Summary
Looking at the data from Compete's consumer panel, there were several significant swings in activity compared to a year ago (see note 1):

• Credit card applications  up 37%
• Checking account applications up 28%
• Home equity applications/leads (see note 2) down 34%
• Refinance applications/leads up 41%

 Commentary

• Credit cards seemed to settle down after the large jump in March. Both shoppers and applicants were down 1% compared to March, but year-over-year applications were up 37% (in comparison, last month card apps were up 53% compared to a year earlier)
• Deposit shopper volume stayed relatively consistent except for checking which saw a 9% increase. However, applicants for savings and high yield savings dropped 17% and 12%, respectively. Last year, high yield savings accounts were more in demand, with 50% more applications in April 2007 compared to April 2008. Declining interest rates appear to be impacting consumer demand. 
• In the home-secured sector, there was more activity in the refinance sector with a 4% gain in shoppers and a 3% gain in applications compared to last month. Compared to a year ago, refinance apps were up sharply 41%. 
• Purchase mortgage activity was flat.
• Home equity showed a significant decline, with shopping down 8% from March and down 17% from a year ago. Application levels were flat compared to last month, but down 34% year-over-year.

About the Financial Services Scorecard
A year ago, we introduced the Financial Services Monthly Performance scorecard produced by Compete. It summarizes the overall performance of 23 large U.S. financial institutions and lead-generation sites. Refer here for the detailed methodology as well as companies tracked.

Notes:
1. Year-over-year comparisons were added to the chart beginning in March. Because of ongoing methodology tweaks, the percentages in this table may be slightly different than if you went back to the data from a year ago and calculated the change. 

2. Leads/applicants = Leads or applications depending on whether the site being tracked is a lead generation site or an actual lender.

No one said it was easy being a startup, especially a "web 2.0 lender" in the middle of major credit turmoil. Lending Club, which had to shut down the retail lending portion of its service in April, is preparing to put the second P back into its P2P loan service (see note 1).

A big part of that process is filing with the SEC so the company can sell retail securities backed by its loans. For lenders, it won't be much of a change. The securities will be backed by the individual loans, just as if it were a standard loan. And at least initially, the securities cannot be resold. However, in the filing, Lending Club says it is planning on creating a secondary market for the securities through its platform. 

Lending Club posted an update on its website announcing the filing.

Lending Club discloses $500,000 monthly burn rate
Luckily for the company's followers, and competitors, the S-1 filed Friday (20 June) sheds light on what would usually be known only to its investors and creditors, the privately-held company's inner finances. The company disclosed that during the fiscal year ending March 31, 2008 it experienced:

• negative cash flow of $6 million
• total net loss of $7 million on revenues of $450,000; the revenue total includes $200,000 in interest on deposit balances   

Lending Club itself is a significant lender on the platform
Another interesting disclosure: More than half the loans originated through the Lending Club platform have been funded by the company and its creditors/investors, even before it had to stop taking new retail loan commitments April 7.  That's an interesting dynamic for a so-called person-to-person lender. Because Lending Club sets the market clearing rates, it's funding did not compete directly with the retail lenders, i.e. Lending Club stepped in to help fund deals that retail lenders had not fully funded. However, had the company not put so much money into the system, borrower rates could have floated higher, potentially increasing lender yields (note 2).

As of June 10, 2008 only $6.4 million of the loans made through the platform have been to "retail lenders." Later in the S1, Lending Club discloses that it has funded $7 million of the $15 million loaned through the platform as of March 31, and then $1.6 million of the $3 million loaned after March 31. That leaves Lending Club holding $8.6 million of the $18 million loaned through the platform.

The lending was financed primarily through loans from Silicon Valley Bank ($3 mil), Gold Hill Venture Lending ($5 mil). Also, through March 31, company insiders and investors had lent about $0.5 million.  

Other stats from the S-1
Other numbers (as of 31 March, 2008 unless indicated otherwise):

• $1.8 million spent on marketing, of which $270,000 was advertising
• $1.8 million spent on engineering
• 23 full-time employees
• Average loan amount per borrower is $9,100
• Number of loans = 1,669 worth $15.2 million (through 10 June 2008)
• 150,000 website visitors in March
• Average amount lent per loan per lender = $75
• 50% of loan volume has been through LendingMatch that automates the process
• $8.9 million had been outstanding for more than 45 days and had been subject to at least one billing cycle, of that amount 98.3% was current, 0.88% was 15- 30 days late and 0.87% was more than 30 days delinquent. No loans had gone into default which is 120+ days delinquent
• On p. 48 is a detailed table of home ownership. job tenure, annual gross income and debt-to-income ratio by Lending Club credit grade

Loan purpose:

• 50% refinancing high-interest credit card debt
• 35% financing one-time events such as weddings, home improvements or medical
• 15% small business financing

Notes:
1. For more info on person-to-person lending see our Online Banking Report #148/149

2. I say POTENTIALLY increased yields. That would depend on whether the borrowers accepted loans at higher rates. And higher rates would lead to lower volumes, so even though interest margins would be higher, there could be substantially fewer deals. And that also increases the risk of adverse selection with only higher-risk borrowers accepting the higher rates.

Did your recycling bin feel a bit lighter last quarter? According to Mintel Comperemedia, financial service direct mail was down 10% in the latest quarter:

Total
Q1 2008:  4.2 billion pieces  Down 10%
Q1 2007:  4.6 billion pieces

Credit cards
Q1 2008:  2.6 billion pieces  Down 14%
Q1 2007:  3.1 billion pieces

I'd like to think that online marketing has turned the corner and is finally making a dent in traditional direct marketing. But it's probably more likely that card companies, using stricter underwriting, simply had 14% fewer credit-worthy people to mail to.  Plus, a few more people are opting out of snail mail (see note below).

Assuming there are 80 million credit-worthy households in the United States (out of 110 million total), the average household received 53 mailings in first quarter. If you are prime or alt-prime credit, you likely saw little-to-no change in your junk mail pile. 

Note: Photo Credit
Proving once again that you can find anything online, the picture above is from Jason Carter's blog where he is collecting credit card offers. This is his first-quarter haul, 23 for his wife and 7 for him. While that is slightly below the national average, Jason has been actively opting out of direct mail offers, so it is not a representative example. 

Two months ago we published a table (here) showing active users at the leading online personal finance startups. Below is the table, updated with March traffic and the addition of one more player: Bank of America.

The bank, which offers a full-featured online personal finance management solution called My Portfolio, powered by Yodlee, has 2.5 million active users, according to BofA exec Marina Moore (note 3). That's an impressive 10% of the bank's online user base, and about 6x the total user base of all the online startups combined (note 4). 

For more information:

• Online Banking Report (131/132): Personal Finance Features for Online Banking
• Online Banking Report (142/143): Social Personal Finance
• Our FinovateStartup Conference April 29 in San Francisco, where Buxfer, Expensr, Jwaala, Mint, and Wesabe will present the latest in online personal finance features

Notes/Sources:

1. Users: per BusinessWeek Online, Feb 2008, figures are reported by the companies and may include inactive users; Mint has been updated to 180,000 from 130,00 based on new figures reported in the Bank Technology News article published in April 2008

2. Traffic: per Compete estimates of website traffic for March 2008, retrieved April 21, 2008. Compete estimates traffic from its online data and can be off by a factor of two or three-fold for smaller websites.

3. As reported in a Bank Technology News article published in April 2008.

4. This table does not reflect all the players, such as Intuit's new Quicken Online, just the ones highlighted in the BusinessWeek article.

Summary
According to data from Compete's consumer panel, both applicants and shoppers in all segments dropped in February. Recession fears appear to be negatively impacting sales activity. However, conversion rates stayed relatively constant except for credit cards, indicating that those still shopping are serious buyers. 

Commentary

• The credit card industry saw a slight decline in both shoppers and applicants (note 1). This has been the case for the past few months following the large holiday push by the credit card companies. Conversion dropped significantly to 23%, down 6% from January and down 9% from December. However, it's back to where it was in second quarter 2007, so it may be more of a seasonal drop than a falloff in demand. 
• Deposits saw losses across all three segments, especially high-yield savings which was down 25% in applications, as the Fed's rate cuts trickled through the banking industry. In checking, all but two competitors tracked saw decreased application volumes. 
• Refinance mortgages had the biggest drop in February, posting a 30% decline in shoppers and 19% in applications. Purchase mortgages saw a similar decline in applications (down 18%), but only an 18% drop in shoppers. 
• The home equity segment fared the best in the home loan category with 10% fewer applications and an 8% drop in shoppers.
  

About the Financial Services Scorecard
In April, we introduced the Financial Services Monthly Performance scorecard produced by Compete. It summarizes the overall performance of 23 large U.S. financial institutions and lead-generation sites. Refer here for the detailed methodology as well as companies tracked.

Note:
1. There was a change in Compete's methodology for measuring credit card shopping activity, so February's count January's cannot be compared. However, the 4% decline shown in the chart is correct, reflecting the change from what January would have been under the new methodology. 

Last week's post on P2P lending traffic prompted several comments on how worthless website traffic is as a metric, especially when the two major players make their loan-production numbers public. With that in mind, I present the Q1 total loan production for Lending Club and Prosper.

While Prosper still had twice the overall loan volume of Lending Club in Q1 ($21 vs. $10 million), Lending Club is closing the gap in the prime/near-prime market (FICO 640+) originating two-thirds the volume of Prosper in March ($4 vs. $6 million). But if you take into account Lending Club's more stringent debt-to-income requirements (max 30%), the newcomer actually surpassed Prosper in these lower-risk loans ($4.1 vs. $3.7 million in March).  

While the two-horse race is an interesting sidelight, the more important statistic is industry growth. In Q1, Prosper and Lending Club combined for more than $30 million in originations, up $10.7 million (55%) compared to about $20 million in Q1 2007. Only $3.4 million of the Q1 total (17%) was subprime, compared to $7.0 million (36%) a year ago.

Loan originations doubled in the prime/near prime (Prosper grades AA to C and all of Lending Club) ending the quarter at just under $27 million.

Why so much attention to a tiny sliver of the $2.5 trillion U.S. consumer loan market? It's new. It's different. It's social. And it's an experiment in online finance we get to watch in real time thanks to the transparency of the lenders. For more info on the market, see our recent Online Banking Report on P2P lending.

Q1 2008 Loan Volume: Prosper vs. Lending Club
in $ millions (U.S. only)

Source: Online Banking Report compilation of company data, 2 April 2008
*Loans made to Prosper grade AA through C borrowers (FICO 640+)
**Loans made to Prosper grade AA through C borrowers with debt-to-income (DTI) less than 30% 
***Lending Club only makes loans primarily to the "prime/low DTI" segment (FICO 640+, DTI <30%)

Note:
1. These prime/near prime/subprime distinctions can help financial institutions compare their prices to the marketplace rates.

Looking at February's Compete data, estimated traffic (see comment 3) at the three major U.S. person-to-person lenders grew by approximately 100,000 unique users compared to January, a 16% gain. Prosper still dominates the category with nearly 10 times as many unique visitors as its nearest rival, Lending Club. 

Update: In terms of funded loans, Prosper had double the volume of Lending Club in February: $6.0 million vs. $2.9 million. In January, the volume was $7.2 million vs. $2.8 million.  

Source: Compete.com, estimated unique site visitors during Feb. 2008                                         *Not launched

Summary
According to data from Compete's consumer panel, the deposit and home loan categories experienced significant increases in both shoppers and applicants during January (with the exception of home equity). Credit cards took a big hit as both shoppers and applicants dropped by double digits. Conversion across the board stayed relatively constant across the three segments, with credit cards moving the most with a drop of 3%.

Commentary

• The credit card segment experienced a decline in the new year as both shoppers and applicants dropped significantly at several large issuers. All but one of the major issuers being tracked experienced downturns.
• Mortgage refinance continued its upward trend from last month with a 16% jump in shoppers and 57% increase in leads/applications. The pushed the conversion rate up 2%.
• Purchase mortgages performed the best out of the home loans segment as more than half of the providers received at least 30% more applications during the month of January.
• Even though home equity jumped significantly in terms of shoppers to their sites, there was still a 7% drop in leads/applications. Home equity had a similar trend last month when leads dropped 6%. Even though home equity lenders were seeing getting their shopping traffic back, they were not successful in converting them to applications in January.
• Deposits saw the most growth of the three segments as it grew in shoppers and applicants across all three categories. Three major checking providers turned in 50% growth in both shoppers and applicants. Only one financial institution tracked showed a significant increase in conversion. This created an increase in conversion for the market of +1% with a similar growth rate in both shoppers and prospects.
• Savings performed even better than checking as all but two companies saw a significant jump in applications as well as shoppers. Because of the increases, conversion stayed stagnant at 6%.
• High-yield savings followed the same path as the entire competitive set saw double-digit increases in shoppers, and only one had a decrease in applications.

About the Financial Services Scorecard
In April, we introduced the Financial Services Monthly Performance scorecard produced by Compete. It summarizes the overall performance of 23 large U.S. financial institutions and lead-generation sites. Refer here for the detailed methodology as well as companies tracked.

Commentary
With the exception of refinance shoppers, most financial products experienced a downturn in both shopping and applications compared to November (see November chart below). This is not unusual during the busy December holiday period. Other observations:

• On the bright side, the mortgage refi category experienced a sharp spike, up 27% in shopping volume, as mortgage rates dropped for conventional loans. However, that activity did not lead to an increase in applications, as that total dropped 17%. The busy holiday period may be to blame for the lack of follow through or consumers may have held off anticipating further rate drops.
• Surprisingly, mortgage applications for home purchase actually increased 8% even though shopping activity dropped 5%.
• There was no good news with home equity, as shopping declined 10% and application/leads went down 6%. Several companies experienced double-digit drops in conversion and leads/applications.
• Credit card applications decreased 6% overall and with all but two of the tracked companies experiencing declines. The only good news: shopper-to-applicant conversion was up more than 3 points compared to November.
• On the deposit side, the number of shoppers and applicants was down across-the-board. Several large financial institutions saw double-digit drops in prospects and applicants.
• The biggest decline, most likely due to rate cuts, was in the high-yield savings category, which posted a 23% month-over-month decline in application volume. Conversion rates also slipped for all but two companies indicating that shoppers may have been disappointed with the posted rates.

Reference

About the Financial Services Scorecard
In April, we introduced the Financial Services Monthly Performance scorecard produced by Compete. It summarizes the overall performance of 23 large U.S. financial institutions and lead-generation sites. Refer here for the detailed methodology as well as companies tracked.

The latest Online Banking Report: 2008 to 2017 Online Banking & Bill Pay Forecast, is now available. It was mailed yesterday to subscribers. It's also available online here. There's no charge for current subscribers; others may access it immediately for a charge of US$395.

The report includes our latest 10-year online banking and bill pay forecast. This year we bumped our long-term usage forecast by 10% to 15% due to a more robust outlook for adoption, especially from mobile-only users (see note 1). For example, we are now projecting 64 million U.S. households banking and/or paying bills online by 2012 compared to last year's forecast predicting 56 million in the same period.

We're still not quite as bullish as Forrester, who's calling for 72 million online banking households by 2011 (post here), but we've closed the gap (note 2). 

In addition to the forecast, we summarized the top ten innovations of the past year. Thanks for the input from all the readers who answered our call for nominations in late December. We'll publish the list here in a few weeks, after subscribers have a chance to see it first.

Note:

1. While we show mobile usage as a separate line item in the forecast, mobile-only banking users are included in the overall online banking forecast. 
2. By comparison, our forecast for 2011 is 62 million. 

In April, we introduced the Financial Services Monthly Performance scorecard produced by Compete. It summarizes the overall performance of 23 large U.S. financial institutions and lead-generation sites. Refer here for the detailed methodology as well as companies tracked. 

Overall June highlights:

• Traffic of financial shoppers was up across all product types except high-yield savings which dropped 2%.
• More important, applications were up across all products ranging from 3% in savings to 26% in mortgage refinance.
• A total of 2.9 million product applications were booked; 200,000 more than the 2.7 million last month.

Specific financial institution performance:

• Bank of America improved its credit card conversion rates dramatically, booking a 30% increase in applications despite only 10% growth in shopping traffic.
• In checking accounts ING Direct, WaMu, and Wells Fargo all increased the volume of prospects looking at checking account options. 
• Emigrant, HSBC and ING Direct were all able to increase application volumes despite a flat or declining volume of potential prospects.
• Home equity prospect traffic grew at 12 of 16 providers and conversion rates were improved at 10 of 16. Bank of America, Citibank, Countrywide and Low.com had the largest month-over-month percentage gains in both prospect and application volume (note 1). 
• In home-purchase mortgages, Low.com nearly doubled its prospect traffic compared to May, while significantly improving lead conversion.
• In mortgage refinance, Low.com also posted the largest percentage gain in prospects but grew applications at a lower rate, resulting in a significant decline in conversion. Quicken Loans showed greater efficiency, almost doubling application volume with roughly the same number of prospects as in May.

Note:

1. For loan products, leads from lead-generation sites such as Low.com are combined with actual applications at financial institutions into a single "lead/application" category shown in the table.

The FDIC database has been updated with Q4 numbers, allowing all the data miners to slap on their hard hats and get to work. Since reporting on the tepid third quarter of ING Direct (U.S.) (here), we've been looking forward to the year-end data.

The biggest surprise is that the bank not only reversed the Q3 account run-off, it managed to add 220,000 new accounts, its best fourth quarter ever. However, things weren't so rosy in terms of deposit balances, which increased just $800 million, the lowest Q4 increase since 2001 when the bank had less than $3 billion in total deposits.

For the full year, ING added $7.2 billion in deposit for an 18% increase, the first time the bank had less than 40% year-over-year growth. And almost the entire increase came in first quarter. The bank essentially had no deposit growth in the final nine months of the year (see table below).  

It will be interesting to see what impact its new high-rate Electric Orange checking account will have on deposit and account growth. The account was growing rapidly during the final stretch of the invitation-only launch period, growing from $1 billion on deposit Dec. 31, to $2.2 billion by mid-February (see coverage here).

At its annual TransPay Conference, BAI unveiled new research into small business payment needs and opportunities. The most dramatic finding: More than half of small businesses (annual sales of $500k to $10 million) would be "likely" or "very likely" to switch banks for "better payment services." In comparison, only about 10% of businesses with sales between $50 million and $250 million felt the same way.

Obviously, there are some serious, unmet needs among small businesses. Some of the things they most wanted (percentages indicate how many small businesses desire each feature):

• Straight-through processing of payments from business to bank (70+%)
• Identity-management platform that safeguards the business identity and protects your accounts when conducting business electronically (70+%)
• Electronic payments package integrating accounts payables, accounts receivables, and expense tracking (65+%)
• Live intraday financial position (55+%)
• Bank services that can easily be integrated into your payroll and HR systems (60+%)
• Automated card-based, expense-processing system that ties in key partners (50+%)

Sizing the small business payments market
BAI Research also assembled an excellent summary of "payments by business size," shown below. It's interesting to note that the number of payments made by larger businesses is less than one-third of all business payments. The other two-thirds comes from small businesses, including almost 16% from the micro-business market (under $100,000 in annual sales).  While most of these businesses use consumer payment services, there is clearly an opportunity for more targeted micro-business payments. For more information, see Online Banking Report #107/108, Small and Microbusiness Banking 4.0.

Venture capitalists have reason to love the remittance business: Official estimates of overseas money-flows from the United States range upwards of $30 billion a year and are growing. The World Bank's estimate of overall remittances to developing countries is $167 billion for 2005, up 73 percent since 2001.

As a result, investment capital has been feeding innovative companies using modern technology, all planning to take market share away from industry leaders Western Union and MoneyGram International. There’s only one problem: According to a recent study by the Government Accountability Office (GAO), those estimates are at best optimistic, and at worst, wildly inaccurate—perhaps by two-thirds.

Continue reading "Do the World Bank's Remittance Estimates Add Up?" »

By 2007, debit cards will edge out credit cards as the Internet payment vehicle of choice, says Ed Kountz, senior analyst at Jupiterresearch.

According to Kountz’ research, online credit card payments accounted for 42 percent of all online purchase volumes, compared with 39 percent of payment volumes for debit. But by next year, those numbers will reverse—39 percent for credit and 42 percent for debit. And by 2010, says Kountz, credit cards will account for 35 percent of online purchase volumes, compared with 46 percent for debit. That translates to an 8 percent annual compounded growth rate for credit between now and 2010, compared with 14 percent for debit.

“The conventional wisdom you’ll hear from the associations is that there’s really no overlap (between credit and debit),” says Kountz. “And from a value perspective, credit will continue to predominate. I don’t think you’ll see debit wipe up the floor or eliminate credit—that’s much too simplistic to say. But issuers need to be prepared for that shift as it comes down the pike; the short-term impact on credit will be moderate, but longer term, it does clearly pose a challenge for what has traditionally been a credit-dominated world.”

Credit’s predicament is only compounded, according to Kountz’ research, by the rise of non-card payment alternatives available online, such as stored-value cards and peer-to-peer payments. Such alternatives won’t be taking over the space anytime soon, but the growth rates will be strong: 21 percent for stored-value cards and 12 percent for peer-to-peer payments. And even though they’ll be coming off a very low base (4 percent of online payments in 2010), and be restricted to items like wireless content, market share for those payment vehicles will more likely be cut from credit’s hide than debit’s.

This can’t be good news for the credit card business. Even though some analysts like to spin the shift in consumer preference from credit to debit spending as no big deal, since the issuers collect their fees from whichever card a buyer uses, the fact is that the credit apparatus is deeply entrenched in issuers’ establishments. This means that at a minimum, the increased use of debit will create internal shifts at those companies as credit revenues and transaction volumes decline. Since e-commerce sales is the fastest-growing segment of card payments, Kountz’ research is at best unlikely to give credit establishments much comfort looking forward.

This is especially true because, as Kountz points out, paying online with a debit card means low-fee, PIN debit transactions, since no signature can be given to authenticate the transaction. Today, no adequate online PIN-entry mechanism is widely deployed, but so-called screen-based floating PIN entry is one possible solution. That innovation involves an on-screen PIN pad into which the buyer makes PIN entries by mouse click, instead of using numbers on their keyboard, thus maximizing security by making it impossible for a keylogger virus to steal the PIN. ATM Direct is currently conducting a pilot program for this system.

”The alternative is some sort of token that’s not necessarily a hardware plug-in,” says Kountz. “I’m still skeptical of the whole token approach. You can lose them or not have them with you when you need them, and for a consumer, it’s just one more thing they have to manage. But assuming (floating PIN entry) can be done securely and effectively from a consumer perspective, it’s a much more intuitive approach than adding hardware.”

The implications of Kountz’ observations for issuing banks can’t be encouraging. Although he declined to speculate on how the phenomenon he describes would affect them, the fact is that revenues from credit card operations are a significant fraction of the largest American banks’ earnings. Some 60 percent of credit card earnings are debt, and PIN debit interchange is significantly lower than signature debit and credit card interchange.

To the extent that online transactions migrate from credit cards to PIN debit, then, it’s a small step to conclude that the fastest-growing payments sector today is set to yield lower per-transaction revenues than the rest of the cards sector, in turn minimizing the revenues growth curve for those banks’ overall card operations. This hardly means that credit cards are disappearing, but combined with the likely future minimization of interchange fees, either through regulation or litigation, it does mean issuing banks are going to have to start running faster, just to stay in place, and much faster to get anywhere.

“Certainly, credit profitability, and credit overall, has been moderating growth-wise, and I expect that trend to continue,” says Kountz. “Resting on the laurels of the past is no longer enough.” (Contact: Jupiterresearch, Ed Kountz, 617 423 4372)

In 2005, online sales growth outpaced overall retail sales growth, 25 percent to 7 percent according to the latest data from the U.S. Census Bureau.

Continue reading "US Census Bureau Says e-Commerce Outpaces Overall Retail Sales Growth" »

Forrester's Ron Shevlin weighs in Jan 10 with an estimate of the amount of deposit balances chasing higher rates online. Using recent (Q4 2005) survey data gathered from 4700 online households, he concludes that 30 percent of online consumers have $10,000 or more in liquid assets. Furthermore, three out of four of those households (24 percent of all online households) are interested in increasing the rate paid on their savings accounts. But one in four of those wouldn't move until they could get 3.5 percent or more in additional interest, an unlikely scenario for most consumers. That leaves 18 percent of online households (24 percent x 74 percent) ready, willing, and able to make sizable deposit moves online.

Analysis
To quantify the amount of deposits in play, a number of assumptions must be made: the amount of liquid assets held in checking accounts; the amount that would be available to move to another account; and the willingness to move balances for various rate differentials (see the Forrester report for complete details). Forrester's conservative analysis assumed that only those willing to move for 1 percent or less in rate differential (6 percent of all online households) would take action, potentially moving $28 billion from low-interest checking accounts to high-interest savings accounts.

Taking a less conservative approach, one could also argue that with many direct banks paying 3 percent more than typical interest-bearing checking accounts, the potential deposit switchers are much more prevalent, closer to the 18 percent we derived in the first paragraph. Under these less conservative assumptions, much more would be at stake, as much as $60 billion or more. Furthermore, the Forrester estimate considers money being held only in checking accounts and does not include other liquid assets in savings accounts, CDs, and money-market funds.

Whether $28 billion or $60 billion, the total deposits at play are a small percentage (0.5 percent to 1.0 percent) of the $6 trillion in insured deposits in the United States.

Action Item
We highly recommend the report for anyone looking to reprice deposits for online customers, or even if you just want to understand what's at stake. The report is available free-of-charge for Forrester clients, or $249 pay-per-view from its website.

--JB

Table 1
U.S. Non-agricultural Workforce, Self-employed vs. Total
 

Source: U.S. Small Business Administration, 12/04 Includes age 16+ with 15+ work hours during the survey week. Excludes agricultural industries.