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's that time of year again when U.S. banks and investment companies get a temporary boost from federal income tax refunds and stimulus checks.

This year, much of that largesse is expected to go towards paying down debt or stashed away into FDIC-insured deposits. But there are still some folks looking for better longer-term returns, so ING's ShareBuilder investment service is giving them a nudge with a $90 new-account bonus  offer (note 1) delivered in the March 25 email to Costco customers. This is higher than the $25 to $50 bonuses we've seen from them in the past.

The ShareBuilder offer was near the bottom of a lengthy email that arrived at 5:30 PM Pacific time yesterday. In total there were 54 products featured. ShareBuilder was the only financial product. 

Email from Costco (25 March 2009)

ShareBuilder landing page (link, 25 March 2009)

Note:
1. The $90 rebate applies to Costco Executive members. Business and Gold members receive $70. In addition, Executive members receive a 25% rebate in ongoing investing fees; Business/Gold receive a 10% fee rebate.

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.

I go online at a Tully's coffee shop every few weeks, but I don't recall ever being pitched something outside the usual Costa Rican blend when logging in to its free Internet connection.

But today, Charles Schwab owned the Tully's landing page, with three banners running across the page touting its High Yield Investor Checking among other things (see below). The two on the right have financial questions that, when clicked, take the user to an article on the Schwab.com site (see last screenshot).

The banner lower-left is more interesting. Little squares scroll across the banner in a very Web 2.0 way and, when clicked, additional info is delivered directly within the banner. Users stay on the Tully's page unless they click the Open an Account Today button.

The three scrolling graphics include:

• ATM fee graphic leads to an ATM calculator (see below)
• The High Yield Investor Checking graphic (not shown) leads to a description of that product
• The map leads to a short animated audio visual piece promoting ATM access and the High Yield account

Comment: This type of grassroots marketing can be done by financial institutions of all sizes. Just find a local coffee shop or cafe and see if they'd like a little cash to subsidize that bandwidth each month.

Schwab banner ads on Tully's landing page displayed after logging in to free WiFi at a coffee shop (Seattle, 3 PM, Friday, 5 Dec 2008)

Clicking on How much do ATM fees cost you? in the banner above opens the following tool in the window. >>>

Users can move to the slider to calculate the cost of a foreign ATM.

Schwab landing page after clicking on question in right-hand banners
(link, 5 Dec 2008)

Apparently, Citibank has been testing a new investment advisory service this summer, myFi, targeting certain Citibank credit card customers. Its first online mention appeared in a frequent-flyer forum, FlyerTalk, May 31 (here) and in the personal finance forum, FatWallet, June 13 (here). The bank has been testing mileage premiums for opening a myFi account and/or increasing spending on a Citi card.

The service consists of a Web-based investment area which will include trading and account-aggregation services later this year (see note 1), combined with telephone and in-person help from non-commissioned Citi Smith Barney advisors. The NY Times's Your Money columnist Ron Lieber tested the human portion of the offering in a Long Island branch and reported on it in his column today.

myFi's director of financial advice is Jonathon Clements, a long-time Wall Street Journal personal finance writer who recently left the paper. If he can instill his pragmatic personal finance outlook to Citi's offering, it would help differentiate it from similar offerings. Andy Sieg is managing director of the service.

The initial creative approach is to use a "financial wellness" theme. Today, the website is bare bones (screenshot below), with a few PDF files available for download. It's clearly a work in progress. The bank should slap a "beta" tag in the upper-right corner so that it's not unfairly judged as a complete offering.

Notes:
1. For more information, see our Online Banking Report on Account Aggregation.

The latest research from our Online Banking Report division is now available. It's a double issue (#152/153) released today entitled:

Online Investing Communities: Will social networking revolutionize saving & investing?

We believe social networking will eventually play a large role in online investing, and evidently we are not alone. We found 54 companies involved in investment-information exchange and only six of those have monthly traffic of 100,000 or more.

So, while we like the idea, it will take awhile to catch on. Only about 25% of the U.S. population owns individual stocks, and only a small subset of those make a trade every year. Furthermore, the prime social networking demographics, those younger than 35, are less likely to own or follow stocks. As a result, we project that it will be well into the next decade before adoption passes the 10% mark.

In preparing the report, we asked 400 U.S. online users their thoughts about the idea of sharing investment info in a social network setting setting such as Zecco Share or Motley Fool CAPS (see note 1). While there was a decent amount of interest from the under-30 group, 30% were somewhat or very interested, the overall enthusiasm for the idea among all U.S. adults (21+) was only 22%. See the full report for more research results and the resulting 10-year social investing forecast.

About the report
Subscribers may download the report here as part of their annual subscription plan. Others may purchase it here. The printed version will be mailed to subscribers later this week. 

For more information read the abstract here.

Note:
1. We asked U.S. online users for their opinions about social networking for investment information (fielded April 18-19, 2008, n = 401). The top-level results are including in the report. For more detail, All-Access subscribers may download a complete summary PDF document of all questions and answers or download an Excel file of the raw data. In addition, All-Access subscribers may use our online research tools to run their own cross-tabs and filters on the dataset. The dataset will be available next week through subscriber accounts at OnlineBankingReport.com.

While not the first bank to experiment with eBay auctions (see note 1), Zions Direct is the first to open a dedicated site within eBay and the first to sell "new-account vouchers" (see screenshots below).

Apparently the vouchers, listed in the gift certificate category, skirt eBay rules against auctioning financial services. The buyer of the certificate can redeem them for a cash deposit into their Zions Direct brokerage account. Zions Direct also auctions CDs every week directly on its website (see previous coverage here).

Bidding starts at $0.99 for the vouchers which range in value from $500 to $1,000. Bidders can pay via PayPal or check. The amount of the voucher is deposited directly into the buyer's Zions Direct account, which is required to redeem the voucher. So not only are buyers receiving cash at a discount, they also can earn frequent flyer miles and a free grace period if their PayPal account is connected to a rewards credit card. There is no requirement that buyers be new customers, nor are their limits on how many certificates can be purchased. In fact, bidder shecdoggy bought 5 of the vouchers totaling $4,000 at a total discount of $72.50.

So far the bank has sold 16 vouchers worth at total of $12,800 to 9 unique bidders for an average of $12.50 less than face, a discount of 1.6%. And there are currently 10 vouchers up for auction (see screenshot below). As more people have caught on, the spread has been reduced to less than 1% on recent auctions (see past and present listings here, Zions Direct eBay store here).   

Analysis
From a marketing perspective, this is brilliant, at least in the short run. For a cost of $15.95/mo for a basic store, and $30 to $40 per voucher (mostly in eBay/PayPal fees), the bank gets its name on eBay, numerous mentions in blog posts and press stories, a cool ad on its homepage (see screenshot below), positions itself as innovative and provides customers a nice little spiff.

Long-term, however, the terms will have to be adjusted or the bank will just be handing over easy money to the "gamers." The certificates will be purchased at face, or slightly over, by existing customers who rack up frequent flier miles and a do a little interest arbitrage during their credit-card grace period. The bank will need to lower the amount of the vouchers to $100 to $200 to reduce the potential for gaming, or if possible, restrict purchases to one per customer. Another cost reduction tactic would be to disallow PayPal payments, but that would reduce the effectiveness of the promotion. 

Zions Direct Auction Listing

Zions Direct eBay Store

Zions Direct Homepage (18 Jan 2008)

Note:

1.  In the late 1990s PNC Bank was the first to try CD auctions. In 2004, WaMu used eBay technology in a market test (see previous article here).

ING Direct will spend $220 million in cash to buy Sharebuilder, a unique Bellevue, WA-based discount brokerage, with upwards of 2 million accounts across 660,000 customers (see previous coverage here). The deal was first reported in the Seattle PI last week (here) and confirmed yesterday (here).

At an acquisition cost of about $100 per account or $300 per customer, it seems workable at face value. However, both Sharebuilder and ING Direct's core businesses have historically been relatively low margin, so it will take good execution to make the acquisition pay off.

Many (most??) of Sharebuilder's accounts have come through co-branded programs with 40 banks and 140 credit unions including National City Bank and Boeing Employees Credit Union. It's biggest brand name partner is Wells Fargo (see co-branded holiday promotional email from 2002 below), which not coincidentally, is also an investor in the company. It will be interesting to see if the company's financial institution partners will continue to promote Sharebuilder accounts now that it's a division of ING Direct.  

ING Direct has offered a small assortment of mutual funds to its customers for years (product page here), but they have not been widely promoted. With the Sharebuilder product, ING Direct will have another tactic to fend off the fierce online competition for high-rate deposits.  

Update (8 Nov 2007): comScore released interesting traffic data on the two companies today. In Sep 2007, ING Direct had 2.0 million unique users and Sharebuilder had 1.1 million and there was only a small overlap of approximately 100,000 users. So the combined entity would have an estimated 3.0 million uniques. However, most of the overlap represents customers of both companies. comScore data shows that 8.4% of Sharebuilder logins in Sep. also logged in to ING Direct that month. That means 50,000 to 60,000 Sharebuilder customers are already ING Direct customers, meaning the net account pickup is closer to 600,000.  

Wells Fargo/Sharebuilder email from 2002 (received 16 Dec 2002)

Wells Fargo co-branded Sharebuilder new account application (7 Nov 2007):

Since its September launch,  Your Credit Advisor <yourcreditadvisor.com> has posted several trendy lists to attract traffic to its credit card application portal. The latest entry, "Top 25 Web 2.0 Apps for Money, Finance, and Investment."

The article includes helpful summaries of each site's capabilities. It's a good jumping-off point to do a little outside-the-box thinking about Web-based finance (see also, Online Banking Report #135/136, "How to Web-2.0 your Online Banking").

This list includes:

• Two loan sites: Zopa and Prosper (see previous coverage here)
• Six personal finances sites: Three we've covered: Dimewise, foonance, ioweyou (see our previous coverage here) and three new entrants: NetworthIQ, MedBillManager and Wesabe, a fascinating social money site we'll cover later this week
• Five real estate sites: Homethinking, iiProperty, Rentometer (owned by iiProperty), Trulia, and Zillow (see our Zillow coverage here)
• Two miscellaneous sites: PayScale, cFares
• Ten investment sites: BullPoo, Motley Fool's CAPS, DigStock, FeelingBullish, GStock, MoneyTwins (foreign currency), SaneBull, StockTickr, WikiFinancial

Who'd have guessed banks would become a popular source of holiday gifts, other than good old-fashioned greenbacks of course?

Now that niche audiences can be targeted with online promotions during the holidays, many financial institutions are marketing financial products packaged as gifts. Prepaid Visa/MasterCards are the hottest item, but there's also potential in other areas. 

Gift cards
The second most popular gift item this year, after apparel, is expected to be prepaid cash cards. While the majority of the $20+ billion purchased will be direct from retailers, hundreds of banks and credit unions, such as Boeing Employees Credit Union (BECU) have joined the fray (see email below). If marketed right, financial institutions could gain a significant share of total sales. See our previous post here about integrating gift cards into online banking for more information.

Credit reports
Equifax is taking advantage of the giving season to market credit reports and/or FICO score gift certificates. The cost is $20 for a three-bureau credit report, $15 for the FICO score and explanation, or $30 for both (see email below). An even better gift would be a year of credit monitoring.

Investment accounts
For years, ShareBuilder has marketed "the gift of stock" during the holidays. This year, many of its partners, such as National City Bank, are offering a $50 gift card as a bonus for new accounts (see screenshot below). That way grandma and grandpa can give junior something that's good for him, an investment account for the future AND something he'll actually like, $50 to spend at the mall.

Piggy bank 2.0
For the younger set, ING Direct has for a year been selling The Savings Machine, a toy bank/calculator/ATM machine. And judging from the note on its website,* it's proving to be a popular Deal of the Month with a lower $17.95 price tag which includes free shipping (see inset). Several years ago, ING Direct reported nearly a million dollars in sales from its online merchandise store <shop.ingdirect.com>, an inexpensive way to get its name on the street.

*Note by the "Savings Machine" product page today: All orders placed from 4 Dec to 11 Dec will be shipped out the week of 11 Dec due to the large amount of backorders.

There's an interesting new buzzword in tech sources, crowdsourcing. You can probably guess the meaning: having users perform tasks that directly assist the business such as creating the core content (eBay, Flickr), editing the content (Wikipedia, Craigslist's "flag this entry"), or adding value to it (blog comments, trackbacks).

It's not a concept that lends itself to financial services, or does it? Marketocracy <marketocracy.com> is a website where 55,000 users run their own "mutual funds," beginning with one million in play money provided by the site (click on inset for screenshot). There is nothing particularly unusual about that as many brokerages and websites allow users to create model portfolios to track.

However, it's what Marketocracy does with these 65,000 user-generated portfolios that makes it innovative. It created a real mutual fund that tracks the portfolios of the 100 most accurate stock pickers in its user base. The Masters 100 Fund (MOFQX) <funds.marketocracy.com> has averaged an 11.65% annual gain since inception (Nov. 5, 2001) vs. 5.76% for the S&P 500.

Financial institution opportunities
While turning customers into investment advisers is a bit of a stretch for most traditional financial institutions, there are more mainstream functions that could be outsourced to end users. For example, a community calendar that users could update in real-time (wiki). Or a personal finance forum where customers post questions or describe their financial situation and solicit advice from other bank customers. To make it more credible, the bank could "vouch" for respondents with some type of "reputation" score. Prizes could be offered to the most interesting questions and/or answers to help spur adoption.

How about having customers design your ads? MasterCard tapped into the popularity of its "priceless" ad campaign with a "create your own priceless ad sweepstakes" earlier this year. The much-parodied ads are so widely followed that MasterCard has a dedicated website where the ads run <priceless.com> (see inset).

Really heading out of the box, how about creating a lending environment that combines the portfolio-management skills of Marketocracy with the person-to-person lending platform of Prosper? Masked loan applications could be posted online and users could choose which loans to fund and at what rates. Actual loan performance would be tracked over time, and the best virtual "loan officers" would receive recognition and prizes (and maybe a job offer). Taking this one step further, why not let the amateur loan officers put actual skin in the game, participating in the loans that were funded through the online loan market.

--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.

UMB Bank <umb.com> ran an eye-catching sweepstakes in mid-December (click on inset for closeup). Users were invited to register online to participate in a week-long stock-picking contest. The contest had its own URL <stockingstuffer.umb.com>.

The contest ran from Dec. 12 to Dec. 15. Top prize was a $1000 Target gift card with second receiving $750 and $500 going to the third-place finisher. Users were required to choose winning stocks from a list provided by the bank. Users could log in anytime during the week to see where they stood. The contest was open only to residents of Missouri, Kansas, Colorado, Oklahoma, Illinois, Nebraska or Arizona. An identical second contest ran simultaneously that was open only to UMB employees.

Analysis
Stock-picking contests are a tried-and-true way to gain Web traffic, email addresses, and add excitement to your website, and in UMB's case to reward employees in a separate sweeps. The bank ponied up for a decent prize pool of $2250 for customers and another $2250 for employees; the graphics were superb; the "stocking stuffer" theme played well around the holidays; and the contest was interactive with the ability to log in and check standing in near-real time.

However, the one-week duration caused a substantial decrease in its overall marketing value. Usually these stock-picking contests run for several months, with leaders posted at various intervals. The holiday theme used by UMB created a natural year-end deadline, so it should have started in early- to mid-November for maximum impact.

--JB

If you'd like to learn more about the latest financial interactive marketing campaigns, check out the Interactive Financial Marketing Database from our sister publication, the Online Banking Report.

Yesterday, I noted that TD Waterhouse was giving away iPod nano's for new accounts. Well, it turns out that is nothing in the high-stakes game of bagging higher-balanced brokerage accounts.

In the middle of its homepage, Charles Schwab <schwab.com> is offering a night on the town in NYC, including 2 or 4 Broadway show tickets, dinner, and even a night in a luxury hotel. What's the  catch you ask?

Just $100k, $250k, or $750k in new money depending on just what level of "free" you'd like (click on inset for details). The deposit does NOT have to made to a new account, but like TD, all retirement and institutional account are excluded. (Click to view the homepage screenshot, links do not work)

Start saving your pennies, you've got until March 15, 2006 to qualify. 

--JB

When I was a deposit product manager in the late 1980s, I worked on a project to bring out an equity indexed certificate of deposit. That project died, one more merger casualty, but I've always been intrigued by the product.

Over the years, a number of banks have offered market-indexed CDs, but they've never been much more than a niche product. That's OK. More than half of Amazon's book sales are from titles not found at retail bookstores. The Internet is a great place to mine the niches. Everbank has already proved that by moving nearly $1 billion worth of foreign currency-denominated deposits.

Analysis
The problem with equity indexed CDs is that they are crummy investments. By the time you pay for the hedging, marketing, and bank overhead, there's not much left over to pay the investor.

Let's look at Everbank's latest incarnation. The MarketSafe CD provides a total return based on a relatively complicated formula that averages S&P 500 prices at six-month intervals during the five-year term. In an up market, the CDs typically return 40% to 60% of the S%P gain (click on inset below).

The main selling point: Investors are guaranteed a minimum 5% total return over the five years (APY = 0.98%). The CDs are FDIC insured up to $100,000 with a minimum investment of $1500.

By Everbank's own figures (click on inset), its CD would have only beaten the S&P 500 index eight times during the previous 31 five-year periods beginning with 1970-1975. And by our estimates, the return would have beaten a normal 5-year CD more than half the time, 17 out of 31 periods. But only twice did the MarketSafe CD beat both the S&P and a regular CD.

Expected returns would be higher if the investor simply bought a mix of regular CDs and S&P indexed funds. The most conservative would be an 82% CD, 18% S&P mix that would still return all principal even if the S&P went to zero (assuming 4% CD APY). For the less conservative, a 67% CD, 33% S&P split would still return the principal even if the S&P dropped 40%. You get the idea.

But the target market for MarketSafe CDs is probably someone that never invests in equities. For that person, the MarketSafe is a reasonable way to put a little money "in the market." From Everbank's perspective, it's a nice addition to their unique deposit product line.

Addendum: View full screenshot of MarketSafe CD page

--JB

Every year it’s a battle to win approval for your business plans. This process, though far from perfect, is a necessary evil to ensure that only the most promising plans are funded.

Online banking, which in the U.S. generates little direct revenue, often requires creative spreadsheeting to show a positive NPV. Following are some of the positives to incorporate into a winning business case.

•       Stay competitive: improving account retention and increasing sales

•       Improve sales by differentiating your products and services with online functionality

•       Increase cross sales, especially credit/loan products

•       Increase online banking and bill payment transaction fees

•       Create a new stream of monthly and/or annual service fees with a premium service option

•       Use marketing dollars more effectively through targeted online promotions

•       Reduce costs through self-service

•       Improve customer satisfaction, retention, and cross sales

If you are looking for the biggest bang for your buck, look to online lending and small- and micro-business initiatives. According to Celent’s study across 1.5 million Digital Insight users (in 2001), online lending generates four times the combined value (NPV) of banking/bill pay. Business services were even more valuable, resulting in returns of nearly six times that of banking/bill pay.

Everbank made a sizable investment in a new online banking platform, a highly customized mix of Metavante and Teknowledge software. Previously, the bank used the S1 online banking platform.

Table 1

NPV from various online banking products

Source: Celent, 10/01  For a better understanding, read Celent’s Customer Retention and Cost Savings Drive Online Banking ROI, Oct. 17, 2001
(1) NPV over 5 years at a 50,000-customer bank; includes direct revenues, cost savings, and retention. (2) Per-customer figures are across all customers, on- and off-line, consumer and small business.

SmartMoney just published its annual stock broker rankings (Note: currently the 2003 survey is posted, the 2004 should be there shortly).

There are now two categories of discount brokers: Premium and Basic. THere was little movement in the premium category year over year other than Vanguard droping from second to sixth and E*Trade making its inagural entry at number 2. Last year it was ninth in the basic category.

The best premium discount brokers:

____2004_________2003
1. Fidelity..........Fidelity
2. E*Trade.........Vanguard
3. Schwab..........Schwab
4. USAA.............Quick & Reilly
5. T. Rowe Price..USAA
6. Vanguard.......T. Rowe Price

The basic category was more interesting with OptionsXpress coming out of nowhere to take the number one spot. SmartMoney's comment, "nearly flawless."

_____2004____________2003
1. OptionsXpress.......TD Waterhouse
2. Muriel Siebert........Muriel Siebert
3. TD Waterhouse......Bidwell
4. Ameritrade............ScottTrade
5. HarrisDirect...........HarrisDirect
6. FirstTrade..............BrownCo
7. ScottTrade.............FirstTrade
8. Wall Street Access...Ameritrade
9. BrownCo................E*Trade (moved to premium)
10. WallStreet*E.........Wells Fargo (moved to premium)

In these uncertain times, your 2004 budget won’t increase without a battle. Following are some of the major ways to make the case for increased investments. See also for a more thorough discussion.

•  Account retention

• Competitive necessity

• Premium service fees

• Incremental cross sales, especially loans
  and credit products

• Increased transaction fees

• More effective use of marketing dollars

• Cost reductions through self-service

If you are looking for the biggest bang for your buck, look to online lending and small- and micro-business initiatives. According to Celent’s groundbreaking study across 1.5 million Digital Insight users (in 2001), online lending generates four times the combined value (NPV) of banking/bill pay. Business services were even more valuable, resulting in returns of nearly six times that of banking/bill pay (see below).

Table 1

NPV from various online banking products

Source: Celent, 10/01  For a better understanding, read Celent’s Customer Retention and Cost Savings Drive Online Banking ROI, Oct. 17, 2001
(1) NPV over 5 years at a 50,000-customer bank; includes direct revenues, cost savings, and retention. (2) Per-customer figures are across all customers, on- and off-line, consumer and small business.

2003 Thinking Exercise:
Premium Online Banking Channel

If a picture is worth a thousand words, what’s a live demo worth? Even though we go to great lengths to describe innovative new services, it doesn’t really sink in until you’ve personally sampled it. To loosen the cobwebs, choose this year’s exercise, 1st Source Bank’s premium online banking (below), or any previous ones:

-          Alerts (2002): Use fyiAlerts from Charter One

-          Savings (2001): Open a savings account and setup automatic transfers at ING Direct

-          P2P Payments (2000): Pay for an eBay purchase with PayPal (now owned by eBay)

-          Account Aggregation (1999): Signup and use account aggregation at VerticalOne (now Yodlee)

2003 Exercise:
Premium online banking with 1st Source Bank

South Bend, Indiana-based 1st Source Bank ($3.3 billion) is one of the first financial institutions to launch a premium option for online banking customers. For this exercise, you don’t need to signup for an account. A visit to the bank’s website should give you enough food for thought.

Time Needed:

-          30 minutes

Material Needed:

-          pencil and paper

Instructions:

1.       Visit the bank  www.1stsource.com 

2.       Find the online banking section.

3.       Observe how the bank positions the various options for online banking. Make sure you look at the comparison chart.

4.       Now think about your own online banking features and benefits. How could they be organized into free and premium channel(s)?

5.       Create a comparison chart similar to 1st Source’s  www.1stsource.com/onlineFeatures.cfm . 

The value of personalized information delivery has not been lost on the Internet’s first full-service bank, Security First Network Bank. They have elected to use investment information as their first outbound messaging service. This fits their strategy of developing a platform for resale to other financial institutions that supports all financial services from checking to credit to insurance to securities trading.

But unless you have a strong brokerage and/or mutual fund department, you probably don’t want to get involved with investment information services right away. The major discount brokerages such as Schwab, start-up Web-based firms such as PC Quote, and most recently Microsoft, are chasing this niche with a vengeance. Let them fight that battle while you concentrate on outbound transaction account info.

Portfolio Tracking Services
SFNB has contracted with MacroWorld to provide quotes, portfolio tracking and investment-oriented news services. The free service is available to SFNB customers (and anyone else right now) via links from its Web <www.sfnb.com>. We recently tested the service with a fictitious portfolio of online banking companies (screenshot right) and found it very easy to set up and use. We especially liked the option to have portfolio values e-mailed on a daily or weekly basis (see next page). Alerts could be programmed with a few keystrokes to provide a heads-up whenever price or activity reached predefined thresholds. The only drawback is that you have to log-on or wait for an end-of-day e-mail to see the alert notice./p>

SFNB allows users to choose e-mail delivery of portfolio values on a daily or weekly basis.

The SFNB tracking services should appeal to the casual trader who likes to follow certain stocks but doesn’t have the time to go online and access quotes each day. Unfortunately, SFNB got a little carried away with some of the information provided. I question the need or desirability of providing bank customers (or anyone) with market timing advice. Leave that mumbo jumbo to the professional traders and stock speculators. Those people won’t be looking to a depository institution for investment information anyway. For the average bank customer, it’s confusing, frustrating, if not borderline misleading, to receive indecipherable investment advice.

Here are a few ideas for adding value to your online banking and investment services offerings.

Web-based services:

• portfolio tracking services with option to track price, volume, news items, historical comparisons
• price/volume charting
• triggered alerts (stock price, volume level, news item, etc.) greet user when logging in

E-mail/push services:

• triggered alerts (stock price, volume, news, etc.) are sent to user via e-mail, fax, or voice message
• transaction confirmations (e.g. payment received, trade executed, dividend received)
• open order reminders
• news items on stocks/industries tracked
• closing prices and portfolio values
• notification when mutual fund quarterly reports are posted to the Web (only funds held by user)