Every month, Compete publishes a list of the 1,000 websites with the most U.S. monthly unique visitors. In January 2011, 43 were financial sites (banking, payments, brokerages, cards, credit reports, lending, or personal finance). Of the 43, 14 were banks (see note 1).

For a little context, Google topped the list with 145 million. The largest banks were similar to Apple (34 mil), Twitter (28 mil), Flickr (21 mil), or Yelp (12 mil).

-----------------

Note:
1. There are 16 bank URLs in the top 1,000, but wachovia.com is part of Wells Fargo. And bbt.com and bbandt.com are both BB&T Bank.

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.

__________________________________________________________________

Top innovations & trends of 2010
__________________________________________________________

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

__________________________________________________________________

New entrants on the list of the top 43 innovations of all time
__________________________________________________________________

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

-------------------------

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.

Ever since Compete came along with its free Web traffic estimates, my work life has been much improved. Now, every time I review a startup or financial company, I check out their website traffic from Compete's free service to give me a sense of how big the company is and how fast they are growing.

But I'd also always coveted the Pro version, which unlocks a bunch more detail on each website, including two years of historical traffic data. So I took the plunge today and upgraded to Pro.

One of the first things I did with my newfound data trove was to highlight the financial institutions, insurance, and investment companies on the list of the 1,000 busiest websites (based on U.S. traffic). There were 29 FI websites, representing 26 unique companies.

PayPal was the top financial company with 30 million unique visitors, making it the 25th most visited site on the Internet. Chase was the largest commercial bank, just 2 million higher than Bank of America.

Quick. What comes to mind when you envision mobile banking? I'm guessing most of you pictured a mobile website or shiny new app running on a recent iPhone, Blackberry, Android or other smartphone.

And if mobile banking was used only by techies, that would be about right. But banking is used by just about everyone, and everyone still doesn't have a smartphone and Internet data plan.

According to the latest study out of Pew Internet (note 1), 82% of U.S. adults have a cell phone (and another 6% of the total live in a household where someone else owns one). And 72% of those cell phone owners use text messaging while only 38% access the Internet through their phone.

And only 60% of the mobile-Internet users, or 23% of all cell phone users, are frequent users, accessing the Internet 3 or more times per week (note 2). 

So the text-banking gap is 49% (72 less 23) or half of all cell phone users. Those are the people that use text messaging but do not regularly access the Internet through their phones. Another way to think of it, the non-Internet-using segment is more than twice the size of the mobile-Internet-using group. Or more simply, text users outnumber (frequent) mobile Internet users 3 to 1. 

Bottom line: Don't overlook the mainstream text-message group for both alerts and balance inquiries. And make sure your marketing and educational material speaks to the sizable segment that could care less about your new iPhone app and just wants to know how to txt for their bal. 

Notes: 
1. Adult data compiled via telephone interviews in May 2010. N = 2,252. Teen data is from a year ago in a telephone survey of 800 teens (age 12-17) fielded June through Sept. 2009.
2. In comparison, text-message usage is crazy high (see eMarketer graph of the Pew Internet data inset). According to the Pew data, adult (18+) text-message users send/receive almost 40 text messages a day. Of course, that's nothing compared to the thumb-weary, under-18 crowd who send/receive an average of 110 messages per day. Side note: The wording on the question asks for the number of messages sent AND received, so one exchange, text out and reply back, should only count as one message. But I'm guessing respondents are thinking of this more as "sent OR received" so that each exchange counts as two messages. I also suspect the kids are over-estimating their usage quite a bit, wanting to wow the researchers with their uber-connectedness. But the bottom line is the same: Teens have embraced texting, and adults have caught the bug as well.   
3. For more info on mobile banking, see our mobile banking series in Online Banking Report.

I don't know if it has anything to do with the publicity Mint received in recent months following its acquisition by Intuit or the promotional links from Quicken's website, but the online PFM juggernaut just blew the roof off its monthly traffic. According to Compete, in January, Mint had 1.7 million unique visitors, 600,000 more than a year earlier.

To provide a little context, not counting the Dec. to April tax-time traffic spike at Intuit, Mint's traffic is now slightly HIGHER than that of its parent company (see chart #1 below). That gives you a little understanding of why Intuit coughed up $170 million for the startup.

Another way to look at it: Mint now has as much traffic as the tenth largest U.S. retail bank, BB&T (see chart #2).

The interesting question for 2010: Now that Mint is part of the establishment, what startup will rise up to challenge it? Or will the banks, back on a path to profitability, fill the need going forward? 

Chart 1: Mint's traffic is now similar to Intuit's non-tax-time traffic

Source: Compete (link)

Chart 2: Mint now has about the same number of visitors as the tenth largest U.S. retail bank, BB&T
Note: Mint is blue line below

 
Source: Compete (link)

Note: For more information on the PFM space, see our Online Banking Report on Personal Finance Features.

It's always difficult to gauge actual consumer demand for new services. Traditional market research, while providing some broad intent data (e.g., "yeah, that sounds like something I might buy"), doesn't really do a very good job in telling you whether real customers will use the service. The problem is that in the real world, customers have real concerns about new products and most are unwilling to spend very much time learning about them.

So it's always great to find financial institutions willing to share usage data on their online or mobile services. This week, First General Credit Union wins our undying gratitude (and a free subscription to Netbanker) by revealing its person-to-person payments numbers in the latest issue of Credit Union Journal. 

The CU uses iPay Technologies P2P payment service which is provided at no-cost to its deluxe bill-payment clients. Keep in mind, this is a small $44 million credit union serving 5,000 members, so the raw numbers aren't large but the percentages are interesting:

Number of online banking users:	500 (10% of members)
Number of bill-pay users:	200 (40% of online banking users)
Number of P2P payment users:	3 (1.5% of bill-pay users,        0.6% of online banking users)

Analysis: The credit union says it hasn't promoted the P2P feature, which is offered free of charge. It's not even mentioned on its website, except on slide 22 of its online demo. So this isn't a representative sample for a financial institution looking to drive usage to the product. However, a 2% penetration (of online/mobile customers) is along the lines of what we expect this year nationwide. Longer-term, we expect usage to grow at least 10-fold from that level (see note below).

Note: For more information on P2P payments including a 15-year usage forecast, see our recent Online Banking Report: Making the Case for P2P Payments (published Dec. 2009).

The latest Online Banking Report: 2010 to 2019 Online & Mobile Banking Forecast is now available. It will mail next week to 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 banking and bill pay forecast. For the third year in a row, the forecast was bumped up a few percentage points to reflect a more robust outlook for adoption, thanks primarily to mobile banking. For example, we now project 73 million U.S. households banking and/or paying bills by online or via mobile in 2013 (note 1). 

The report also includes a revised 10-year forecast for U.S. peer-to-peer lending. After experiencing a 30% decline in 2009, we expect healthy growth next year with a record amount of loan originations.   

Top ten innovations & trends of 2009 and of the decade
The report includes a summary of the top ten innovations of the past year, including the surge in mobile banking usage, the amazing tools coming out of the iTunes App Store, and of course, the surprising adoption of Twitter, with nearly 1000 financial institutions worldwide tapping the real-time info stream (note 4). 

We also listed the top 25 innovations of the decade topped by the invention of simple online payments by PayPal ten years ago (note 2) and the advent of modern mobile banking (note 3) which appeared in the United States just three years ago at Citibank (powered by mFoundry) and BancorpSouth (powered by Firethorn).

Notes:
1. Mobile banking access is included in the overall online banking numbers, but it's also shown as a separate line item. 
2. Technically, this launched in mid-Nov. 1999, but that seems close enough to 2000 to make the all-decade list.
3. There were a number of earlier mobile efforts, including from Citibank, in the 1999 to 2001 period, but they were ahead of their time and shuttered in 2001/2002 for lack of interest. The "modern era" began in 2007 in the United States.
4. Follow them all on Twitter via The Financial Brand's financial institution lists.

If anyone still wondered how serious Intuit is about incorporating the Mint brand into its portfolio after its $170 million acquisition, take a look at the latest version of the Quicken sales site. Mint is prominently featured (see first screenshot below), especially if you scroll one "ad spot" over (second screenshot).

I also found Mint mentioned at PayTrust, Intuit's bill management site (third screenshot). There's even a small plug on the Quicken Online login page (fourth screenshot).

However, on Mint's site the co-branding is not reciprocated. Quicken is not mentioned at all and Intuit is relegated to 8-point type at the bottom of the page (fourth screenshot).

The latest traffic figures from Compete support the theory that Intuit is de-emphasizing Quicken Online in favor of Mint. Traffic to <quicken.intuit.com> fell 50% in November to about 400,000, while Mint held steady at about 3x that, 1.2 million unique visitors.

Source: Compete, 10 Dec 2009 (link)

Quicken homepage on default choice, Quicken 2010 (link; 9 Dec. 2009, 11 PM)

Quicken homepage with Mint.com selected from scrolling choices
Note: Yellow highlight is mine

Intuit PayTrust homepage (link)

Quicken Online login page (link)

Mint homepage
Intuit mentioned twice at bottom of page (yellow highlight is mine). 

Note: For more information on the PFM space, see our Online Banking Report on Personal Finance Features.

Some interesting data was released today from the American Bankers Association (press release). According to its annual telephone survey of 1000 U.S. consumers, online/Internet banking is now the most common banking method among U.S. consumers (note 1). 

Here are the totals (see notes 2, 3):

Question: Which banking method do you use most often?

Source: American Bankers Association, telephone survey of 1000 U.S. consumers conducted by Ipsos-Reid, on August 14-16-2009

Notes:
1. Remember, this reflects households willing to take a telephone survey but who may or may not use the Internet. If you are surprised to see online usage trailing branch usage until this year, you may be thinking of research results from other surveys of online users, who have long preferred online banking over other delivery channels.
2. Unlike the ABA release, I've eliminated all the Don't know, Unsure, and Other responses from the totals. So, the figures above represent the delivery-channel penetration of customers who named a single one from the list read to them.
3. The changes in mail, telephone and mobile seem odd. It's possible that the way the question was constructed accounts for these counter-intuitive results in the lesser-cited categories. In 2009, respondents were given two new choices: "other" and "none of these." In 2008, without those two bail-out choices, more customers chose one of the six channels read to them over the phone.  In 2008, 110 respondents out of 1000 said don't know, unsure, etc. In 2009, that number doubled to 226 respondents out of 1002.
4. Image credit: Bank of Hawaii.

In what will surely be the first in a long string of similar headlines, the top of  yesterday's Wall Street Journal Money & Investing section declared:

BofA Plans to Cut 10% of Branches

The article, which has been picked up by nearly 100 news sites in the past 24 hours, reported that Bank of America was planning on reducing the size of its 6,000-branch network. There were no details on timing or whether the bank was retreating from certain markets or was simply pruning overlapping branches broadly.

But in later interviews with bank execs, it sounded like Bank of America was merely predicting a gradual shrinkage in its branch network over the next three years, and had no firm plans for specific closures. Here's a followup quote from president Liam McGee as reported by Charlotte NPR station WFAE:

"I think <CEO Lewis> was asked a question, 'Boy, could there be x-percentage less branches in the next few years?' And he was just saying, 'Yeah, could be, and if there was it would be in magnitude of this as opposed to a much higher number.'"

McGee says the bank is going through a 3-year evaluation process that could result in fewer branches, but that no particular number is targeted. He says customers' changing habits are driving the process.

What I found more interesting in the debate were some of the numbers the bank tossed out showing the growth of it's non-branch delivery:

• Nearly 50% of deposits are made in ATMs...up amazingly from 33% six months ago. The bank didn't say whether this was NUMBER of deposits or VALUE of deposits, but it's likely the former. Also, it's unclear if remote deposits made via scanner are included in the total. That new technology is making a significant dent in branch-based deposits at many financial institutions.
• 2.8 million customers are now using the mobile channel which was introduced in mid-2007. That's an average of about 120,000 new customer per month. However, growth appears to have accelerated slightly this year. In early Feb, the bank said it had 2 million mobile banking customers; so in the past 5.5 month, growth has been just under 150,000 new users per month.   
• The bank has a 60% market share in online bill payment; an amazing penetration for a bank with 12% of the country's deposits. 

Note:
1. See our Online Banking Report: The Demise of the Branch (April 2006), for more on the long-term trends in the mix of branch and alternative delivery.

TowerGroup has just released a new research note discussing the growing adoption of mobile banking in the United States. The research unit of MasterCard is predicting a five-fold increase in active users (note 1) between year-end 2009 and year-end 2013.

In comparison, we (note 2) are projecting a four-fold increase. But either way, it's a phenomenal growth curve reflecting a market that financial institutions must pay attention to.

Following are the numbers Tower released; more details are contained in the full report (purchase here). I also compared to those that we projected in our Jan 17 Online Banking Report.

Please note: TowerGroup forecasts active USERS; we forecast active HOUSEHOLDS. There are about 1.9 adults (18+) per household in the United States, but often, not all of the adults in the household are active banking users, so it's a bit hard to compare the two figures. But if you assume 1.2 to 1.4 mobile banking users per household (note 3), we are pretty close this year, but TowerGroup is a bit more bullish five years out.

Sources: Online Banking Report, Jan 2009; TowerGroup, May 2009

Notes:
1. Active mobile users have used the service within the past 90 days.
2. See our Online Banking Report: Mobile and Online Banking Forecast or the Online Banking Report: Banking on the iPhone for complete details.
3. We assume the number of mobile users per household will grow over time starting with 1.2 per household in 2009 to 1.4 per household in 2013.  

Last week, USAA released astounding figures on its mobile banking usage: The 10-month-old service is already used by 11.4% -- about 800,000 -- of its 7 million members, making USAA one of the largest mobile banking providers in the country (press release; see note 1).

The mobile platform has bagged more than 13 million logins in ten months, about 3% of its nearly 500 million annual customer contacts (note 2).

With the introduction of its own native iPhone app last week (note 3), USAA now supports the three primary methods for mobile access (see screenshot below):

• mobile website at <mobile.usaa.com>
• text-message banking (see inset above)
• downloadable app for iPhone (link to app in iTunes) and other phones (via Firethorn)

Only Bank of America, with 2.6 million mobile users, has publicly revealed a larger mobile base. That makes USAA number two among known user bases. However, it is highly likely that both Chase/WaMu and Wells Fargo/Wachovia have cracked the one-million-user mark and are second and third largest. 

USAA's mobile landing page (18 May 2009)

Notes:
1. On a side note, USAA posts its press releases in blog format which allows visitors to comment and/or subscribe via RSS.   
2. The 3% is approximated from data in the press release: 470 million customer contacts in 2008 and 13 million mobile logins since the service was launched in summer 2008.
3. Since last fall, USAA users could access their accounts via Firethorn's multi-bank iPhone app.

If you haven't been following Twitter the last few months, you may not realize it now has almost eight million monthly unique visitors according to Compete. That's almost double the traffic it had just two months ago and a nearly a nine-fold gain from a year ago.

To put that traffic in perspective, it's more than half that of the NY Times and slightly more than banking giant Wachovia (see Compete chart below).

Banking activity
Financial institutions are pretty new to the micro-blogging platform. In a search today, we found 15 U.S. banks and 22 credit unions with active Twitter feeds (see notes 1, 6-8). There were also and nine international banks for a total of 46.

See the table below for the non-inclusive list ranked by number of Twitter users that follow the bank's feed (note 2). Wachovia (now owned by Wells Fargo), the only major bank that has promoted Twitter on its main website, leads with 2,000 followers (see previous post on Wachovia's foray on to Twitter).

Opportunity 
Participating in Twitter is a low-cost entry into social media that can actually help save a customer relationship or three. Compared to blogging, it is much less labor intensive. It's also less of a marketing platform given the 140-character limit in posts. But in the current environment, perhaps less truly is more. By all means, find a gung-ho Facebook devotee in your bank and let him or her get you into the Tweeting game.

Table: Banks and Credit Unions using Twitter (updated 16 March 2009)

Source: Online Banking Report, 13 March 2009 (see notes 6,7,8)

Notes:
1. To be considered active, the bank or credit union had to have set up a Twitter account, customized it with its logo, have made more than 1 update or "Tweet," and have at least 10 followers. 
2. This is not a complete list. With a few exceptions, we only looked for financial institutions with "bank" or "credit union" in their name.
3. Wells Fargo's Twitter page says it will be launching soon.
4. Twitter URL = www.twitter.com/<shown below>
5. For more on bank blogging, see our Online Banking Report on Banking 2.0
6. List and totals updated with ING Direct and First Federal on 16 March 2009
7. Searched on "CU" and found eight more credit unions on 17 March 2009. Thanks Gabriel Garcia.
8. Added NAB's Ubank from comments, unsure why it didn't show up on "bank" search

We've regularly cited third-party estimates of website traffic to Mint and other PFMs. More often that not, we'll get a comment or email taking us to task for using such inexact and/or irrelevant data. But we believe that website traffic, even a rough approximation, is a leading indicator of success. 

Luckily, we now have better metrics for the two online leaders. In response to what appears to be a truth-in-advertising query from Intuit's general counsel (see note 1), Mint disclosed its registered-user count (note 2), which has been growing at an average of 17% per month in Q4 2008 and so far in this year. 

As of yesterday, Mint had 934,000 users, double third quarter's end-count. That's 3,400 new registered users per day (seven days a week), almost 25,000 per week. The company should pass one million before St. Patrick's day.

While this growth in registered users is impressive, what's truly astonishing is that 70% of the registered users, 680,000 so far, have entered at least one bank or credit card username/password in order to automatically download transactions into Mint.

In response to Mint's disclosure, Quicken Online reported its 650,000 registered users, currently growing at a 45,000-per-week clip. If that continues, they'll pass one million before the April tax deadline.

It looks like there's quite a battle shaping up between the two leading online personal finance specialists. And don't overlook the banks. Both Bank of America (2.5 mil as of April 2008) and Wells Fargo (1 mil as of Nov 2008) have more online personal finance users at this point.

What it means: Account aggregation, left for dead a few years ago, is making a fearsome comeback. The three biggest players, Bank of America, Mint, and Quicken Online, now have more than 4 million registered users, approximately 4% of all U.S. banking households (note 3).

Table: Mint Registered Users by Month

Source: Mint, Feb. 2009
*Registered users are anyone who has signed up with email address
** Through Jan 25 (per Mint letter, 28 Jan)
***Through Feb 19 (per TechCrunch post, 19 Feb)

Notes:
1. Intuit's letter to Mint here.
2. Mint's response here.
3. Yodlee provides the aggregation engine for both Bank of America and Mint.
4. For more info, see our Online Banking Report on Account Aggregation and Online Banking Report on Personal Finance Features

Bank of America has been making the rounds with the press touting the runaway success of its mobile banking solutions. Major stories ran in American Banker and The Wall Street Journal this week.

The bank, with 29 million online banking users, reports numbers just shy of the 2-million mark in mobile. That's up from one million early this summer (post here). While it's still less than 10% of online banking customers, it's an impressive number considering fewer than 4 million mobile banking households exist in the entire country (see note 1).

Several other interesting stats from BofA:

• More than 40% of active mobile bankers --  someone who's logged in within the past 90 days --  use an iPhone or iPod touch. That's about double the usage you'd expect given Apple's 23% share of the U.S. installed smart phone base (note 2, 3).
• The bank believes the mobile channel is driving some new business to the bank with 8% to 10% of mobile bankers, almost 200,000, having signed up for the service within 90 days of opening a BofA account (note 4).

Source: ChangeWave Research, survey of 3,800 cell phone users fielded Dec. 9 - 15, 2008 (link)

Notes:
1. See our latest Online Banking Report: Online & Mobile Forecast for more details.
2. The 23% figure does not include iPod Touch.
3. One other bank provided its usage numbers to the WSJ: Mississippi's BankPlus reported 4,000 users with 60% of the usage (2,400) coming from iPhone users.
4. That number doesn't seem all that surprising. You'd expect new customers would be somewhat more likely to sign up for new delivery channels than the existing base. And given typical banking churn, 10% to 20% of a bank's customer base are new every year.

For card issuers, the latest online application activity is is either good news, bad news, or neither since Compete tracks only applications submitted, not approvals. This following chart was presented in its webinar today. You can request the entire deck at the bottom of its blog post.

According to Compete, there were more than 12 million credit card shoppers in the U.S. in December, up 6% from November and down 11% since a year ago. Of the shoppers, about 20%, or 2.4 million submitted an application. That was an 8% increase from Nov., but a 23% decline from a year ago. 

But Compete has no way to measure whether the card applications it tracks are approved. Recent data from Lending Club shows that less than 10% of its online consumer loan applications were approved in Q4. The big credit card issuers probably do a bit better by driving creditworthy borrowers to their sites via direct mail and online advertising.

Assuming approval rates of 20%, the 2.4 million credit apps in December resulted in about a half-million new accounts.  

Source: Compete, 29 Jan. 2009

The latest Online Banking Report: 2009 to 2018 Online & Mobile Banking 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 US$495.

The report includes our latest 10-year online banking and bill pay forecast. This year we again bumped our long-term usage forecast to 6%, up from 3%, to reflect a more robust outlook for adoption, primarily from mobile-only users. For example, we are now projecting 71 million U.S. households banking and/or paying bills online by 2013 compared to last year's forecast predicting 66 million for the same period.

Mobile banking (see note 1) access is included in the overall online banking numbers, but it's also shown as a separate line item. Based on the new open-platform standards ushered in by the iPhone and App Store, we increased both our short- and long-term adoption forecast by 10% to 20%. For example, by year-end 2011 we now predict there will be 18 million U.S. mobile banking households. A year ago we forecasted 16 million.

We also included a revised forecast for U.S. peer-to-peer lending. We cut back our short-term estimates by more than 50% due to regulatory and economic constraints on the business. A full 10-year forecast is included in the report.

Top ten innovations & trends of 2008
The report also includes a summary of the top ten innovations of the past year including the surge in mobile banking demand and the marked increase in traffic to personal finance speciality sites such as Mint and SmartyPig.  

Note:
1. A mobile banking household is one where someone has used a mobile device to access bank or credit card account info within the past six months. Includes text-based queries, but not simple broadcast alerts.

It's so refreshing to have some real numbers to go on, even if they are self reported. Aside from Prosper, Lending Club (here), and most recently SmartyPig (here), few of the startups we track provide meaningful metrics on their operations. That's why we use Compete website traffic estimates as a proxy for success.

Yesterday, MoneyAisle, the reverse-deposit-auction marketplace from neoSaej, released the following results for fourth quarter 2008 (press release): 

• $1.65 billion in auctions run by consumers, up three-fold from Q3 2008 (note 1)
• $100 million in deposits generated

That's not a lot, but we can make a few estimates from that info (note 2):

• Assuming 80 active bank partners, the average take per bank in Q4 was $1.25 million
• But applying the 80/20 rule to those results means that 16 banks generated about $80 million in deposits, or $5 million each
• And conversely, the remaining 64 banks brought in just $300,000 each
• Assuming the average deposit balance auctioned was $20,000, five thousand separate auction winners funded a deposit
• Assuming a commission of $37 per funded auction (note 2), neoSaej would have generated $185,000 in commission income in Q4, this is in addition to license fees and monthly maintenance fees

And for those of you who still want traffic numbers, MoneyAisle's website usage (monthly unique visitors) has been trending upwards after suffering a post-launch dip in November. In December, visitors totaled just under 20,000. 

Bottom line: It's a promising start for the company which earned an OBR Best of the Web this summer, was picked by the audience as Best of Show in October's Finovate (video here), and was recently chosen as a top-10 innovation of the year in our most recent Online Banking Report (here).

When MoneyAisle adds integrated online account opening (powered by Andera), results should be even stronger. 

Notes:
1. Deposit-generated total is 6% of total auctions run, because consumers are not obligated to make the deposit after they run the auction.

2. My speculative estimates, not provided from the company.

3. We outlined the company in a June blog post and in the pages of our Online Banking Report on New Models for Lead Generation and Online Banking Report on Growing Deposits in the Digital Age. 

Engaging users doesn't have to to be a long and drawn-out process with multiple passes through legal and compliance to ensure you won't end up on the 10-most-wanted list at the OCC.

All you have to do is ask customers a question now and then to show that you are genuinely listening. And with low-cost web-based surveys, the cost to conduct a short survey among your own customers is minimal.

Some sample questions:

• What should we write about in our next newsletter/blog/website?
  (provide list of ideas plus write-in area)
• Which offer should we put on our homepage?
  (similar to the SmartMoney example below)
• Where should we locate our new ATM? (with list of choices)
• How would you rate your recent experience with our call center?
  (sent shortly after a customer talks to a CSR)
• How would you like to retrieve your balance on your cellphone (via text message, via mobile browser, via voice)

In a real-world example today, SmartMoney Magazine sent me an email (see below) requesting that I complete its "cover survey" which would take "no more than a minute." The Survey Monkey-powered survey was indeed just 3 questions and took only seconds to complete. There was no marketing (see note 1), no cross sales, and I was left with a better impression of the magazine. Besides a satisfied customer, SmartMoney gains valuable editorial feedback.

Note:
1. After completing the survey I was dropped on to the SmartMoney homepage increasing its pageviews and unique visitor totals for December.

2. Photo credit (via flickr): Ryan McFarland at www.zieak.com.

Industry blog, P2P-banking.com recently compiled a list of peer-to-peer  loan volumes from around the world. The chart is reprinted by permission below.

These numbers are cumulative, all-time volumes since inception. More than half is from Virgin Money USA which has helped individuals put $370 million in loans together since it began as Circle Lending in 2001.

Because these companies don't all use the same model, I've revised the tables somewhat, excluding: 

• Facilitators: My definition of peer-to-peer lending excludes Virgin Money and Loanback because they do not serve as matchmakers (note 1). They do play a crucial role in putting a legal framework in place for friends-and-family loans and often end up servicing the loans as well. They are more like PayPal where Prosper/Lending Club are like eBay.
• Microfinance markets: I would exclude Kiva as well. It's an awesome platform that allows U.S. citizens to loan money to third-world merchants at zero interest. A powerful tool for philanthropy, yes, but not really peer-to-peer. The same goes for MyC4 and Microplace.

So excluding the above companies, total worldwide originations are $262 million, with two-thirds of that from Prosper.

Here are the market shares of the 8 true P2P lenders that have originated more than $1 million since launch:

Source: P2P-Banking.com, 28 Oct 2008

Note:
1. This does not mean I dislike Virgin Money's business model, just that its loan volume is not comparable to the others on the list.

2. For more info on the P2P lending market, see our Online Banking Report on Person-to-Person Lending

As I was drilling into the latest Compete traffic numbers for the annual Online Banking Report planning issue, I noticed a significant uptick in traffic to online personal finance specialists, almost across the board.

Sept. traffic revealed a total of 1.2 million unique visitors (note 1) compared to less than 400,000 a year ago. Not surprisingly, consumers appear to be taking a closer look at their finances. 

The big three newcomers last year: Mint, Wesabe, and Geezeo saw combined traffic increase by 450,000 users, a nearly three-fold increase from 2007. Geezeo was the star percentage-wise, growing more than six-fold. But Mint accounted for three-fourths of the net gain across the existing players with 330,000 more visitors (see Table 1 below):

Also, two newcomers made a big splash last month:

• PNC Virtual Wallet launched in July (coverage here) by PNC Bank, which trailed only Mint last month with nearly 140,000 unique visitors (see 2 below).
• Rudder (a relaunch of Spendview) drew 50,000 visitors last month after its launch at DEMOfall in early Sept.

Granted, the PNC Virtual Wallet benefits enormously from the 2 million monthly visitors to parent PNC.com and PNCBank.com. Yet, it's still an impressive total and is encouraging for banks and credit unions considering similar efforts.

Table 1: Online PFMs launched more than 1 year ago

Table 2: The online PFM class of 2008

 Notes:

1. Sum of the monthly unique visitors from all PFM companies, visitors that went to more than one PFM provider are not eliminated from the total, so there is double counting in the totals. Data source is Compete, pulled 21 Oct 2008.

2. Rudder was previously Spendview, but we consider them to be essentially a new company.

The June financial shopping numbers released by Compete revealed a mixed bag as interest in credit cards, home equity, and purchase loans fell double digits compared to a year ago. However, deposit activity moved in the opposite direction.

More specifics:

• Although credit card application volume was relatively flat (down 1% for the year and down 4% for the month), the number of shoppers decreased 39% compared to a year ago. Although the data shows only application volume, there has likely been a sharp drop in approvals, as underwriting standards stiffen and credit-worthy applicants stay on the sidelines. 
• In June there was a slight drop in checking shoppers (down 4%) and applications (down 5%) compared to May. However, year-over-year both were up with a 32% increase in shoppers and a 6% increase in applicants.
• However, savings shoppers increased 51% from last year and 7% from May with applications up 43% compared to last year and 24% over last month.
• High-yield savings showed similar gains compared to a year ago, with 31% more shoppers and 30% more applications. 
• Home equity and purchase mortgage activity were both off compared to the previous month and also a year ago. The only good news was an increase in refi activity with 10% more shoppers than May and 27% more than a year ago. But application volumes were down 21% from May and down 34% compared to last year.

About the financial services scorecard
A little over 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 2008. 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 tracked is a lead-generation site or an actual lender.

Now that we are well past the mid-point of 2008, it's a good time to look at where we are with one of the most talked-about online financial subjects of the decade: person-to-person or social lending.

Currently, two U.S. companies are actively originating unsecured, multi-purpose P2P loans (note 1): 

• Prosper: Through July, the leader in the market is running 10% ahead of its 2007 loan-origination pace. The company has funded $55 million and is on pace to do just under $100 million for the year. Website traffic is up 15% compared to a year ago (see graph below) and through July there have been 13% more loan listings (see previous coverage here, Finovate 2007 Best of Show video here; monthly volume reports here).
• Zopa: The company, which isn't technically person-to-person (the loans are originated by six credit union partners) but definitely has a social aspect to its loan program, has not revealed any numbers, but they list 475 loans on the "browse all borrowers page." Assuming average loan size of $8000 to $9000, they are doing less than $1 million per month. Zopa is using Google AdWords to pitch "instant approval" with a credit score of 640+ (see screenshot below), an aggressive marketing move, especially combined with the 8.49% APR touted on the landing page (see screenshot below; previous coverage here; FinovateStartup 2008 Best of Show video here).

In addition, three more P2P lenders appear very close to launching or relaunching:

• Lending Club: The company, launched in May 2007, has been essentially closed to new business since March as they retooled loans into securities for regulatory reasons. However, the company is scheduled to present at our Oct. 14 Finovate conference, implying that they will be out of their quiet period by then (previous coverage here; Finovate 2007 video here).
• Loanio: The startup appears to be very close to launching based on an a Sept. 3rd email sent to its house list announcing the launch "in just a few weeks" and adding in parenthesis (yes, we mean it this time!). The company will likely be the first to offer a co-borrower loan application (previous coverage here; Finovate Startup video here).
• Pertuity Direct: The newest competitor in the space is Pertuity Direct which we wrote about last week. Its website claims a Sept. 15 launch, and we look forward to seeing their first public demo at Finovate on Oct. 14.  

Finally, several companies are looking to launch P2P services in 2008 or 2009, including Globefunder, Community Lend (Canada) and one we just heard about today, Swap-A-Debt.

Forecast revision
Last December we published our second detailed Online Banking Report on Person-to-Person Lending. In that report, we predicted just under $200 million in originations this year. However, due to the inactive period at  Lending Club, the delay in Loanio's launch, and the more conservative approach by Prosper lenders, we are lowering the 2008 forecast by 25%, with an expected total of $135 to $150 million for the year as follows:

• Prosper ($95 to $105 million)
• Lending Club ($25 to $30 million)
• Zopa ($5 to $10 million)
• Loanio ($1 to $5 million)
• Pertuity Direct ($1 to $5 million)

P2P lending traffic from Compete (July 2007 through July 2008)

Zopa AdWords ad on "loanio" search
(4 Sep 2008, 1 PM PDT from Seattle IP address)

Landing page (4 Sep 2008, link here)

Notes:
1. Specialists are involved in the student loan piece (GreenNote and Fynanz) along with Virgin Money and Loanback which help with person-to-person loan documentation and servicing. 

2. Top-right graphic from April 2008 ABC News segment on Lending Club and person-to-person lending.

In the year or so that they've been widely available, so-called reward checking, those high-yielding accounts that require a hefty number of debit card transactions (see note 1), have attracted quite a following.

But besides the number of blog posts and press mentions, we've had few other metrics upon which to gauge their success. Until now. In an email to me yesterday, the company behind many of the accounts, BancVue, laid out the total rewards checking results across its client base:

• 381 financial institutions live
• 610,000 reward checking accounts
• $5.5 billion on deposit in the accounts
• $9,000 average balance
• Opening more than 13,000 accounts per week (700,000 annual run rate)
• Average of more than $14 million in deposits per financial institution
• Average of 1,600 accounts per financial institution

Although $5 billion isn't even the rounding error across the entire $3-trillion U.S. retail deposit market, it's real money to the smaller banks and credit unions offering the program.  

Notes:
1. Most accounts require 10 to 12 debit transactions per month in order to earn the high yield. For more info, see our previous coverage and Finovate Startup video here.
2. Upper-right graphic comes courtesy of First State Bank, Gainesville, TX.

May continued to show increases in both deposit and home-loan shoppers while demand for credit cards edged downward. On a year-over-year basis, almost all segments are down with the exception of home equity and home purchase.

• Credit card shopping was down slightly (-1%) compared to April and down 7% in applicants. Conversion also declined 2% over the previous month.
• Compared to April, deposits had big gains in both checking and savings shopping, up 8% and 5% respectively. 
• Both savings and high-yield savings saw more than 20% gains in number of applicants compared to the previous month; however, both were down compared to a year ago.
  
• Despite increased shopping volumes, home-secured lending, as measured by the number of leads and/or applications, dropped compared to last month. The largest was the 38% drop in refinance activity.
• Conversion rates were down in all three loan categories, dropping 1% in home equity, 2% in purchase, and 4% in refinance.
  

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 2008. 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.

According to Compete, website traffic to personal-finance startup Mint increased to 460,000 in July compared to 400,000 the month before, for a 13% increase. Site traffic has quadrupled since December, gaining 350,000 unique monthly visitors.

As expected, Bank of America reached the one-million-mobile-user milestone this week. Last month the bank disclosed it had 840,000 active mobile users as of March 31. With 160,000 new users in the past 9+ weeks, it appears that BofA has stayed on the 75,000/mo pace of first quarter.

Even more interesting to me was the news that the bank has "nearly 25 million" online banking users. That's 3 million more than the bank had last fall, an impressive 13% gain. Six years ago, there weren't even 20 million online banking households in the entire country (see note 1).

The bank also passed along a few other mobile metrics in today's press release:

• 40% are using mobile for money movement (bill pay and/or funds transfer within BofA accounts)
• 80% viewed transactions and balance data (leaving 20% who check balances only)
• In May, the bank had 4 million mobile sessions, or 4.2 sessions per user/per month, assuming 950,000 active users
• Two-thirds of mobile users are under 35, about 13% are age 35-44 and 20% are older than 45

Note:

1. Source: Online Banking Report: 2008 through 2017 Forecast

Change Sciences, publishing under the moniker of its new Kantuit research service, just released its latest financial services website evaluation. The report uses proprietary user-experience modeling to rate, rank and compare 18 leading banking sites on how easy it is to find, select, and open a new deposit account online (see Table 1, inset).

Citibank and WaMu were ranked one and two and scored significantly better than the others. Wachovia was third, scoring about 20% higher (the lower the score, the better). Bank of America, Fifth Third and BB&T were in the next tier, finishing about 50% higher. Among mega-banks, U.S. Bank had the worst score, more than double the leaders. 

The Change Science score includes various components that show how a consumer may struggle with various aspects of the application process. These individual scores are totaled to come up with the final composite score shown in Table 1 right.

For example, Figure 1 below illustrates the scores for "Effort (expended) finding and learning about deposit accounts" with Fifth Third leading the way with a 0.1 score, compared to Peoples United Bank, the worst of the sample, scoring 19x higher at 1.9

Download an abstract of the research results here (registration required). The full report runs $4,000; a significant investment yes, but you could make that up with just a handful of additional good deposit accounts. 

In its latest quarterly financial results (here), Bank of America said it signed up 224,000 new users during the quarter to bring its active mobile banking base to 840,000. Assuming the 75,000/mo pace continues through second quarter, the bank should be over 900,000 now and will surpass 1 million in the next few weeks.

Although it's a nice milestone, it's only 4% of the bank's 23+million active online banking users (here). Given that mobile is pushed frequently in the bank's online banking area, one could argue that 4% adoption is pretty anemic. But according to M:Metrics, less than 14% of U.S. mobile phone users accessed info via the mobile Web in February. So 4% of a 14% universe is much more impressive, indicating the bank has tapped almost 1/3 of the short-term potential for mobile Web-based services, a good start.

To really goose adoption, text-based solutions may need more emphasis (see Chase screenshot below). According to M:Metrics, U.S. text users outnumbered mobile Web users almost 4 to 1 in February, 110 million to 30 million.

Industry forecast update
These adoption rates are about what we expected. In the forecast published a year ago in our Online Banking Report on Mobile Banking, we were relatively bearish short term, projecting 900,000 mobile users by year-end 2007 growing to 2.5 million by the end of 2008.

With BofA reporting 840,000 and assuming they have about half of all users, the U.S. market has likely already passed the 1.5 million mark and will end the year at more than 3 million.

The adoption rate depends on how hard banks push mobile options. Along with BofA, Chase has been one of the most aggressive, showing mobile use in its advertising for several years now (previous coverage here). I love its "Text your account. It texts you back." Just seven words conveying more than most 3-minute demos.

Summary
According to data from Compete's consumer panel, March rebounded from the lower traffic in February. Every product, except standard savings accounts, posted increases in the number of applications. Credit cards were the biggest gainer (up 24% in shoppers, up 13% in applications) following sharp declines the past few months. Home loans market performed similarly, with double-digit increases in applications for both purchase (up 15%) and refinances (up 12%). 

New this month, we have valid year-over-year comparisons shown (see note 1). Compared to a year ago, both checking and credit cards applicants and shoppers have risen significantly. Home loan shoppers are up slightly, but applications are up. 

Commentary

• Credit cards saw a large jump in both shoppers and applicants. The credit crisis seems to have benefited the credit cards market as applications, especially for balance-transfer cards, have increased. Compared to a year ago, shoppers are up 47% and applicants are up 53%. However, conversion dropped by 2% from February.

• Deposits saw overall shopper loss in all three segments during March, but applications for checking were up 2% as were high-yield savings (up 8%). Last year at this time, deposits were increasing across all segments. In March of 2008, however, applicant levels are below what they were in 2007 with 31% drop in high-yield savings applicants and a 7% decline in all savings accounts.

• After a terrible February, refinance mortgages posted a 27% gain in shoppers as well as a 12% gain in applicants. Year-over-year refinance applications are up 32% from a year ago. Purchase mortgages also saw a similar improvement from last month with a gain of 23% over last year. Home equity had the largest gain in applications in the month of March as leads/applications (note 2) grew 34%. Year over year, however, applications are down 32% due to the housing crisis of the past few months.

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. New this month: Year-over-year comparisons are now included in the monthly table. 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.

In an unscientific poll of 500 Facebook users (see note 1), we found that 13% of respondents are interested in accessing their bank balance through their Facebook account (red bar below).

Source: Online Banking Report, 9 April 2008, n = 500

While that's not exactly a ringing endorsement of the idea, it's potentially enough early adopters to get the service rolling. Most of the interest emanated from younger segments. For example, 18% of 18-to-24 year-olds said they'd probably use Facebook banking (gray bar below) compared to about 5% of the 25-49 group (green and yellow bars below).

Source: Online Banking Report, 9 April 2008, n = 500

But it will take education to move "Facebook banking" into the mainstream. The majority of respondents, 70%, said there is "no way" they'd bank within Facebook and another 13% said probably not, resulting in a strong 83% negative rating. Given well-founded concerns surrounding online security, that's not surprising. 

For more information:

• See previous posts on Facebook banking apps from mShift and Galaxy
• See Online Banking Report on Social Personal Finance 

Note:
1. Survey was conducted April 9 through Facebook's polling mechanism. Total respondents = 500. Respondents are self-selected so the results should not be used to forecast specific demand.

It's been a while since we looked at the actual usage of payment, personal finance, lending, and banking apps on Facebook (previous coverage here; see note 1). And assuming the numbers provided by Facebook are accurate, it's not good news. 

Overall, the banking and personal finance apps have anemic usage levels totaling just 263 daily users (for apps with more than 1 daily user). That does not include virtual currencies or stock tracking/investing applications (see note 2). In comparison, the most popular general Facebook app, FunWall, has more than 3 million daily users.

But the number will grow rapidly if major financial institutions add balance inquiry functionality such as (#4) MyMoney from Fiserv's Galaxy unit (previous coverage here) and mShift's Key Point Credit Union app discussed here (only 1 daily user, so it did not make our table).  Activity in Facebook personal finance apps yesterday (13 March 2008):

*See comment 1

**Does not include apps with less than 2 users

Notes:

1. You cannot make a meaningful comparison with last summer's activity because Facebook changed the way it reports usage. Previously, the company reported the number of application downloads and now it shows the much, much smaller "active daily user" total. For example, in July 2007, LendingClub had already had more than 11,000 downloads. Under the new measurement system it tallies just 26 daily users which puts it in third place (see table below).

2. The leading stock tracking app, Fantasy Stock Exchange, has 7,990 daily users. The most popular virtual currency AceBucks has 11,300 daily users.

Commentary
The revolving credit season was off to a quick start as credit card applications posted a double-digit increase. However, all other product categories declined.

• Monthly credit card applications rose 11% in November and conversion was up for all but one tracked company. Almost all companies experienced double-digit application growth as well.

• Several key companies in the mortgage refinance space experienced significant losses among both shoppers and submitted leads/applications. Purchase shopper activity dropped 8% from October while applications saw a 19% drop.

• Home equity saw a 27% decrease in shoppers, and a 13% decrease in total leads and applications.

• In deposits, there was a slight decrease from last month in shoppers and applicants for savings and checking accounts. High-yield savings had 13% fewer shoppers. However, with large application growth turned in by several companies, total application volume slipped just 1%.

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.

Update, Dec. 10: The original chart, published Dec. 7, contained a mistake in the home equity application count. The correct number, shown above, is 82,362 instead of the 111,139 in the previous chart. NetBanker and Compete regret the error.

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
Online credit card applications were up as consumers prepared for holiday shopping. In contrast, home loans continued their downward trend.

• Monthly credit card applications rose 4% in October and conversion was up 5 points, reversing the prior month-over-month trend. 
• Several key competitors in the home loans refinance and purchase categories saw significant losses among both shoppers and submitted leads/applications bringing total submitted mortgage activity down 11% from September.
• Home equity saw a 14% decrease in shoppers and a 14% decline in total leads and applications submitted. Both direct lenders and lead aggregators saw declines this past month.
• In deposits, there were 4% more shoppers across all categories (checking, savings and high-yield savings).  Only checking, however, was able to convert that into more online applications with a 7% increase.

The world's largest online banking base (note 1) grew an impressive 11% year-over-year, rising to 22.8 million active users, an increase of 2.2 million from 30 Sep 2006 (note 2). 

Bill payment grew slower, up 7% or 800,000 users, ending the period at 11.6 million active users. Overall bill pay volume is $224 billion annually, or $1,600 per user per month. Bill pay as a percent of online banking fell more than one point to just under 51% (note 3).  

Online Banking     Bill Pay     % of OL using Bill Pay

2007        22.8 mil            11.6 mil              50.8%

2006        20.6 mil            10.8 mil              52.4%

Change    +2.2 mil            +800,000            (1.6%)
                +10.7%               +7.4%

Notes:
1. As far as we know, no bank in the world has more active online users; however, one could argue that PayPal, with 37.5 million active users in the latest quarter, is larger. Interestingly, ING Direct is closing in on BofA on a worldwide basis. With its Sharebuilder acquisition, ING Direct has 20 million accounts worldwide, about 30% in the United States, although not all are active, which BofA defines as being online within the past 90 days.

2. According to Doug Brown, Bank of America's SVP Product Innovation E-Commerce Channel Services, as cited during his BAI Retail Delivery presentation.

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
In September, leads for home equity, mortgage purchase and refinance continued to decline. Regular savings accounts also dropped significantly, although the high-yield version savings booked an 8% increase.

Other highlights in September:  

• Within the deposit category, checking accounts and regular savings declined; however, the high-yield category showed good growth with 137,000 online applications from two million shoppers, 11,000 more than last month.
• While there were 8% more online credit card shoppers this month, lower conversion rates resulted in a 3% decline in submitted applications. 
• On the loan side, both home equity and purchase mortgage categories experienced more shopping activity. But once again, a decline in conversion rates resulted in fewer submitted leads/applications. 
• Refinance mortgages continued to slide in both online shopping activity (down 14%) and submitted leads/applications (down 8%). Several lenders saw double-digit percentage declines.

Here's a great slide from Mary Meeker's Web 2.0 Summit presentation (download at Morgan Stanley) showing the dominance of social networking sites. If you haven't been able to get management to buy off on your social media plans, circulate this slide.

These are the top 10 domains now compared to two years ago as measured by Alexa. The red sites on the left have dropped out of the top 10 giving way to the green sites. Web 2.0-oriented sites can now claim six of the top-10 slots, including four social networks: Facebook, Orkut (Google), Myspace and Hi5, and two user-generated sites:  YouTube and Wikipedia.    

Also according to Morgan Stanley, worldwide Internet use passed the 1 billion mark early last year, and is estimated to hit 1.3 billion this year. The chart also shows the distribution of Internet users by region. Note the dominance of the red part of the bar, and, no, that's not Republicans, it's Asia/Pacific.

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
In August, the continued rise in interest rates led to a drop in home equity, mortgage refinance, and credit card applications while deposit accounts and purchase mortgage applications were up.

Some highlights from the monthly activity: 

• Credit Card applications were down 2% overall, but Chase (27%) and Capital One (5%) grew applications and conversion compared to July
• Savings applications were up across the group with the exception of Citibank which posted a 13% decline
• For high-yield savings, only HSBC and ING Direct saw both application and conversion growth
• Home equity application/lead volume and conversion dropped across the group with declines observed at 9 of 16 providers
• Purchase mortgage  application/lead volume was up over July with Countrywide and Capital One both showing notable growth
• The refinance mortgage market was flat overall, masking strong application/lead growth at Countrywide, E-Loan and NexTag while declines were recorded at LendingTree/GetSmart, LowerMyBills and Low.com

Compete's latest data confirms the spike in traffic at three-week old online personal finance startup Mint. The startup created considerable buzz after winning the $50,000 grand prize at TechCrunch in September (see previous coverage here).  

According to Compete, Mint's 200,000 unique visitors in September equaled that of $17-billion Webster Bank, the 64th largest U.S. bank or thrift holding company according to American Banker (Q1 2007). It will be interesting to see if Mint experiences a dramatic traffic decline after the publicity-driven visits slow down.   

Traffic at Mint.com (blue) vs. Webster Bank <websteronline.com> (red)

Just like a fluctuating body temperature is an indicator of your underlying health, your credit score is a similar measure of your financial well being. Yet, in a recent poll of Facebook users age 18-24, we found that fewer than 20% had seen their credit report or credit score within the past year (see note 1, 2).

Furthermore, today's tightened credit market has put a premium on having a good credit score, even in the upper end "prime segment." Here's the tease from the top of the Personal Journal section of today's Wall Street Journal, "Lending squeeze raises the bar on credit scores." (article here, see note 3).

Clearly there is a need here. Most U.S adults, especially younger ones, should track their credit score at least quarterly. However, fewer than 10% of adults subscribe to credit monitoring services, partly because of their cost and partly because of the hassle (see note 2).

Banks, credit unions and card issuers are ideally suited to fill this gap. At a minimum, low-cost one-click access to their credit score would provide customers with an important early warning system to stave off potentially debilitating personal finance woes (note 4).

Notes:

1. Be aware that this is a completely unscientific online poll of 200 Facebook users who say they are age 18-24 in their Facebook profile. The results should NOT be projected to the larger population. It was conducted on July 23, 2007 by Online Banking Report (see note 2).

2. For more information, see the latest Online Banking Report on Credit Monitoring.

 3. And over at another Dow Jones effort, the FiLife blog, the writers have been on a bit of a mission to pressure banks and card issuers to make credit scores freely available to customers (see post here). FiLife is a joint effort between Dow Jones and IAC, the parent of Lending Tree and GetSmart.  

4. According to the FiLife article cited above, among top-10 banks, only WaMu currently provides free access to credit scores for its credit card customers (see inset).

Note: Part one of this series can be found here.

On blogs I visit discussing social media, one ongoing debate concerns metrics. Some claim that metrics for social media projects are not meaningful; some claim that new metrics must be developed to gauge social behaviour. Some even claim that metrics aren't needed.

I believe that it is essential to have meaningful key-performance indicators in place for a social media project, as you would for any other project. You must know what success will look like to know if the project is worth repeating or not. Some of these metrics are familiar Web metrics, some are more similar to offline advertising, some are similar to PR metrics, and some are indeed brand new and hard to measure.

For ChangeEverything.ca we measure a few things that are familiar to anyone who runs a website:

• Unique visitors
• Time on site
• Referring URLs
• Natural search results
• Number of registered users
• Number of active users (need to define for yourself)

We also measure "Web 2.0" stuff:

• Our Technorati authority ranking
• The number of RSS subscribers
• Conversions of visitors to contributors (people who make it through the registration or content-creation funnels)

Like offline media, we measure how many people in our geographic region are aware of the site, just like we track awareness of our television campaigns. We also measure how many can link it back to our brand.

Like our PR, we try to measure the earned media the site has garnered for us, which has been significant, with lots of positive coverage on TV, radio and newspapers. We also keep track of what bloggers say about us. We consider a blogger writing positively about ChangeEverything.ca to be an unsolicited third-party endorsement. Happily, almost all blog posts so far have been positive, as have our earned media. It's difficult to criticize this project since most press coverage is about how the site has helped the community in some way. And that leads us to the most interesting metric by far.

Where we need new metrics is on the issue of real-world impact. This was not a metric we had in place prior to launch—honestly, it never occurred to us. But it became necessary because of activities happening in the real world (remember that?) due to the influence of the site. The first time this became obvious was after a bad snowstorm Vancouver in November 2006. The site's amazing community moderator Kate created a post called Got Hats? and asked for people to donate warm clothing and blankets to the homeless. This initiative took off and over the next few days, we estimate that more than 4,000 pieces of clothing, blankets, pillows, and, yes, hats were donated to local shelters, all via communication and organization on the site. The change occurred while snow was still on the ground, while the need was still very real, and even a matter of life and death. It was the first clue that we were onto something truly important.

There are many positive traits the site lends to the Vancity brand. ChangeEverything.ca is more than a bunch of people discussing local issues they want to change. The site has created real impact in the communities Vancity serves. Since the Got Hats? episode, we have seen the impact of the tremendous exposure a woman on the site has received for blogging in depth about her valiant attempt to give up plastics in 2007, the successful implementation of a bike share experiment in Vancouver and now a contest where people can win $1,000 to give to an organization making change for the good (appropriately called ChangeSomething).

Traditional Web metrics can't measure the human terms of this impact, and that's the beauty of social media. It spills over into people's lives, because people are in the driver's seat. We need to expand our view of key performance indicators for social media so they reflect the project's success, which now includes the true impact of these projects on our communities.

I think that explains why those of us who advocate for the appropriate use of social media are so passionate about our work.

Due to Facebook's roots as a college-only social networking site, as recently as last year you had to use a .edu email address to gain admittance, it has remained a young person's playground much longer than MySpace. However, much to the chagrin of my college-age niece and her friends (note 1), Facebook has aged rapidly this year.

As you can see in the inset, in May, comScore reported that more than half of Facebook visitors were 25 or older (see full press release here and note 2). Using this chart, we estimate the median age of a Facebook visitor was about 23 a year ago and now it's closing in on 30 (I'd guess 27 or 28 based on the comScore data). Even more frightening for the younger set: last month there were 2.6 million more unique visitors over age 35 than in the 18-24 category. We noted this trend at MySpace last year (here).

Significance for Banks
As you consider your social networking strategy, don't think it's only for the under-25 crowd. Some of your prime customers, the 30-somethings with new families, new cars, new homes, and accelerating careers, also keep in touch with friends via social networks. Refer to Online Banking Report, Social Personal Finance, for a long-term forecast and strategic options for financial institutions. Also, see our earlier post on the Top-10 Banking & Money apps on Facebook here.

Facebook Lingo Defined
For those of you new to Facebook, Ad Age ran a sidebar off its lead article this week, This 23-Year-Old has Google Sweating, explaining a few key Facebook terms:

• Minifeed: Like an RSS feed, that automatically updates everyone on your friends list of any changes you make to your profile, including removing items. This feature caused a bit of a revolt, due to privacy issues, when introduced last year. But now it seems to be an important part of the network. It's especially critical for the viral spread of new applications such as Lending Club or Chipin. Unless they opt out, every time a Facebook user adds an application to their account, all their friends are notified in the mini-feed.
• Poke: The virtual equivalent of smiling at a co-worker passing in the hallway; a way to connect with someone without the more formal protocols of email, text, or voice messaging.   
• The Wall: A place to write comments on your friends profile, or respond to comments on yours.
• Tag: Allows users to associate names with the people in the pictures they've posted. As Ad Age says, "a college grads worst nightmare when it comes to the ever-crucial job search."

Notes:

1. This summer, my niece, a college sophomore, couldn't believe that I had a Facebook account. And she was more than a bit skeptical of my claim that I was tracking the social network for my blog and newsletter. To her, it's a privileged place for her friends to communicate: uncles, aunts, and especially parents, are definitely not on the invitation list. It will be interesting to see what happens to the hip kids as the establishment invades their turf. The Wall Street Journal had a similar story this week about fellow workers and even bosses requesting to be added as friends in social networks (here).

2. comScore is reporting the demographic profile of visitors, NOT the active-user base, i.e., those that maintain profiles. Active users would undoubtedly skew younger.

Last month, we introduced the Financial Services Monthly Performance scorecard produced by Compete. Here's the second installment, summarizing the overall performance of 23 large U.S. financial institutions and lead-generation sites. For more information, including the detailed methodology and companies tracked, refer to that post (here).

The highlights:

• Financial shopping was down or flat in most categories, especially savings accounts; not surprising given the typical tax-time spike in April.
• The main exception to the trend was checking, which grew a phenomenal 31% in May compared to April. 
• The main drivers of checking account growth: Bank of America's promotion of free MyAccess Checking (see coverage here) and, to a lesser extent, Wachovia, whose Google/MSN marketing caused a major spike in traffic
• But it wasn't all rosy in checking accounts: While BofA was experiencing 25% growth in applications, ING Direct went through a typical post-launch downturn with a 50% decline in application volume
• Credit card conversions were up dramatically, with a 5% increase in application volume despite a 6% drop in shoppers, resulting in a 22% conversion ratio (see note 1) 

Note:

1. Compete revised its card applications show in the previous report. The revised number of card applications:
     March 2007: 1.57 million instead of 1.71 million
     April: 1.70 million instead of 1.88 million with 8% growth instead of 9% 

The researchers at Compete Inc. have developed a new scorecard that tracks the overall performance of 23 large financial institutions and lead-generations sites (note 1). We will publish this scorecard each month here at NetBanker and we will occasionally drill down into the data at Online Banking Report. To make it monthly scorecard easy to access, it will have its own category, <netbanker.com/compete>. 

There are a number of interesting insights from this data:

• Card applications were up 9% even though shoppers only increased 1%, helping push conversion to a healthy 21%. In this case "conversion" means they APPLIED for the product. We do not know whether they were approved or not.
• Checking applications were up 24% to 182,000, with the launch of ING Direct's Electric Orange having a role in that.
• Home-secured loan activity was up sharply from March, increasing 30% in the refi and home equity categories. Purchase loans were also up 23% month-over-month.

Notes:

1. Companies tracked: 

Credit cards: American Express, Bank of America, Capital One, Chase, Citibank, Discover

Deposits: Bank of America, Capital One, Chase, Citibank/Citi Direct, E-Loan, Emigrant/Emigrant Direct, HSBC/HSBC Direct, ING Direct, U.S. Bank, Wachovia, Washington Mutual, Wells Fargo

Home Loans: Ameriquest, Bank of America, Capital One, Chase, Citibank, Countrywide, Ditech, E-Loan, LendingTree/GetSmart, Low.com, LowerMyBills, National City, NexTag, Quicken Loans, Washington Mutual, Wells Fargo

2. Definitions:

Shopper: Consumer who visited product-related content at a site in the competitive set. For the purposes of this Monthly Performance Update, a consumer can be counted for each site they visit. 

Application: Any Web form requiring the consumer to enter personal info including Social Security Number; counted only when completed.

Lead: Any Web form requiring the consumer to enter personal information, not including Social Security Number; counted only when submitted.

Conversion: = (Leads + Applications) / Shoppers

3. Methodology:

Compete's projections are supported by industry-leading data management and technology. The consumer and industry data is drawn from numerous sources and comprises the largest continuous consumer behavior database in the industry. Its proprietary data methodologies and patent-pending technology aggregate, transform and normalize this data and ensure it is representative of the entire U.S. online marketplace.

People are recruited to join Compete's member community through www.compete.com, the first website to help consumers personally benefit from clicksharing. Consumer data is also licensed from national ISPs and ASPs. This multi-source data collection methodology sets the industry standard for representative and actionable data. Members are protected by Compete's stringent privacy policy and data collection techniques that purge personally identifiable information.

It's no surprise that financial services companies are some of the largest online advertisers. It's been that way since the medium began accepting advertising in 1995. However, you might be surprised who was the number 1 financial-services advertiser in 2006: Experian with $128 million, 50% more than Microsoft's $82 million. Only five companies spent more online in 2006: Vonage, AT&T, Dell, Disney and GM.

The credit bureau and direct marketing company has expanded its direct web-based financial services presence via acquisition over the last few years and now owns prolific advertisers such as LowerMyBills.com and FreeCreditReport.com.

Most financial companies in the top-50 were in the brokerage and investment category with TD Ameritrade, Scottrade, E*Trade and Fidelity all in the $100 to $120 million category. Non-brokerages included IAC/Interactive parent of Lending Tree and GetSmart, American Express, Capital One, Bank of America, and the biggest surprise in the top-50: LoanWeb with $37 million, more than any retail bank in the country, except BofA. 

Here's the financial services companies in the top 50. Data in from TNS as cited in Online Media, Marketing, & Advertising Magazine (OMMA) last week (here). Previous NetBanker coverage is here.

Overall Rank/Company/2006 Online Advertising Expenditures

6   Experian               $128 million
9   IAC/Interactive    $123 million (includes non-financial products)
10  TD Ameritrade     $120 million
14  E*Trade                $107 million
15  Scottrade             $105 million
18  Fidelity                 $98 million
23  American Express $80 million 
25  Charles Schwab    $72 million
29  Forex Capital Markets $57 million
34  Capital One           $53 million
35  Morgan Stanley     $53 million
44  Bank of America    $43 million
48  LoanWeb               $37 million

Source: TNS, 2007

Last week we reported on the apparent traffic spike at person-to-person lender Prosper. Compete's Snapshot showed Prosper with 1 million unique visitors in March.

Based on that observation, Compete dove into the Prosper numbers and found that the domain had not yet been added to its more rigorous monitoring system, and in fact, there appeared to be some panel bias in the original March traffic numbers. Under Compete's revised assumptions, Prosper's March traffic estimate is a third less, just under 700,000 visitors, instead of 1-million plus. 

Also, Compete has now released its April estimates and found that Prosper's traffic declined 25% to 500,000 visitors. While that no longer puts Prosper at the same level as Suntrust, the lender does have considerably more visitors than the nation's 23rd largest bank, Comerica (see revised traffic chart below, Prosper is the blue line).

Preparing a table for our upcoming report on social finance, we were slogging through website traffic at Compete.com and discovered a startling statistic. In March, traffic to the person-to-person lender Prosper.com was four-fold that of January, growing to more than 1 million unique visitors. That puts it in rarefied company, approximately the same as a top-20 bank such as SunTrust, which according to Compete had just 10% more traffic in March (see chart below).

If those numbers are accurate, and they weren't driven by unsustainable events such as a a mentions in major blogs or media, Prosper may have moved past the early adopter stage, and into the more mainstream web-based financial services arena.

It appears the traffic is converting to registered users. The last time we checked, April 25, the homepage said it had 240,000 registered users. Today, it says 270,000. That's 12% growth in 15 days.

Market research is an amazing thing. You can take the same study and reach two entirely different conclusions. Or you can achieve totally different results by the way the question is worded, what multiple choice answers are provided, what questions preceded it, or even the tone or style of the interviewer. Then there are issues with how the sample was selected, online vs. phone, whether it is representative of a national audience, whether incentives were provided, etc. etc. etc.  

That's not to say that market research should be ignored. Just that you need to be careful with it. And if you make decisions based on market research, you need to understand how and when it was collected, what the exact questions were, and who underwrote the study.

Case in point: Mobile banking demand

In the past two weeks, two reliable research companies, Jupiter Research and Compete, Inc. released research finding on whether U.S. consumers think they will want to use mobile banking when it becomes available. This type of "what if" question is even more problematic than other types of market research. Because the participant doesn't use the service in question, the interviewer first has to paint a picture of what it might look like at some future point, then ask the respondent what their level of interest is. So, the results are highly dependent on how the hypothetical service is described, and if it's a telephone interview, how enthusiastic the questioner is about it. Imagine the difference in response to these two questions:

1. How would you like to press a button on your cellphone that gave you instant, secure, free access to your bank account balance so you didn't ever bounce a check again?

or

2. At some point in the future, you might be able to download and install a Java application over the air for your mobile device that provided a subset of the functionality of online banking ported to a 2 inch screen. And, as long as you never left your phone somewhere by mistake, it should be as secure. How excited would you be about that?

Unfortunately, I haven't seen the exact questions or methodology used to produce the following press releases, so I can't say exactly how the companies reached their conclusions. However, Compete will be presenting their finding in a free webinar Thursday, so you might want to listen in. If you can't make it, I will file a followup blog post. Full disclosure: After spending much of Q1 researching and writing about mobile banking and payments, and yes, selling reports of my findings, I'm firmly in the pro-mobile banking camp (see previous coverage here). 

Finding 1: Considerable interest in Mobile Banking

Author: Compete, Inc.

Link: http://blog.compete.com/2007/05/01/mobile-banking-rebirth/

Synopsis: In an April survey of online banking users, only 19% said they would definitely not use it, while 11% said they definitely would. The vast majority (70%) between the extremes need more info before they decide. There is a measurable advantage for the negatives (38% won't/probably won't use) over the positives (29% will/probably will), but that's doesn't seem particularly negative for a service that does not yet exist.

Note: Compete will be presenting the results in a free webinar Thursday, May 3, at 2PM Eastern. Presenters: Paul Zeckser, Director Financial Services Practice & Ryan Burke, Director, Telecommunications and Media Practice

Finding 2: Little interest in Mobile Banking

 Author: Jupiter Research

Link: http://www.jupiterresearch.com/bin/item.pl/press:press_release/2007/id=07.04.23-mobile_banking.html/

Synopsis: Limited data was released to the public, but in a press release last week, with the title, JupiterResearch Finds Limited Consumer Interest in Mobile Banking, the company said only 8% of consumers were interested in mobile banking. No supporting data was provided. We will invite report author Asaf Buchner, who I respect greatly, to provide more background on Jupiter's findings.

Note: Below is the exact quote from the press release. The specific scenario here, "using mobile browsing to check account balances," may be part of the reason for the lower interest. Only about 10% of U.S mobile phone owners use mobile browsing today.  

Just eight percent of online consumers who own a cell phone are interested in using mobile browsing to check account balances.

Since I'm a numbers junkie, whenever I'm at a conference, I try to note as many meaningful statistics as possible. By meaningful, I mean a number that provides an outsider with some insight into the business. Merely saying, "we beat our expectations by 63%" does NOT qualify, unless the speaker also shared their expectations. 

The flow of numbers was about a bit below average during the three days I attended Net.Finance, but the two professional researchers on the agenda, Jim Van Dyke of Javelin Strategy and Asaf Buchner of Jupiter Research, delivered slides chock full of statistics. I will check with them to see if they are willing to share with our readers. 

Here's some of the nuggets buried in the presentations from the other experts on stage: 

Most Eye-Opening Stat: 

• During the past 14 months, more than 280,000 messages have been posted on the Prosper.com discussion forum, according to CEO Chris Larsen (see here for Colin Henderson's complete notes on this session).
  
  My take: That's an amazing level of consumer engagement with the new lending platform. To put that in perspective, Wells Fargo's Student Loandown blog has received 98 total comments during its eight months online.

Best Stat to Drop in a Business Case:

• Shari Storm, CMO, Verity Credit Union, said that 1% of its new members named the blog when asked how they heard about Verity; the new members had an average of 2.7 accounts with $9,000 in deposits and $11,500 in loans (excluding mortgage); furthermore, the CU's blog, launched in Dec. 2004, now has 1,000 readers (see here for Colin Henderson's complete notes on this session)
  
  My take: While I don't recommend trying to turn this single data point into an ROI calculation, it's the first time I've heard a financial exec say something about blogging that the finance folks will appreciate (chalk up another first for Verity).

Stat that Most Contradicts My Previous Position:

• Vancity's ChangeEverything.ca blog, launched commercially in Sept 2006, now has 1,000 registered users who've generated more than 2,000 blog entries and comments; in total, the site has had 45,000 unique visitors according to William Azaroff, Interactive Marketing Manager (see here for Colin Henderson's complete notes on this session)
  
  My take: Despite my reservations about whether it would gain traction without a financial services perspective (see our Online Banking Report on Bank 2.0 here), Vancity's unique blog has gained a small, but growing, worldwide following, and, more importantly, has contributed measurably to Vancity's efforts to help its community and create positive brand positioning for the CU. Nice work.  

Blogging/Podcasting:

• Key Bank's most popular podcast, top stock picks by John Caldwell, has recorded 70,000 visits and 12,000 unique users, according to Interactive Marketing Manager Mickey Mencin
• Colin Henderson, BankWatch blogger and former BMO exec, mentioned that 39% of Canadians are now reading blogs 

Online Marketing:

• Colin Henderson also cited Forrester findings that 50% of recent financial buyers did 100% of their research online; 30% performed both on- and offline research; and just 20% conducted all the research offline. In Citibank's late 2005 new checking account promotion, the bank gave away 275,000 iPods, according to Charles DeFelice, SVP customer information environment (it wasn't specified if this was the POTENTIAL or ACTUAL number given away, since consumers had to follow through with a number of electronic activities over a period of months in order to qualify for the freebie) 
• Jon Kaplan, head of Google's financial services group, said that 60% of Google users have a personalized (Google) page and that 20% of Google search volume originates from these pages
• GE Money's SVP of Strategy Vincenzo Picone said the company has 300 million customers with $190 billion in assets across 54 countries which led to a net profit of $3.5 billion in 2006; the company has 2010 targets for 300 million unique visitors; $20 billion in online originations and 1 billion transactions via the online and mobile channel
• U.K.'s Lloyds TSB experienced a 71% revenue lift (against a control) on its homepage by implementing Touch Clarity's (now Omniture) targeted ad server which uses a number of variables to determine which ads should be shown to an individual visitor; according to Omniture's Brent Hieggelke who showed results from a case study presented by Lloyds TSB at a recent conference

Mobile Banking:

• Jennifer Vos, director of Citi Mobile, Citibank's new mobile banking service, said that one-third of current Citi customers have input mobile phone numbers into the bank's alert system; furthermore, the new mobile offering was piloted by 100 employees, who have recently been joined by another hundred users in the southern California market

Small Business Banking:

• Wells Fargo has 150,000 "very active" small-business online banking users according to Eskander Matta, SVP of internet services group; businesses are making $45 million in payments per month with the bank's DirectPay service launched just a year ago

Branding:

• 94% of ING Direct's customers would recommend it to a friend, according to John Owens, Head of Marketing

Online Banking:

• Customer satisfaction in online banking, while on the rise, still trails online retailing by five percentage points, 78% vs. 83%, according to Larry Freed, CEO Foresee Results

In today's special Technology Report in Wall Street Journal, the lead article was "What's New in Wireless," by Amol Sharma. The article's main focus is mobile video and advertising, but there are several paragraphs about mobile payments, mentioning the Cingular/AT&T/Citibank cellphone payment trial through MasterCard's PayPass. The only statistical backup provided was the 1.3 million Japanese mobile users signed up for NTT DoCoMo's year-old mobile credit-card service (note 1).

That number seemed low based on what I've been hearing about the popularity of all things mobile in Asia. It turns out the 1+ million number is just DoCoMo's credit-card slice of the mobile payments pie. 

In Japan, per capita credit card usage is just one-seventh that of United States (note 2) and stored value is much more popular. DoCoMo has 20 million stored-value mobile wallets in place, 15x the number of credit users. The mobile wallet penetration is approximately 40% of DoCoMo's 52 million wireless subscribers (note 3). 

That's a healthy uptake rate for a product that was introduced less than three years ago. Even the year-old mobile credit card adoption is dramatic given the country has just 130 million credit cards outstanding. DoCoMo's market share is already higher than 1% of total cards outstanding, the equivalent of 8 million accounts in the United Sates (note 4).

Interestingly, part of the reason for the popularity of cash replacements in Japan is that the lowest paper-money denomination is 1,000 Yen, or about $8.80, making coins more common and somewhat less convenient for low-value payments compared to the U.S. and its ubiquitous $1 bill. However, the stored-value mobile wallet is expected to eventually become popular in the U.S. once merchant acceptance grows, especially in the youth and underbanked segments with less access to traditional bank cards; but it won't likely reach current levels of Japanese penetration for another five to seven years (note 5).   

Notes:

1. According to a Feb. 1 article in the Motley Fool, DoCoMo has 1.5 million users who've applied for and activated the credit card function in their phone. The number of outlets accepting DoCoMo mobile payments was expected to top 150,000 this month. DoCoMo allows other credit card issuers to use its ID platform to delivery card services to its customers. DoCoMo also began issuing its own mobile credit card under the DCMX brand last year. For more information, watch the DoCoMo's video about its mobile wallet (here). The wallet discussion begins at about the 4.5-minute mark of the 16 minute video. DoCoMo's ID credit-card platform and its own DCMX credit card discussion begins at the 6-minute mark and ends a little before the 10-minute mark. The rest of the video discusses i-Mode's international growth and is not directly related to payments.  

2. According the Federal Reserve Bank of Philadelphia, in 2004 American's made 84 credit card purchases annually per capita, vs. 11 in Japan (see report here). According to the online CIA Sourcebook, in mid-July 2006 the population of Japan was 127 million compared to 298 million in the United States.

3. According to the company, DoCoMo has a 55% share of the Japanese cellphone market.

4. The U.S. has about 800 million credit cards outstanding (according to FRB Philadelphia, see #2.  

5. See our forecast in Online Banking Report 138/139 published three weeks ago.

Forrester Research is known for making conservative technology forecasts, doing a great job of not getting caught up in the early hype. For example, five years ago (May 2002), Forrester predicted there would be 38 million U.S. households banking online by 2006, about double the 20 million at the time. That prediction turned out to be about 10% to 15% shy of the actual total (see note 1). 

But in Forrester's latest online banking forecast (here), VP and Bank of America/Wells Fargo veteran Cathy Graebner, is uncharacteristically aggressive. In her report she says the U.S. market will grow to 72 million online banking households in less than 5 years, a 55% increase from Forrester's current estimate of 46 million. If that happens, penetration would be 63% of all households, or 76% of online households (note 2).

In comparison, we are projecting 54 million households, a 30% growth from our estimated 42 million online banking households at year-end 2006. Even our high-end forecast calls for only 62 million, still 10 million shy of Forrester's number.

Analysis
Normally, Forrester and Online Banking Report track pretty closely. I have a call in to Cathy to see where our assumptions differ (note 3). In many ways, I hope she's right. But I believe there is currently a ceiling for most ecommerce activities at about a 50% penetration rate (of all households), and I just don't see how online banking can move significantly past that within five years. Perhaps mobile access will bump the growth rate 3 or 4 years out, but I still don't think that's enough to get past 60 million households.  

Look at it this way. An estimated 10% to 15% of households don't even have a bank account. If you subtract those from the total, Forrester is saying that more than 70% of U.S. households with bank accounts will be using online banking less than five years from now. That would be great for our industry, but I just don't think it will happen for at least another decade (note 4).   

Read it yourself and let me know which forecast you believe is closer.

Notes:

1. Our parent publication, Online Banking Report, had similar view at the time, predicting in December 2002 that 43 million U.S. households would be banking online by 2006 (see Online Banking Report #89, published Dec. 10, 2002). Online Banking Report is published by the same company as this blog. According to our latest forecast (Online Banking Report #137), 42 million U.S. households were banking online at year-end 2006.

2. Penetration figure calculated by taking Forrester's 2011 online banking forecast and dividing by our 2011 total U.S. household forecast.

3. I have not read the full report, only the abstract on the Forrester website.

4. The furthest out we project is 2016, where our total still trails Forrester's 2011 prediction (see OBR 137).

When I saw the blog postings this week that Freakonomics authors, Steven D. Leavit and Stephen J. Dubner, had penned an article on identity theft, I anxiously clicked into the Sunday NY Times Magazine to read the article (11 March 2007, link here). I had hoped that the popular statistical wizards had taken on the subject of why ID theft loss estimates vary by as much as 20-fold, from a couple billion to more than $50 billion (note 1).

Unfortunately, the article, Identity Crisis, shed no light on any of the statistical anomalies nor did it offer any help with definitions, even after using this lead sentence:

There are as many varieties of identity theft today as there are varieties of, say, mushrooms.

The lightly researched article relied on the usual Javelin and FTC numbers and reached the unsurprising conclusion that merchants are the ones that most care about credit card fraud. But the authors glossed over the fact that it's the online merchants who are burned most by card fraud, due to card-not-present chargeback rules (note 2). Real-world card swiping merchants are often made whole for fraud situations provided they followed the card association rules for checking the signature scrawled on the receipt against the 1/8 inch script scribbled on the back of the card (as if that stops much fraud).

The authors also failed to realize, or at least note, that the oft-cited Javelin finding that more than half of ID theft is from people you know, includes only the situations where the victim has knowledge of who perpetrated the fraud. In round numbers, here's what the pie looks like:

• 50% of ID theft victims don't know who stole from them
• 25% know who stole from them, but have no relationship with the crook
• 25% know who stole from them, and the crook was family, friend or co-worker

I believe that it's a bit of stretch to say that half of all identity theft is from related parties when it could be a little as 25% or as much as 75%.  

Blog Comments on ID Theft
Unlike the old days when the only way to interact with an article was a letter to the editor, Leavit and Dubner maintain a blog (here) where readers can sound off on the issues. The blog entry, Who Cares About Identity Theft?, went up on March 9, two days before the full article appeared in the Sunday Times. I was surprised today (March 17) to find only 29 comments on the identity theft piece, especially since the blog has more than 55,000 readers and both the print and online NY Time's columns directed readers to the Freakonomics blog.

And no one seemed to care that the authors did little to further the debate on identity theft, chargebacks, or law enforcement priorities (note 3). In fact, it appeared that only a half-dozen of the commenters had even read the full article. So we have at least a partial answer to the "who cares" question, not the blog readers (note 4).

Notes:

1. During the past month, I've had conversations with extremely frustrated reporters from the Wall Street Journal and Wired Magazine, who were trying to figure out what the true costs of financial fraud in the U.S. really are. 

2. I have to admit being biased here. As an online-only merchant, I pay large credit card fees, around 3% that cover the supposed "high-risk" nature of online commerce, even though I have zero recourse if the charge is later disputed as fraudulent.

3. The article had conflicting anecdotal evidence on law enforcement efforts to stem financial fraud, saying the FBI usually needed at least $100,000 in losses to get involved. The article implied, but did not explicitly say, that lesser amounts are not pursued aggressively by local police departments. Although it cited an officer from the Los Angeles County Sheriff Department's ID Theft Task Force, which at least sounds like significant enforcement action.

4. It's not so much consumer don't "care," but that they are no longer so interested in discussing it and/or they are less concerned now that many understand that they are well protected against financial loss.

Advertising-monitoring firm, Mintel Comperemedia reported last week that nearly 9 out of 10 credit card solicitations in 2006 directed recipients to the Web, up sharply from 56% in 2003 (see note 1, 2). Several big mailers, namely American Express, still seem reluctant to use website response as an option, at least in the mailers we see at our house.

American Express tests must show a drop in response by offering too many choices. But if you don't have the budget of American Express, which can afford to drop a mail piece in every credit-worthy household every two or three weeks, you should add website options to your direct mail creative. That way, you can at least capture a lead at your website, even if they don't ultimately accept your credit offer. 

Total mailing volume for 2006 was 9.2 billion pieces (see note 1), or about 3 per week per credit-worthy household. Two of those were from the five largest mailers listed below which accounted for more than 60% of the volume, according to Comperemedia. JPMorgan Chase accounted for 18% on its own. 

In another data slice from Comperemedia, cited by Capital One in a Feb. 2006 investor presentation (PDF here), response rates have fallen from 1.4% in 1995 to 0.3% in 2004 (see note 3).

Here's a breakdown of the billion-piece club, and their percent change compared to 2005:  

1. Chase >>> 1.7 billion (down 4%)

2. Capital One >>> 1.2 billion (up 13%)

3. American Express >>> 1 billion

4. Citibank >>> 980 million (down 2%)

5. Bank of America/MBNA >>> 920 million (down 17%)

Other top-10 mailers: HSBC (up 25%); Discover (up 29%); Barclays Bank (190 million, up 70%)

Note:

1. Comperemedia tracks mailing volume for more than 150 large financial institutions. So the figures here do not include mailings from thousands of smaller banks and credit unions. In total, those probably account for less than 5% of the total from the top-150. 

2. Comperemedia press release is here. Interview of Comperemedia director Jenny Roock by MediaPost is here.

3. Credit card response rate slide from Capital One's investor presentation (PDF) at the Debt & Equity Conference, Feb. 2006; data from Comperemedia.

The folks at BAI, using research by Raddon Financial, ran the numbers on new checking account sales per branch and found that Bank of America is opening 31 new checking accounts per branch per month, or just about one per day (article here). WaMu did better with 39 per month or 1.3/day. The article said community banks typically get only about one-fifth that,  just 2 new checking accounts per week per branch.

I'm not sure exactly what those numbers mean, but someday in a meeting when you are trying to make a case for new investment in your website, you can counter the, "but customers love the branches" with, "sure they do, but even BofA, who spends more than $200 million/year advertising, only manages to sell one checking account per day per branch" (see top 2005 advertisers here). It still might not mean anything, but it makes it sound like you've done your homework.

The problem with comparing branch-account openings to online-account openings is they are not separate ecosystems. Would the account have been opened online without a nearby branch? Or did that account, opened at the branch, come as a result of research conducted online by the customer? In the U.S., you need both channels for the foreseeable future, unless you sell a financial product that doesn't need physical support, like a savings account (see note 1).

Another wild card: How do you gauge the impact of increasingly prominent website offers like this one currently running on the checking account page at <bankofamerica.com> (see note 2)? Naturally, to get the $50 you have to open the account online.

Notes:

1. For more information on the future of the online channel vs. branch, see our report, The Demise of the Branch, published spring 2006 in Online Banking Report (OBR 128).

2. The offer was presented to a non-customer browsing the main Bank of America site from a Seattle IP address and indicating their state of residence was Nevada.

We've finally wrapped up our latest report, Mobile Banking & Payments 2.0, published by Online Banking Report, our by-subscription research division (see note 1).

• Link to the PDF abstract and table of contents here
• Link for subscriber access, or to purchase, here

Work on this report started at BAI's Retail Delivery Conference in mid-November where we scheduled a series of briefings with the three mobile players in attendance: ClairMail, Firethorn Mobile, and mFoundry. As reported here previously, we were mightily impressed with the opportunities available in the mobile space.  

After three months of looking at mobile banking, talking to more players, and trying to develop a reasonable forecast, we have slightly tempered our initial enthusiasm. While we remain optimistic that the mobile channel will someday eclipse desktop online banking in terms of pageviews and routine transactions, in North America mobile banking is NOT a new channel, but rather an extension of existing sales and service channels (see note 2). And with few fees expected, the business case must be made on the softer retention benefits and customer service savings.   

The Forecast
Even with a challenging business case, most top-10 retail banks are headed to market in 2007-2008 with some form of mobile banking. We forecast that 25% of U.S. households will use mobile bank access by the middle of the next decade. The mobile banking adoption curve for the next 10+ years will be virtually identical to that of online banking from 1995 to the present (see inset above and note 3). 

But we are much less certain on which method of mobile banking will cross the chasm. Unlike Web-based banking, there are powerful entities, called wireless carriers, that stand between the bank and its customers in True Mobile Banking. So it seems that text/SMS-based services will lead the initial wave, because they are less dependent on the carrier and most under-40 users are already using them. However, long term, we believe more complete one-button (see note 4) solutions will prevail. And while we do forecast the adoption for all three methods, there are too many variables to be certain. A year from now, things should be quite a bit clearer.   

Subscribers, please post your comments about this report below, or email them directly to jim@netbanker.com.

End Notes:

1. For those of you that may be new readers, this blog is written by the publishers of Online Banking Report, an industry newsletter that began 12 years ago. Many of our blog postings are a by-product of the research we are doing for Online Banking Report, so you'll often see references to our more in-depth research published there, available by subscription only. 

2. This is different in other countries where branch and PC-based banking is less pervasive.

3. U.S. adoption by household, +/- 25%. The underlying data and assumptions for this table are in the full report, OBR 138/139, as referenced in the opening paragraph.

4. One-button mobile banking is our name for banking functions that may be called up on the mobile screen through a link on the main menu. It could be a WAP-based mobile website or a downloadable application. 

Yesterday, Money.com posted an article (here) citing new account totals for ING Direct's Electric Money checking account:

• 60,000 accounts, a 1.5% penetration of the
  bank's 4 million accounts
• $2.2 billion in new deposits, a hefty $37,000
  per account*

Two weeks ago (Feb. 1), the bank said it had attracted 42,000 accounts (see post here).

The inset is an actual Electric Orange MasterCard debit card. 

*An average of $37,001 if you ignore my $100 account

Well, not so much when compared with other Western countries; however, the bigger question is whether they are all overbranched. Only Singapore, with 111 branches per million inhabitants, is in a good position cost-wise. Italy and Switzerland, with more than 700 branches per million, have their work cut out for them as they reduce the number of branches from a level twice as high per capita as the U.S. total of 372 per million.

At our sister publication Online Banking Report, we've predicted that the total number of branches in the United States will fall by about 40% during the next 20 years (see note 1). Given expected population growth, that equates to about half the number of branches per million (using the BIS baseline, our projection is that the U.S. would have fewer than 200 branches per million in 2025).  The reason for the decline is the rise of the out-of-branch channels: phone, online, ATM, and soon mobile (see note 2).

Here's some interesting data from the Bank for International Settlements <bis.org>. Click on the table below to read the five-year data trend. The 270-page PDF is located here.

Interestingly, of the 13 countries covered in the report, only Hong Kong, Singapore, Sweden and The Netherlands have fewer branches per capita than the United States. We have almost 25% less than the 13-country average. Only two countries showed an increase in the 2001-2005 period: Italy which added 1,500 branches and the United States which grew about 6,000 (see note 2).

Here's the list in order of most branches to fewest per million inhabitants:

1. Italy                 >>> 762
2. Switzerland   >>> 701
3. France            >>> 649
4. Belgium          >>> 566
5. Germany        >>> 561
6. UK                     >>> 472
<< <AVERAGE >>> 471
7. Japan               >>> 459
8. Canada             >>> 441
9. U.S.                    >>> 372
10. Sweden          >>> 295
11. Netherlands >>> 270
12. Hong Kong   >>> 249
13. Singapore     >>>  111

Notes:

1. See Online Banking Report's Decline of the Branch (#128), published May 2006.

2. Tom Brown's been writing about the trouble some banking chains have been having with the performance of their new de novo branches (see here).  

3. In 2001 and 2002, the U.S. branch total in the BIS data-set excluded credit unions.

There's finally a simple and free resource for determining website traffic at most domains. Compete Inc. uses its panel of two million users to estimate traffic at hundreds of thousands of websites.

Compete's Snapshot service shows the traffic trend over the past 12 months plus a more detailed snapshot of the current month that includes pages viewed and length of stay (see Emigrant Direct example below).

Using Snapshot, we found 31 financial institution sites with one million or more unique users in September:

Rank/Unique Visitors (millions)
1)   17.1  Bank of America
2)   16.7  PayPal
3)   11.9  Chase
4)   11.4  CapitalOne
5)   11.3  Citibank
6)   10.0  Wells Fargo
7)    6.2   Discover Card
8)    5.6   American Express
9)    5.3   WAMU
10)   5.0   Wachovia

11)   4.1   LendingTree
12)   4.0   Fidelity
13)   3.8   US Bank
14)   2.9   Geico
15)   2.3   ING Direct
16)   2.2   Countrywide
17)   1.9   Progressive
18)   1.8   National City
19)   1.8   MBNA (Bank of America)
20)   1.8   Vanguard

21)   1.7   USAA
22)   1.6   FirstUSA (Chase Bank)
23)   1.5   Allstate
24)   1.4   Fifth Third
25)   1.3   Suntrust
26)   1.3   State Farm
27)   1.2   E*Trade
28)   1.2   Schwab
29)   1.0   Navy FCU
30)   1.0   HSBC
31)   1.0   BB&T

Also, PNC Bank and Key Bank both had just under 950,000 unique visitors. 

Source: Compete Inc., 6 Nov. 2006, <snapshot.compete.com>

Although growth has slowed, as it must when you have the penetration of Bank of America, the company still managed to add 760,000 active* online banking users and 430,000 active* bill pay users in the latest quarter. The bank's $15 enrollment bonus surely helped boost the total (see Aug. 11 post).

Excluding PayPal with 31 million active users (includes international accounts, see previous post), Bank of America continues to hold a large lead over the next largest U.S. online banking base, Wells Fargo's 8 million.

Although the bank posted an impressive 6.3 million gain year over year, about 4.5 to 5 million of that appears attributable to the MBNA acquisition (see chart below).

Bank of America Active* User Base
Qtr  Online Banking   Bill Pay
2006 (includes MBNA)
Q3....20.6 million   10.8 million 
Q2....19.8 million   10.4 million
Q1....19.6 million   10.1 million

2005 (excludes MBNA)
Q4....14.7 million    7.3 million
Q3....14.3 million    7.0 million

*BofA defines Active as having used the service in the past 90 days.

On the bill-pay front, the bank processed $49 billion in payments for its users during the quarter, up $2.1 billion over the previous quarter (+4.5%). The average payment amount was $4,500 per active bill pay user, or $1,500 per month with 84% of the payments delivered to the payee in electronic form (ACH).

The bank also reported e-bill delivery volume of 21 million in the quarter from 370 billers.

Thanks to Scott Loftesness at Payments News for digging through the bank's 47-page earnings supplement for these gems (see pp. 18-19).

While the number of external blogs at U.S. banks and credit unions can be counted on your fingers today, that won't last. Here's the eight we've heard about:

• Bank of Internet (MyRVBank and Senior BofI)
• First Tech Credit Union (began April 2006; see screenshot below)
• Forum Credit Union
• Savings & Loan Credit Union (Australia)
• Service One Credit Union
• Vancity Credit Union (Canada)
• Verity CU (began Dec. 2004)
• Wells Fargo Bank (began March 2006)

Source: OpenSourceCU.com, Online Banking Report

Trends
The New York Times reported last Wednesday on the expected explosion of business blogging. Citing statistics from Nancy Flynn, director of the ePolicy Institute and author of Blog Rules, it is estimated that only 4% of major corporations operate external blogs today. However, 85% more plan to do likewise. Among small business, 10% have already incorporated blogs into their marketing plans. 

Bank blogging forecast
We are in the process of developing a blogging forecast for release in November's Online Banking Report. Our preliminary estimate is that within two years, there will be at least 500 bank and credit union blogs.

It's no suprise that credit unions would jump on this trend; it fits right in with their membership and community focus. For example, Seattle's Verity CU has been blogging for almost two years (see 29 Aug 06). The unexpected first mover among major financial institutions is Wells Fargo (see 23 Sep 06), which has two blogs and six months' experience under its belt.

Action Items
If you pride yourself on having a state-of-the-art website, you'll want to add a blog in 2007. You can start with something relatively simple, such as First Tech Credit Union's news and announcement service. Then you can graduate to the more advanced versions with real personality, such as Verity Credit Union's and Wells Fargo's Student Loandown.

In a new Forrester study on Gen Y consumers (must be a Forrester client to access), Analyst Charlene Li tracks the growing influence of blogs. The company's research shows that one in four Gen Yers regularly reads one. Here's blog readership by generation:

24% Gen Y (ages 18 to 26)
12% Gen X (ages 27 to 40)
7% Young Boomers (ages 41 to 50)

We've seen studies that show even higher usage; it depends on whether you count social networks such as MySpace as a "blog." The influential Pew Internet & American Life Project <www.pewtrusts.org> released a blogging report this summer. In that study fielded in January, Pew found that 39% of Internet users, or 57 million, were reading blogs and 9%, or 12 million, were writing them.

Financial institutions thinking of starting a blog might want to tune into Charlene's teleconference next week (Sept. 22, 1:00 PM Eastern; cost = $250) when she looks at the criteria companies should use when choosing a blogging platform, including a review of nine providers.

She's also summarized the vendor comparisons in a $995 report which looks at Drupal, iUpload's Customer Conversation System, Roller, Six Apart's Movable Type and TypePad, Telligent Systems' Community Server, Traction Software's TeamPage, UserLand Software's Manila, and WordPress. Her report abstract names iUpload as her favorite.

The privacy furor that erupted August 6 over the 20-million Web queries posted by AOL has distracted from the useful information contained in the database. While AOL removed it a week ago, numerous search-engine researchers had already downloaded the file and have reposted it with front-ends for research purposes.

SEO Sleuth <seosleuth.com> has posted the top-2000 search terms from the AOL sample. Click the continuation link below to see a list of all banking terms that made the top 2000 list. Here's the first 10 with their overall rank among all search terms:

40. bank of america
86. bankofamerica
114. fidelity
159. bankofamerica.com
170. paypal
174. www.bankofamerica.com
202. free credit report
215. american express
259. wachovia
264. wells fargo

What's striking about the AOL search data is the overwhelming preference to search on brand names rather than product categories. Also, that Bank of America has an extraordinary share of mind with searchers, with its various forms accounting for four of the top six most-searched financial services terms.

--JB

Rank/Search Term/Number of Searches/% of Searches that Ended in a Click (to ANY website)
Note: Click on the search term for a list of the websites visited after entering this search term

In its seventh annual Internet-bank "beauty contest," Global Finance Magazine <gfmag.com> named Bank of America the best consumer Internet bank in the United States and Citigroup the best corporate Internet bank. Apparently, the magazine loves Citigroup's work, naming it the best corporate Internet bank in 46 countries and best consumer Internet bank in 11 countries including Germany, United Kingdom, and Indonesia (see list of complete winners, by country, by clicking on the link at the bottom of this article). 

The magazine also named winners in specific categories. In the United States, the winners were:

Consumer Internet Banks:

Best investment management services: Bank of America

Best bill payment and presentment: Bank of America

Best online consumer credit: Wells Fargo

Best website design: Wells Fargo

Best integrated consumer bank site: Bank of America

Best information security initiatives: Bank of America

Best online deposits acquisition: TD Bank Financial Group
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Corporate/Institutional Internet Banks:

Best online cash management: Citigroup

Best trade finance services: Citigroup

Best website design: Wells Fargo

Best integrated corporate bank site: Wells Fargo

Best information security initiatives: JPMorgan Chase

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