The latest Online Banking Report: 2011 to 2020 Online & Mobile Banking Forecast is now available. It was mailed over the weekend to all OBR subscribers. It's also available online here. There's no charge for current subscribers; others may download it immediately for US$495.

The report includes our latest 10-year online & mobile banking and bill-pay forecast. While our reading of the tea leaves is unlikely to be perfect, it seems clear that the demand for online banking in the United States has reached a plateau (note 1); in fact, we are likely within a year or two of online banking penetration peaking and slowly heading down.  

How could that be? Mobile of course. In fact, through the end of 2020, we project an increase of 40 to 45 million U.S. households using mobile banking, to a total of nearly 60 million. During the same period, online banking penetration is actually expected to drop by a few million households.

If we are right, sometime near the end of the decade mobile banking will surpass online (note 2), although by then, the two will look pretty similar. 

The report also includes a revised 10-year forecast for U.S. peer-to-peer lending. After more than doubling in 2010, we expect continued strong growth of around 40% compounded annually through 2020.

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Top innovations & trends of 2010
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The report includes a summary of the top ten innovations or trends during the past year (in alphabetic order):

• In-statement merchant rewards goes from zero to 100 financial institutions
• Loan preapproval wizards reduce uncertainty for applicants
• Location-aware mobile services for banking debut
• Mobile banking goes mainstream
• Mobile capture removes the paper from commerce
• Mobile payments gains real momentum
• Online personal financial management (outside of the bank) struggles
• P2P lending solidifies its niche
• Social media proves it can have real impact in financial promotions
• Transaction streaming and sharing gain a foothold

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New entrants on the list of the top 43 innovations of all time
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Each year we rank the top online/mobile innovations of all time (North America). There are a total of 43 products listed from 42 unique companies:

• 15 banks
• 5 credit unions
• 9 non-bank financial services companies
• 13 technology companies

The class of 2010, which was unusual for being all technology companies rather than financial institutions (note 3):

• Blippy for its automated transaction-sharing network
• Cardlytics for its merchant-funded in-statement online rewards service
• Finsphere for its location-aware fraud-targeting service, PinPoint
• Mitek Systems for its mobile photo bill pay

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Notes:
1. The penetration of online banking into U.S. households is relatively flat going forward. However, because each households accesses a larger number of financial accounts, growth at individual financial institutions is still growing on average.
2. Forecast is for the United States. Mobile has already surpassed all types of banking in some developing countries.
3. Perhaps this can be explained by the necessary focus of financial institutions on getting through the global banking crisis beginning in 2008.

I've been looking forward to the day when financial companies would begin to leverage mobile phone location to fight payments fraud. That day has arrived with the launch of Finsphere's PinPoint which began its private beta a few hours ago. We have 100 invite codes if you want to test the service free of charge (enter "Finovate" in the Promotional Code box on the signup page).

PinPoint is a subscription-based alert service that runs on top of online banking. Using Yodlee's aggregation technology, PinPoint monitors all of the user's card-based transactions, and sends email and text alerts on potentially fraudulent transactions based on a number of factors, one of which is the consumer's physical location as indicated by the location of their mobile phone. Pricing has not been finalized.

The service competes with aggregated alerts from OFM's such as Mint.com or Strands. But PinPoint's main competition is the card issuers themselves. The service holds several potential advantages compared to financial institution services (note 1):

• The addition of the consumer's location is a huge help in identifying potential fraud and reducing false positives.
• Receiving fraud alerts from a single, trusted source with a consistent design and methodology makes it more likely that the consumer will actually pay attention and take action. 
• The service provides contact info and help for reporting fraudulent transactions.
• PinPoint's entire mission is to identify fraud and help the end-user avoid paying for it; while financial institutions have similar high-level goals, they also have competing priorities that sometimes get in the way.  

The startup also plans to connect the service to credit bureau data where it will compete with the credit monitoring players such as Experian, TransUnion, Equifax, Intersections and others (note 2). The demo videos show a mobile app, but that's not part of the initial release.

Finsphere is a Seattle-based startup that's been operating in stealth mode since 2007. The company has raised nearly $20 million in two rounds from Bezos Expeditions, Mohr Davidow Ventures, Shasta Ventures, and Frazier Technology Ventures. The CEO and co-founder is Mike Buhrmann, a serial entrepreneur in the wireless/mobile space who originally worked at McCaw/AT&T. President Robert Boxberger is a former Wamu/Providian card exec (note 3).

Until today, press reports have been limited to reports of its first two rounds of venture funding (see previous Netbanker post). The company had developed a broad range of patented technologies dealing with location-based fraud tools. In addition to the consumer service launched today, the company has its eye on enterprise fraud-management tools.

PinPoint homepage (9 August 2010)

Activation screen
Users must confirm email address and mobile phone, then add one or more cards

Alert preferences
Users establish dollar thresholds for alerts, whether they want text and/or email delivery, and how often they want to receive then (daily or weekly)

Notes:
1. For more information on alerts, see the most recent Online Banking Report: Transaction Alerts & Streaming.
2. For more information, see Online Banking Report: Credit & Fraud Monitoring Services (August 2007).  
3. Check out the company's About page, where five top execs introduce themselves and provide a 60-90 second overview of the features and benefits of the service. A very good use of video.

Last week, the Puget Sound Business Journal reported on a Pacific Northwest stealth startup that's receiving a lot of attention from Silicon Valley, at least measured in dollars. The $10 million round for Finsphere is an impressive endorsement, especially given the apparent involvement of prominent VC Mohr Davidow.

There's not a lot we know about the company other than the founders are out of the wireless industry, and the company's services are described as "location-based transaction verification services." That sounds like using the GPS-based or triangulated location of mobile phone users to authenticate card transactions and/or online banking logins. Armed with the GPS reading, card companies would know that you (or at least your mobile phone) are where your credit card activity says you are, e.g., buying a tank of gas in Washington D.C.

With GPS capabilities coming to the iPhone next month, this could be a very large market indeed. If we are right about the product, we'll try to convince the company to demo at one of our Finovate conferences.