emails: personalization. The company includes customer name and last four digits of their account number to help distinguish the message from fraudulent phishing attempts. E*Trade draws attention to the feature with a Security Enhanced icon on the top-right (see first screenshot below).

Clicking on the Learn More link drops readers to the bottom of the email message where product URLs provide direct-navigation alternatives to paranoid readers (see second screenshot below). I hadn't seen that before, a nice touch.

E*Trade email promoting 401(k) rollovers (received 11 June, 3 PM Pacific)

Security "fine print" at bottom of above message

Landing page for email offer (link)

 
Note:
1. Detail on the rebate:

• $500 for rollovers of $250,000 or more
• $250 for $100,000 to $250,000
• $100 for $50,000 to $100,000
• $50 for $25,000 to $50,000

It will be a long time before the new mobile application markets, Google's Android Market and RIM's Blackberry App World, get anywhere close to Apple's App Store in breadth or depth. Currently, there are 162 apps listed across all categories in the Android market and 88 for the Blackberry (North America), compared to more than 25,000 for the iPhone (U.S.).

However, Blackberry already has tied the iPhone in one sub-category, big-name U.S. financial services companies. As of today, each has four. Bank of America is the only one supporting both.    

*Blackberry App World also has an Obopay mobile payments app with ties to Citibank.

Financial institution opportunities: The list of participating financial institutions won't stay short for long. You must support iPhone and Blackberry users, the sooner you do so, the more free publicity you can garner. For more information, see our latest Online Banking Report, published today, Mobile Banking 2.0: iPhone Edition.

Blackberry App World Finance & Banking section
(9 March 2009, 10 PM Pacific)

In my pre-Super Bowl post about E*Trade's "baby" franchise, I wasn't aware of several other ways the company is using social media to increase awareness:

• Baby's Twitter page (screenshot #1 below and note 1;): This is a new effort launched Jan. 22, the same day the 2009 outtakes clip was released into the wild via YouTube and press release. The baby Tweeted a few times on the days leading up to the game, and a few since, but the funniest part was the 26 game-day Tweets that actually incorporated real-time events into the script. There are only 650 followers today, but that's up 150 since Monday morning -- not a bad start for a low-cost marketing tool. 
• Baby's Facebook page (screenshot #2 below): Also launched around Jan. 22, the E*Trade baby Facebook page already has 3,825 fans. The commercials are posted along with a photo album. 

The E*Trade homepage has also been used before and after the game to take advantage of interest in the baby ads. The baby dominated E*Trade's homepage the day after the big game (see screenshot #3 below of the Monday morning homepage). 

Lessons for financial institutions
You don't have to be a Super Bowl advertiser to use social media to support your advertising campaigns. Banks and credit unions of any size can use these relatively low-cost tactics.

Here are the eight key support elements to consider for your next campaign:

   1. Press release
   2. Blog entries
   3. Facebook page
   4. Twitter stream
   5. YouTube page
   6. Homepage placement
   7. Landing page
   8. Google keyword buys (see screenshot #4 below)

1. E*Trade baby Twitter page (link, 3 Feb. 2009)

2. E*Trade Facebook page (link, 3 Feb. 2009)

3. E*Trade homepage the morning after Super Bowl XVIII (2 Feb. 2009)

4. E*Trade is running Google ads on searches for "etrade baby"
(3 Feb. 2009, 6PM Pacific)

Note:
1. Thanks Jeffry Pilcher for the Twitter tip.

2. See our Online Banking Report: Bank 2.0 for more ideas.

Even before the next installment of its popular talking baby runs later today during the Super Bowl, E*Trade has already scored.

Through advance publicity and select print ads highlighting the "baby URL" <etrade.com/baby> (note 1), the online broker/banker has already landed more than 2 million views of the outtakes for today's Super Bowl ad. And the clip was posted to YouTube just nine days ago (22 Jan. 2009). 

The E*Trade outtake clip (below) currently ranks 13th on the most-viewed videos of the month at YouTube, an extremely high level of popularity for a corporate-sponsored clip unrelated to music or film.

Demonstrating the power of making YouTube's most-viewed list, the E*Trade outtake clip is only 100,000 views shy of surpassing the Trading Baby clip from the 2008 Super Bowl, a video that's been online for a full year.

Here's the view count as of 9:30 AM Pacific today (Feb. 1):

2.2 million   Trading baby from the 2008 Super Bowl (posted 1 Feb. 2008)

2.1 million   2009 outtakes (posted 22 Jan. 2009)

1.6 million   Banking baby from the 2008 Super Bowl (posted 1 Feb. 2008)

270,000      Mobile  baby (posted 30 June 2008)

All clips are posted on the company's official YouTube page (see below).

E*Trade's YouTube channel (link, 1 Feb. 2009)

E*Trade "baby" landing page six hours before the 2009 Super Bowl
(link, 1 Feb. 2009)

Note:
1. The E*Trade baby teaser ad ran in the 31 Jan. 2009 Weekend Wall Street Journal. The quarter-page ad, one of only six ads in the entire paper, ran on page W6 (West Coast edition).

In the early commercial Web era (1995 to 1998), five financial startups inspired me in terms of their innovative products and services: 

• E-Loan for mortgage
• E*Trade for stock brokerage
• Netbank for deposit-taking
• NextCard for credit cards
• LendingTree for lead generation

These were my go to companies for ideas and inspiration when covering the space in the mid-to-late 1990s. In those days, traditional financial institutions were just getting started and were not as far along in features and functionality. 

Sadly, two of the five have failed, NextCard in 2002 (here) and NetBank in 2007 (here). And the other three are struggling through the credit crisis.

The latest downer: This week, E-Loan, owned by Banco Popular, announced its exit from the online mortgage origination business. Reading the headlines, I first thought they'd thrown in the towel altogether. But it turns out they are discontinuing only direct mortgage originations. The company will continue to use its popular website (see traffic below) to attract potential borrowers who are handed off to other lenders, something it already does today for student, auto, personal and business loans, along with credit cards. This is a potentially lucrative fee-based business with zero credit risk.

It's a cautionary tale of how critical, and difficult, the execution piece is. These were industry darlings, always in the news and at the top of the search results. Yet, in financial services especially, you have to temper innovation with prudent underwriting and business practices. All three were brought down by credit-related problems. 

E-Loan traffic has stabilized at around 250,000 uniques per month:

I was searching Twitter today to see if any major brokerages were using it to reach out to customers. The only hit was E*Trade which is using Twitter to update its Complete Savings Account rates. It seems to be coming from the bank, but it's possible someone else, perhaps an employee or fan, is responsible for the two entries: the first on March 12 announcing a 3.45% yield and then on April 1 when the rate dropped to 3.01% (note 1).

Regardless of who's responsible, it makes sense to use the new channel for outbound communications. If nothing else, the 90 seconds spent creating those two entries have already generated a favorable mention in this blog. 

For those of you not familiar with Twitter, it's a communications tool that allows users to post short (140 characters max) updates about what they are doing, what they are thinking, or anything else. Unless the user chooses to make their updates private, anyone can read them, just like a blog post. That's why Twittering is sometimes called micro-blogging. But it's more like "broadcast instant messaging" for most people who's musing will be seen by just a handful of friends, family and/or colleagues.

For more info from an actual Twitter user, read Ron Shevlin's recent post.

Note:

1. I suspect it's an "unofficial" Twitter page because they didn't put APY behind the percentage, although that is spelled out in the short bio section in the upper right, and they are not using the company logo.

Even before the big game Sunday, E*Trade was showcasing its SuperBowl ads on YouTube. Six hours before kickoff this ad (inset) was displayed next to search results for "etrade," "banking" and other terms (note 1). The "trading baby" video had been watched just a few hundred times when I saw it yesterday; this morning, it has had more than 90,000 viewings.

The YouTube ad contains three links:

1. Clicking on the arrow launches the funny "baby trading" video embedded on that page
2. Clicking on the "Press to Watch" takes you to the E*Trade page on YouTube <youtube.com/etrade> where you can watch a series of commercials (screenshot below)
3. Clicking on "See all the E*Trade videos" takes you to this landing page at E*Trade's website (see screenshot below)

Later in the day on Sunday, E*Trade also added a link to the videos from its homepage (screenshot below).

The Commercials
E*Trade ran two ads within a few minutes of each other early in the second half. "Trading baby," shown above, uses an adult voiceover to discuss how easy it is to trade online. The second ad, "banking baby" (embedded below), showcases the company's high-yield savings account. This has to be the first, and probably last, time a savings account product received SuperBowl advertising exposure. It has 107,000 views in less than 24 hours.

Both ads ended on an upbeat note, saying that E*Trade was opening a thousand accounts per day, a great message against the backdrop of negative publicity the company received a few months ago with its subprime problems.

Screenshots:

E*Trade Ad Next to YouTube Search Results (3 Feb 2007)

E*Trade YouTube Landing Page <youtube.com/etrade>

E*Trade Advertising Landing Page <etrade.com>

E*Trade Homepage (4 Feb 2007)

E*Trade Google Ad (4 Feb 2007)

 Note:

1. Searches conducted from Seattle IP address: YouTube Sunday, Feb. 3, 9AM Pacific, Google Monday Feb. 4 at 10 AM 

<Updated 12/1/06 with more details>

Two new entrants in the so-called high-yield savings market launched this week:

• E*Trade Bank <etradebank.com>: Its new 5.05% Complete Savings Account was advertised in the Wall Street Journal today and took next-to-top honors in Google search results for "best savings accounts" (see end note 1, screenshot below).
• iGoBanking <igobanking.com>: The new online brand from Flushing Financial launched Monday with a 5.3% rate on an online savings account (see end note 2, screenshot below).

iGoBanking (click to enlarge)

As previously reported, Flushing Financial launched its entry into the online savings market. The 5.3% APY no-minimum account ranks as the fourth highest in the nation according to the Bank Deals blog (see list here). The rate leader continues to be E-Loan's at 5.5% (see our coverage here).

However, iGo can claim the highest no-minimum rate in the nation since E-Loan and the others require at least $5,000 to qualify for the higher rate.   

The bank will focus on deposits, CDs, and savings in 2007 and may expand to home equity and mortgage lending in the future.

Analysis
The website is attractive and relatively well designed. The online application is hosted by CashEdge (see related post here). Unfortunately, the outsourced application fails to maintain the look and feel of the main website and may cause a few applicants to second guess their decision to sign up (click here for a more thorough analysis of its application design). 

E*Trade Bank (click to enlarge)

E*Trade's Complete Savings account builds on the direct bank's lineup of award-winning products (see previous coverage here). The bank flat-out understands the market and the medium.

The landing page for the new savings offering is brilliantly laid out with Google-like simplicity using just 25 words of copy (other than the table and the below-the-fold fine print). Notice how they show specific competitive prices, including high-yield market leader ING Direct. But what most consumers will remember from the chart is the "6X national average" rate.

Finally, the "Open an Account in Minutes" and "Free, one-click transfers to and from any institution" address user concerns on both those issues. And the small padlock with E*Trade's protection guarantee helps users understand security issues.

End notes:

1. Search conducted at noon PST, Nov. 29 from Seattle IP address (see screenshot below).
2. Source: American Banker, 29 Nov. 2006 (article here)

Google search results for "best savings account"

E*Trade is running a clever teaser advertisement on MySpace today. The 200 x 175 pixel ad in the right-middle area of the user's homepage asks, "Are you willing to accept a $1.50 fee to see this ad?" (click on the inset right for a closer view).

Choosing "yes" results in another screen saying, "Are you sure?" while selecting "no" yields a "Good." Either way, a pitch for E*Trade's ATM rebate program is the final screen (click on inset left for a closeup). Users clicking through end up on the landing page shown below.

Analysis
Although it took me a moment to figure out the premise, that a $1.50 fee to view an ad is as absurd as paying that to use an ATM, it's a clever campaign. The company is sure to get good click-throughs, at least on the teaser ad. Whether the company signs up enough good checking accounts is another matter. But if you are courting young online users, you must take a look at MySpace (see NetBanker March 16).   

--JB

Flipping through the latest issue of SmartMoney magazine, it came as no surprise to see a full-page advertisement from Fidelity. But what caught my eye was the subject matter. Margin loans.

And this was no soft-sell pitch with smiling 50-somethings sipping Chardonnay on their deck. It was all business, showing how Fidelity's margin-lending rates fared against those of its major competitors. The hard-hitting approach isn't carried through to its website though, which opts not to show any comparative data.

E*Trade, one of the best financial marketers, is said to be offering teaser rates as low as 3.99% to encourage investment clients to transfer higher-rate debt to their margin accounts (WSJ, 4/20/06). However, its published rates vary from 6.74% to 9.74%. The retail banking sweet spot, loans of $50,000 to $250,000, are priced at 8.74%.

Fidelity doesn't go quite that low. Rates vary considerably depending on the balance, but under $500,000, borrowers pay 8.5% to 10.5%. Only those borrowing more than $500,000 pay an ultra-low rate of 5.5% (see inset for current rates).

Analysis
What's going on here? Brokerage firms are finding that customers are willing to borrow against their securities to finance all types of non-investment purchases. UBS AG's wealth management unit says that 75% of its $10 billion in margin-loan outstanding has been used to purchase things other than securities.

Expect more competition from brokerage firms as empty nesters and younger retirees finance portions of their lifestyles with loans against their investments. Deferring tax liability on portfolio gains is a big part of the decision to borrow. But there's also the psychological aversion to seeing investment balances decline.

Financial institution loan officers should be well versed on the risks of margin loans, and instead offer home-equity loans and cash-out refinances with similar rates and no risk of a potentially disastrous margin call.

--JB

The best time to grab the attention of your online banking customers is immediately after they log in. Many financial institutions post offers and important information on a "splash screen" shown to customers before they see their account info. PayPal has been especially active in this area, placing new info in front of users every month or so for the past four years.

Where's the second-best place to position an offer to online banking customers? In our view, it's the screen displayed after successfully logging out. At that point, customers have completed their tasks, but you still have their attention as they wait to see that they've successfully ended their session. Last month, we looked at Bank of America's preapproved credit card offer at logout (NetBanker Feb. 23).

E*Trade is another financial institution using the logoff-screen real estate effectively. Today, they displayed two offers designed to attract additional customer assets to the bank (click on inset for a closeup):

1. Free one-year subscription to MorningStar's stock-information service ($135 value) for transferring $20,000 or more into a new E*Trade Complete Investment Account (see the landing page below)
2. 4.4% teaser rate (good for three months) for deposits into the bank's Money Market Account. New customers earn the rate on any deposit amount, existing customers must deposit $25,000 or more to earn the special rate. After three months, rates revert to the normal, 3.6% for $50k or more or 2.75% for $5k to $25k (see the landing page below).

MorningStar offer landing page >>>

-

--

4.4% APY offer landing page>>>

--JB

Today E*Trade added yet another new feature to its website, the Intelligent Investment Analyzer. It sounds a lot sexier than it is, an eight-question asset-allocation worksheet. But that's the point. E*Trade is using classic marketing techniques to identify customer needs and concerns and design the solutions to address them.

The company's core messages touch on security, maximizing investment returns, minimizing loan rates, and so on. And the messages are delivered with an understated flair. For example, look at the homepage graphic above. It delivers the message in a number of ways including good color, an effective image of an open laptop displaying a colorful pie chart, and copy that emphasizes key benefits:

• Fast: "recommendations in minutes" and "one-click investing"
• Smart: "diversified," "optimizer," and "intelligent"
• Personalized: "custom recommendations"

Who wouldn't be tempted to click through to see what's behind the optimizer? Unfortunately, the questionnaire, powered by Thomson Financial, isn't particularly appealing (click on inset left for a closer view). And once completed, users are required to log in to their E*Trade account to view the "All Star" mutual fund recommendation designed to fit your self-described investment needs. But all in all, it's an excellent lead into the company's mutual fund area.

For more on E*Trade's string of innovations, select "E*Trade" in the topics reachable via the top navigation bar, or click here.

--JB

Wow. It's not often a press release rates an article in BOTH The Wall Street Journal and The New York Times. But that's exactly what happened today when E*Trade made the relatively innocuous announcement that it wouldn't hold its brokerage customers responsible when their accounts were defrauded.

Consistent with previous innovations, the online brokerage and banking powerhouse wrapped its new message with impressive graphics and copy (see inset above-left for graphic displayed on its homepage today). Clicking on Learn More leads to an impressive security area where E*Trade touts four main protective measures (click on inset above-right for a closeup)*:

1. Security tokens
2. Electronic statements with paper turnoff
3. Email alerts
4. Antiviral and firewall software, which can be purchased through a link to Norton (60-day free trial offer); users can also run a real-time scan to check for vulnerabilities

Analysis
It just goes to show you how skittish the public has become about online security. I'd wager that most brokerage customers are sophisticated enough to realize they will eventually get their money back if it's stolen from their account. So this is a non-event from a financial standpoint. E*Trade even admits that online fraud cost it only $2 million last year, less than the cost of one of their famous Super Bowl ads. The brokerage also said there were "fewer than 50 incidents," implying a fraud loss of approximately $40,000 per incident.

Evidently E*Trade's marketing department prevailed over its legal counsel and actually put the company's fraud-protection policies in writing. It's amazing that makes headlines in 2006 and may say more about the growing need to cover your behind to fend off the class-action bar even if it means scaring off customers.

We hope this prompts other financial institutions to take similar action. One of the main functions of financial institutions is safeguarding assets. Customers, online or otherwise, shouldn't have to guess whether certain types of fraud are covered. As any good lawyer would say, "Put it in writing."

--JB

*The screenshot displayed here is only the top portion of the security area, to download a screenshot of the entire page, click here.

Credit card companies have been poaching revolving balances from each other for years primarily through direct mail. It helped boost the share of early movers, such as Capital One. But once the tactic was widely copied, it dragged margins down for all.

The same technique has been used online with dedicated balance-transfer microsites posted by Bank of America and others beginning in 2003. The online balance transfer is better than paper because it can be interactive, prompting the user to make additional transfers, or to correct errors in the information input. However, it still requires the user to make a trip to the website to make the transfer.

Enter E*Trade's new Mileage Maximizer program, launched with a page-dominating color ad in Tuesday's Wall Street Journal. With the Mileage Maximizer, the bank encourages users to make purchases on their existing non-E*Trade rewards card, then have the balances AUTOMATICALLY swept to an E*Trade 8.9% APR line of credit each month. The bank's website is used to initiate and maintain the transfer process. But like recurring bill payments, once the sweep is established, it will occur each month with no interaction by the user.

E*Trade may well be the most innovative online financial services company. Here are some of the industry firsts they've logged over the years:

• 2001: MyLoanTeam from E*Trade Mortgage (OBR 73)
• 2003: Real-time funds transfers (OBR 96/97)
• 2005: 7-year online transacation archives (OBR 118)
• 2005 (March): First U.S. bank offering security tokens for online access (NetBanker 2 March 2005)
• 2005 (December): First virtual rewards card, Mileage Maximizer

--JB

Editor's Note: Mileage Mazimizer was awarded an "OBR Best of the Web" in our report on online lending published Jan. 31, 2006 (OBR 126).

As we searched Google today for debit card info, we noticed E*Trade on top of the paid search results with an AdWords listing entitled Platinum Visa Debit Card (it was the first "banner" on the top of the search results).

Interestingly, clicking on the link takes you not to a single-product pitch for a debit card, but to the broker's E*Trade Complete product which combines brokerage, banking, and lending into a single offering (click on inset for landing page screenshot).

Note: The graphic image appearing in the middle of E*Trade's landing page features a check, debit card, and security token overlaid on a screenshot of its online banking area.

Analysis
Showcasing its Complete product on debit card searches shows good mastery of search engine marketing by E*Trade. The online giant figures the type of person searching on debit cards will be intrigued by the total control promised by the package account. The out-of-scale security token also adds a reassuring touch to the image (see inset). 

-- JB

Today's American Banker (subscription required) reported that E*Trade will give security tokens to its high-roller customers, those that trade more than 5 times per month or who have more than $50,000 in their accounts.

As we reported in January, E*Trade has been testing the service with several hundred customers.

The quote of the day is from famed Gartner analyst, Avivah Litan:

However, banks face little risk from trying the technology, which has significant potential, she said. "If they get low adoption, they're not spending very much money. If they get high adoption, they sell a lot more services. I could see people switching to E-Trade if they offer this type of security."

Analysis
The days of simple username and password access are numbered. Don't be the last one on your block to install a security system, that's a sure way to become the target of cybercriminals, and even worse, scathing press reports when customers are victimized.

--JB

The Wall Street Journal published a story today that marks the growing importance of branchless online banks, Online Banks are Boosting Yields. Our sister publication, Online Banking Report, was the source for the article's market statistics on branchless banks, which have developed a small, but significant following around the world.

In the United States, there are several dozen branchless banks, but more than three-quarters of the total branchless bank deposits are held by two banks, ING Direct and E*Trade Bank. Total branchless bank* deposits in Q3 2004 were about $65 billion, or 1% of all U.S. deposits, or about 2% of all deposits under $100,000. See below for more specific details.    

Branchless Bank Deposits
As of Sept 30, 2004, the deposit totals of the major branchless banks are as follows:

ING Direct       $26 billion in 1.9 million accounts ($14,000/acct)
E*Trade Bank  $23 bil in 2.3 million accounts ($10,000/acct)
NetBank          $2.7 bil in 200,000 accounts ($14,000/acct)
Everbank         $2.3 bil in 370,000 accounts ($6,200/acct)
All the rest      $5 to $10 billion total
--------------------------------------
Total               $60 to $65 billion

Total US Deposits
The total amount of deposits held in U.S. commercial banks on 9/30/04 was $6.4 trillion including retail and commercial deposits.

If you look only at deposits of $100,000 or less (a proxy for retail deposits), total deposits were $3.7 trillion.

Although it takes some work to get the whole thing, E*TradeBank’s $175 new-account bonus is the richest we’ve seen for a new checking account. Here are the bonus levels (see file for download below):

$75 Open a checking account with at least $1000
$75 Begin a direct deposit of at least $1000 per month
$25 Pay 2 bills online within 60 days
$175 Total

For screenshots and the fine print, download the following file:

Download may_21_financial_innovations_etrade.doc

E*Trade Mortgage has a more pleasing overall appearance than IndyMac, but it doesn’t do as much to boost applicant confidence in the process and company. However, the new E*Trade branding provides a much-needed credibility boost.

(Ed. Note: The company and Web site was relaunched as E*Trade Mortgage on June 18. Our evaluation is of the previous LoansDirect product and Web site design. Many of the core features remain unchanged.)

 The Company

The company was originally launched in 1983 as Tricor Mortgage and renamed LoansDirect in 1999. When it was acquired by E*Trade on Feb. 1, it was already a major online player with a number 2 ranking on Gomez and one of the highest online loan volumes . E*Trade has originated nearly $1.5 billion in loans in the four months since it took over the former LoansDirect (Feb. 1 through May 31), with another $546 million locked in the pipeline. May volume totaled $494 million alone.

It appears E*Trade Mortgage may be on track to become the largest direct originator of online retail mortgages. In Q1 2001, it ranked behind Countrywide, LendingTree, and MortgageIT on Inside Mortgage Technology’s list of top originators.  However, Countrywide includes telephone originations in its total, so its true Internet total may be less than E*Trade Mortgage’s. And if its rapid growth continues, E*Trade Mortgage could outpace MortgageIT and LendingTree in 2001.

table 1

Gomez Scores: E*Trade Mortgage vs. IndyMac

Spring 2001

Source: Gomez Advisors, 5/01  Note: called LoansDirect on the scorecard.

Catching IndyMac

Even though IndyMac has the number one ranking on Gomez, E*Trade Mortgage’s score is so close, a mere 4 basis points lower (6.55 vs. 6.59), that statistically the two companies are tied for first. E*Trade Mortgage has been gradually closing the gap during the past three scorecards. In Fall 2000, it scored 22 basis points less than IndyMac (6.58 vs. 6.36). The gap fell to 8 basis points in Winter 2000 (6.52 vs. 6.44).
 

E*Trade Mortgage trails primarily because of its Ease-of-Use score, a full point behind IndyMac (see table 1, previous page). If the mortgage unit can maintain its customer focus in the aftermath of the merger, it could overtake IndyMac in the next scorecard, especially with its tighter integration to E*Trade and E*Trade Bank.

table 2

E*Trade Mortgage’s Best of the Web 2001 Features

Source: Online Banking Report, 5/01

E*Trade Mortgage Satisfaction Guarantee

1. No Obligation, No Application Deposits. At LoansDirect there is never an up-front fee to apply, and if you are ever dissatisfied with our service or our rates, you may cancel without any cancellations fees or obligation.

2. Guaranteed Low Rates and Fees. We are the lender, saving you middleman commissions and add-ons. If we can’t beat a competitor’s rate and fees, we’ll give you $500 at time of close even if you close with someone else.

3. Guaranteed On Time Closing. Work with an experienced online lender. We have performed thousands of loans online. Don’t rely on an “Internet start up” and lose sleep over closing deadlines. LoansDirect guarantees that your loan will close on time or we’ll pay you $500.

4. Guaranteed Fees. Once you are locked in and approved, LoansDirect guarantees that our Total Value Price quoted to you at the beginning of the loan process will not change at time of close. No more worries about how accurate a Good Faith Estimate is.

5. Our $100 Call Back Guarantee. LoansDirect guarantees you will receive a call from a loan representative within 60 minutes of submitting a completed online loan application during our regular business hours, or we will pay you $100 at the time of closing! This is one more way LoansDirect guarantees you will receive the service you deserve.

Source: Company Web site, 5/01

Like IndyMac, E*Trade Mortgage also provides up-to-date competitive rates and fees. One big difference, it doesn’t show its own price for comparison, leaving that somewhat difficult task to the borrower. 

 

My Loan Team is another superb touch. The innovative approach includes a private Loan Consultant (salesperson), Loan Coordinator (takes it through closing) and Loan Manager (the supervisor you can contact if there are problems).

Seen in this demo, E*Trade includes pictures, phone number, email addresses, and whether each staff member is currently in the office.

A brave feature from E*Trade Mortgage. Within 24 hours of the close of each loan, an email customer satisfaction survey is sent to all borrowers. The answers are automatically posted to this public Web area in real time. Although direct comparisons are difficult, E*Trade’s appears to score lower than MortgageBot, which also posts its scores to the Web. For example, 67% of MortgageBot users rated the overall experience Excellent, compared to only 43% at E*Trade. The scores are also shown in graphical format lower on the page.

E*Trade offers a useful and fast home value report from HomeGain. Any user (you don’t even have to register) can type in a street address and in less than 30 seconds have a full valuation derived from the home’s assessed value, most recent sales price, sales date, year built, number of bedrooms and baths, and home and lot size. User’s can change the data reported, e.g., add a bedroom and get a new estimated valuation. Finally, the service provides a list and map of other home sales in the neighborhood.

List of comparable sales in the neighborhood.

Map of comparable sales.

E*Trade’s Neighborhood Report provides census data by zip code compared to state and national totals. There was a small error in our report, which compared our Seattle neighborhood to New York state instead of Washington.

Report choices:

•    Demographics Report 
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After clicking on the DirectConnect button in the upper right corner, a screen pops up with four choices for immediate contact: Direct Messaging (aka online chat), Internet Voice with no need for a second line (provided by Centrecom), toll free voice, or email with promise of immediate response.

The company offers two application choices: Express Application, which covers only basic info and then moves the rest of the process to the phone; and Online Instant Approval, which is a complete mortgage application evaluated in real-time.

Express Application (page 1): Input form, page 1 of 2. Users can switch to the full application at any time and all information is saved from previous screens.

Express Application (page 2): Input form, page 2 of 2.

Express Application (page 3): Loan Choice. Note the “Low Cost Promotional Rate,” a no-points, $995 fee product (see next screenshot) that happened to be a very low-priced mortgage the day we stopped by. Users can also select from the usual laundry list of fixed and adjustable products, all with clearly stated APR, points and monthly payments. Guaranteed closing costs are one-click away (second column from the right).

Express Application (page 3b): E*Trade does a great job making burdensome fee information affordable and understandable. On this $100,000 loan application it charged a flat $995 guaranteed for all lender fees including credit report, appraisal, etc. They also listed an ESTIMATED $450 for other third party fees including escrow agent and title insurance; and below this table, another ESTIMATED $600 for prepaid interest.

Express Application (page 4): Review and Submit triggers a credit report and a call from a sales rep to finish the application.

Full Application (page 1 of 6): Users may switch to the Express Application at any time and your information is saved.

Full Application : Users may navigate to any section of the application prior to completing an earlier section.

Full Application (page 4): Pop-up help is adjacent to most questions. There are also calculators located by each numerical question to assist in answering.

E*Trade

www.etrade.com

E*Trade’s banner campaign hawking an airline frequent flyer mile bonus.

E*Trade (Palo Alto, CA) is offering United Airlines frequent-flyer miles for new accounts according to the following schedule:

Bonus Mileage Program

Source: company, 4/99

The company is encouraging multiple account openings by allowing customers to earn up to 50,000 miles in a calendar year through any combination of the above. For instance, a new or existing client could earn 50,000 miles by opening ten, $1,000 accounts; a total investment of just $10,000 that would earn two round-trip domestic airline tickets. Separately, the company is
rumored to be working on a rewards program tied to its credit card.

USAccess Bank,
a virtual bank from Porter Bancorp, launched on January 27 with a full service offering and grand plans.

The newest entrant in the Net-only bank field was publicly launched the week of Jan. 27. USAccess Bank is a newly formed unit of Porter Bancorp (Louisville, KY; $500 million), a privately held bank holding company. We also hear that First Internet Bank of Indiana (Indianapolis, IN) may open its virtual doors with a month.

Unlike the three Net-only banks that preceded it, SFNB in Oct. ‘95; Net.B@nk in Oct. ‘96, and CompuBank in Oct. ‘98, USAccess Bank launched with a complete product line that includes loans, checking, insured money market, CDs, and bill payment. The other three started with checking accounts and deposit products only. We like USAccess Bank’s implementation and will analyze it in detail next month (OBR 2/99).

When Carolina First spun off Atlanta Internet Bank (since renamed Net.B@nk) in July 1997 and hit an immediate jackpot (see table right), we expected many banks to take the same approach. The downside was small ($2 million investment in Carolina First’s case) and the upside so high ($60 million for Carolina First’s so far), we thought it would be a popular strategy in 1998 (OBR 8/97),  We were wrong.

It’s been 19 months since the Net.B@nk IPO and no bank has repeated this feat. In fact, the very first virtual bank, Security First Network Bank, was practically donated to Royal Bank last year (the deal closed in Sept. 1998) in a complicated deal that involved an equity investment in SFNB’s parent S1. But that was before the recent spike in virtual bank and broker stock prices (see table ).

Carolina First’s $60 Million Jackpot

Source: Company reports and stock prices, 2/3/99

Riding the Internet Bubble

Source: Yahoo Finance, 1/99

Buying tickets in the Internet lottery

The run-up in Internet financial services companies in the past few months has not gone unnoticed in the banking community. As a result, we expect 25 to 35 or more Net-only retail banks to open their doors this year, many with plans to go public as soon as possible assuming the IPO window remains open.

Many will begin life, like USAccess Bank, as autonomous units of traditional financial institutions. It’s kind of like buying a million lottery tickets, but with the odds in your favor. Even if the IPO bubble bursts, you could run the division as a sideline or sell it off to the many companies hungry for ecommerce opportunities.

Haven’t started yet? Take heart. Porter Bancorp went from inception to launch of USAccess Bank in about six months. So even if you have yet to start the project, you still have an outside chance to launch in 1999. But the concept won’t be nearly so novel, or lucrative, by year-end. If your bank has been dragging its feet, despite your impassioned pleas, you can at least route the Carolina First results for a satisfying “I told you so.”

If you still have a chance for funding, buy yourself BizPlanPro, hole up in a hotel for a week, and develop the plan that could propel you to Internet stardom in 2000 and beyond. We’ll repeat the basic formula (see table right) which has changed little from when we first reported it 18 months ago (OBR 8/97).

Creating YourOwnNetBank.com

1. Create an autonomous Net banking unit.

2. Stock it with talent from inside and outside the bank. You’ll need both perspectives for quick movement and credibility at the parent company.

3. Find a catchy “e-name.” You’ll probably have to buy it from one of the many domain-name brokers. Most names are fairly inexpensive.

4. Target a segment not currently served by the parent, e.g. eBay users, or as Carolina First did, consumers in a nearby metro area.

5. Jack up your rates to bring in accounts and deposits to begin a buzz about your company. Consider the extra half-percent a marketing expense.

6. Develop an innovative e-billing and payments program to show the Internet investment community you’ve got your handle on a new “business model.” Maybe even apply for a patent, that will look good in the offering prospectus.

7. Purchase high-quality loans from the parent on favorable terms to lock in a profit.

8. Go public with only a couple million shares of float to create upward momentum in the stock price.

9. Pray the bubble doesn’t burst before you are vested.

Source: Online Banking Report, 1/99

IPO Watch: Net-Only Financial Companies

Source: Online Banking Report, 1/99

E-Billing and Payment Index

*Previous articles are available in the OBR Digital Archives, www.onlinebankingreport.com

E*Trade

www.etrade.com

E*Trade (Palo Alto, CA) launched its new “financial hub” with a $100 million advertising campaign. One new feature is free email with spam blocking.

E-Loan
www.eloan.com

To look at the future of mortgage lending, visit E-Loan (Palo Alto, CA), the privately funded brainchild of two California mortgage brokers, Chris Larsen and Janina Pawlowski. Although Larsen and Pawlowski have been running a mortgage brokerage in Palo Alto for six years, the Internet version just launched June 30, 1997 in California. Coverage in 46 more states has been added since. E-Loan received its 1,000th loan application in late October, less than four months after opening its virtual doors.

Main Areas in E-Loan’s Web

•  Search for Rates
•  Recommendations
•  Qualify for a Loan
•  Monitor a Loan
•  Set up a RateWatch
•  Online Resources
•  About E-Loan
•  Lock a Loan (for customers only)

E-Loan’s Web offers a number of devices to engage mortgage shoppers. For instance, in Monitor a Loan, users input a few bits of info about their current mortgage to see if the company can find a better deal from one of the lenders it brokers loans for. E-Loan’s methodology is similar to other refi calculators available online. But what distinguishes E-loan from the others, is that the lender doesn’t leave users hanging after performing the mathematical calculation. E-Loan offers an “apply now” icon whenever they find a money-saving loan program. If it can’t beat the loan today, the company offers a free
e-mail service to let users know when rates dip low enough for a refinance to make economical sense.

E-Loan.com banner on www.moneyclub.com .

We made our first visit to E-Loan after noticing its banner (above) running on Internet Finance Corp.’s MoneyClub Web www.moneyclub.com , a personal finance site unrelated to E-Loan. The online lender is also mentioned in the “other resources” section of Intuit’s new mortgage Web.

E-Loan’s user-friendly headline on its Web page and brand new E*Trade-like logo.

E-Loan does a good job maximizing its search engine appeal. From the title of its Web, “E-Loan - save 80% on fees!” (the title is what appears on search engine listings and as the default name when you save the address as a bookmark), to its extensive use of META tagged keywords (META tags are invisible to the reader, but are picked up by search engines), the Web builders at E-Loan know what they are doing.

We like how E-Loan incorporates its key benefits right into its logo on the top of its first page (see above). They’ve even chosen a type style nearly identical to that of E*Trade, the high-profile pioneer in the online brokerage industry.

E-Loan’s old front page design included a RealAudio recording of a broadcast from c|net radio.

Internet lending start-ups need to remember it’s not enough to have a catchy name, perfect Web address, and good placement on search engines. The companies are still unknown commodities, and consumers are going to be wary, rightly so. That’s why the c|net linkage (screenshot above) is so important. By clicking on the link, users hear a five-minute interview with President Chris Larsen. It’s like a five-minute radio commercial, but much more believable. All-in-all an extremely effective marketing device.

The start-up also included its physical address and state of California license info on the bottom of the first page. But in its latest Web redesign in late October, the c|net linkage has been relegated to the About E-Loan section and the license info has disappeared altogether. We think that is a mistake.

E-Loan’s RateWatch is the best rate update service we’ve seen (see p. 8). Why? It’s really a rate page in disguise. The first thing a user does is enter rate targets for up to three different mortgage types. In the example below, we indicated an interest in a 1-yr ARM under 5%, or a 15- or 30-yr fixed mortgage at 7% with no more than 1 point. The first thing E-Loan does is check its current product inventory to let you know if they have something that meets or beats your price parameters. If so, up pops “rate available” and a bright blue “apply now” icon.

Only after you’ve had this initial opportunity to buy, does the broker give you the option to set up a daily rate update on your three target loans. To do so, you simply verify your e-mail address at the bottom of the page and press “submit.”

E-Loan’s free RateWatch provides daily status of up to three loan programs by e-mail.

“Monitor a Loan” provides an analysis of the user’s current loan vs. other loan products available.

The beauty of E-Loan’s approach is they never stop selling, but they provide so much value that the user barely notices. In Monitor a Loan: Compare your current mortgage to the market (screenshot above), users provide the details of their current mortgage, then receive an analyses of a variety of money-saving refinance options. A summary table is presented and users can opt to drill down to see more detail on savings projection, Net Present Value, etc. Naturally, the company provides an opportunity to apply now, or set up an e-mail RateWatch.

Some lenders do a good job moving users through the buying process, then fumble when it comes time to take the application. Not so at E-Loan. They continue to provide useful bits of advice every step of the way. On the first page of the application they offer four choices:

• apply online with secure server
• apply online with standard server
• order hardcopy application forms
• print out a set of application forms

At the bottom of the page they provide timely reassurance regarding the privacy of the application:

• For your comfort, our on-line applications do not require account information.
• When selecting an online application, you are told:
• The form below has been customized for a purchase preapproval. Please note that you do not have to answer every question on the application. Missing information can be forwarded to E-Loan once your loan is in process.
• Finally, for those chickening out, a chance to select a different option:
• If you don’t want to apply over the Internet, please click here for other options.

Lest you think we’ve lost our critical eye, E-Loan could improve in several areas. The lack of an 800 number for questions seems a glaring omission, but it’s probably to keep costs down. I would be surprised if the company didn’t expand its telephone support soon. Other areas for improvement include:

• expand online help and FAQs
• provide real-time online sales support (via chat)
• provide more background on the company and principals to give prospective applicants a better sense of the company’s stability
• provide more simple tools, such as payment calculators, to complement the advanced analyses already available

• company was launched on June 30, 1997
• received 1,000th loan application Oct. 27, 1997
• has marketing agreements with NewRealty.com  www.NewRealty.com an Internet-based real-estate brokerage; buyer’s broker JV Pinto and Associates; and luxury home-builder SummerHill Homes
• E-Loan is listed on Intuit’s QuickenMortgage Web site in the Mortgage and Real Estate Directory  mortgage.quicken.com
• E-Loan brokers loans through the following lenders among others: American Savings Bank, Bank of America, Bank United/Commonwealth Bank, CMG Mortgage Corporation, Countrywide, Flagstar, Great Western/Sierra Western, Headlands Mortgage, NationsBank Mortgage, North American Mortgage Company, Norwest Mortgage, Western Financial, World Savings

At E-Loan Christian Larsen, President, and Janina Pawlowski, CEO, are co-founders, 650.617.0403, janina@eloan.com . Rick Hutcheson is President of Internet Finance Corporation 415.427.1030, rick@moneyclub.com . George Marcus is Chairman of SummerHill Homes. John Pinto is President of JV Pinto Associates: Patrick Boyle is President of www.NewRealty.com , 415.325.1213.

Tradewell Discount Investing
www.tradewell.com

Last month we reported how difficult it has proven for American Express to leverage its brand name in the area of online trading. Despite an estimated $30 million investment, they reportedly had only 10,000 accounts compared to the 750,000 of industry leader, Charles Schwab. This month comes a report from Financial NetNews that Tradewell has suffered similar results. According to the newsletter, Tradewell has only 1,039 accounts despite a $2 million marketing investment, an acquisition cost of more than $1,900 per account. This compares to a $75 acquisition cost for each of the 32,000 accounts booked in second quarter by E*Trade according to CFO Stephen Richards. AmeriTrade, parent of Aufhauser, Ceres Securities and eBroker, recorded acquisition costs of $312 for each of 24,000 accounts booked in the latest fiscal year, according to Pete Ricketts, Director of Corporate Development.

Contact: Steve Schoenfeld is CEO at Tradewell, 717.234.8484.