Our parent publication, Online Banking Report, just published a new report: New Models for Lead Generation: How auctions, community recommendations, product placements, and specialized search provide alternatives to Google AdWords.

Not only is this the longest report title in our history, it's the first time we've looked specifically at lead gen sites (click on the Table of Contents right, to download the abstract).

The report was inspired by MoneyAisle, an auction-based retail deposit market, that debuted June 9. Although, it has a few kinks to work out, we are impressed by its work and are awarding it the second OBR Best of the Web this year (see note 1 and Credit Karma below).

But auctions were not the only new lead gen model we looked at. Others included:

• Community-based deal finders such as Credit Karma, the winner of our third OBR Best of the Web award for 2008 (see screenshot below, watch Finovate Startup demo here), SmartHippo (demo), and FiLife which also launched in June
• Specialty financial search services such as BancVue/FirstROI's CheckingFinder (coverage, demo) and Mortgagebot's Mortgage Marvel (coverage, demo) both Best of Show winners at Finovate 
• Product placement in financial tools such as Mint (coverage, demo), Credit.com, FindABetterBank (demo), and Credit Karma

The report, which includes a ten-year forecast for auction and personal finance community involvement, is available as part of an annual Online Banking Report subscription or it can be purchased individually for $495 here.

Next month: New security technologies your customers are going to love, or not.

Screenshot: Credit Karma offer page: Countrywide's high-yield savings offer is rated positively by 53% of Credit Karma users and earns a composite score of 63% which also factors in clickthrough rates and exclusivity, see box in upper right (9 July 2008)

Note:
1. The first winner in 2008 was SmartyPig (here). Best of the Web awards are given for new products/features that "raise the bar" for online banking. It is not an endorsement of the company or even the product itself. See previous coverage here.

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

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

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

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

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

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

For more information read the abstract here.

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

We just finished the latest from our Online Banking Report, entitled Searching for Customers 3.0 (see note 1). The report takes a fresh look at search engine marketing for financial institutions including local search, financial keyword selection, how to leverage social media such as blogs to improve your organic results, and more.

It's 36 pages long with 11,000 words and 28 tables. The report includes overall search marketing trends and metrics. We also dive deep into the most popular financial search terms and to help you uncover new ideas for your own search marketing tactics.

Online Banking Report subscribers may download the report here. All other may purchase it for US$245 (single user) here. The abstract is available here.

Note:

1. The "3.0" in the report title means it's the third time we've covered this subject during the 13-year history of Online Banking Report. We also looked at search in April 2003 (OBR 95) and June 2001 (OBR 69) when Google AdWords was just getting rolling.

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

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

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

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

Note:

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

For much of the past four or five weeks I've been researching and testing person-to-person lending sites. I've become a lender and have gone through the borrowing process at all three major U.S. P2P lending exchanges: Prosper, Zopa, and Lending Club. Plus I set up friends and family with loans at Virgin Money USA and LoanBack.

It was all part of the research process for the latest Online Banking Report entitled, Person-to-Person Lending 2.0: Disruptive service or market niche? That report is now available at our main website (here).*  

I had originally intended on publishing it in early December. But as I was trying to wrap things up, Zopa launched its new U.S unit. So I stopped the presses and added an analysis of its unique model. Then as I was finishing that, Lending Club made a significant change last week, becoming a national lender instead of state-sanctioned one. That too is now in the report. 

Here's a summary of the major fourth quarter activity in the person-to-person lending sector:

• Oct. 2: Prosper overhauled a number of its lending tools, which were announced at our FINOVATE conference Oct. 2 (video here) 
• Oct. 6: Virgin Money (formerly CircleLending) launched its revamped friends-and-family service with a splashy debut in Boston with Virgin founder Richard Branson leading the parade (coverage here)
• Dec. 3: Zopa launched its U.S. version, an entirely new way of looking at the P2P space (coverage here)
• Dec. 13: Lending Club went national in a unique partnership with WebBank

________________________________________________

*Subscribers may download the report free of charge.
Others may purchase it as an individual report.

Over at Online Banking Report, we just posted the latest report, our 13th annual Online Banking Planning Guide (2008 version). It includes 60 pages of ideas, tips and tools to help you generate new ideas, plans, and strategies for 2008 and beyond. Subscribers, you may download it now (here) as part of your subscription. Others may purchase (here).

While there are more than 500 online banking product and marketing ideas in the report, we hand-selected 15 to put on the hot list for next year:

• Alt-mortgage zone
• Balance transfers
• Fraud monitoring
• Green banking
• High-yield savings
• Home equity center
• Long-term archives
• Microbusiness services
• P2P loan servicing
• Personal finance
• Premium/VIP online banking option
• Prepaid cards
• Problem mortgage help
• Web 2.0
• Widgets

Just a quick note to let you know that the latest Online Banking Report has just been uploaded to our website. It's title: Online Credit Monitoring Services: The robust business case for financial institution distribution. I'll post some conclusions from the report later, but you can read the abstract here. 

Subscribers, you can download it now (here) free of charge. Everyone else, it's US$595 on its own, or for "just" $500 more you get the new report plus a stack of others, including our report on Social Personal Finance, Mobile Banking, Mobile Payments, the latest online banking forecast and more. 

Last week, I promised to provide more details on the conclusions in our latest Online Banking Report, Social Personal Finance: Will social networking revolutionize personal finance? It was mailed to subscribers last Friday, so it should be making its way through inter-office mail as we speak (or download here). 

Here are the major themes/conclusions from the report:

1. Social networks are the new main street; so banks that want to be where their customers are should NOT ignore social networks.
2. There are many ways to bring social networking concepts into mainstream banking sites, for instance blogs and forums allow conversations to take place with both customers and employees participating.
3. The leaders in the space now are startups such as Wesabe and Lending Club. But what they gain in social networking savvy, they more than give back in lack of trust. So financial institutions are still incredibly relevant in social personal finance.
4. In the future, social networks may become so trusted that they can function as a virtual credit union, bringing together members to provide each other with financial services (e.g., P2P lending) or using their clout to negotiate deep discounts with financial providers (e.g., affinity credit cards).

 Social personal finance innovators profiled in the report include:

• Buxfer -- Named OBR Best of the Web in the report for several pioneering features, including login via third-party APIs, transaction input via email, file appending, Google gadget, and budget alerts
• Wesabe -- Also named OBR Best of the Web for its integration of personal spending records with the wider community

We also looked at Mint, Geezeo, Lending Club, Wells Fargo, and Intuit's new Personal FinanceWorks and Small Business FinanceWorks.

----

For more information on the report see the landing page here or download the abstract here. And for Colin Henderson's take at The Bankwatch, go here.

Wow, I can breath again. I just loaded the latest Online Banking Report on to our website, Social Personal Finance: Will social networking revolutionize personal finance? I'll post a summary later. Subscribers, you can download it now (here) free of charge. Everyone else, it's US$395 on its own, or for "just" $700 more you get the new report plus a stack of others, including our report on Web 2.0-ing your Bank, Mobile Banking, Mobile Payments, the latest online banking forecast and more.

Thanks to Scott at Payments News and Colin at The Bankwatch, who've already given the report a mention. And thanks to the Bryan Donovan and the folks at Compete, who provided a new online financial services data snapshot that I know you are going to find extremely valuable. More on that tomorrow.

Now, back to our regularly scheduled blog.  

Our parent publication, Online Banking Report, has just released its latest in-depth report: Mobile Money & Payments 2.0: Why credit & debit card issuers should embrace mobile delivery now

• Link to the full report here
• Link to the abstract here

The report builds on last month's Mobile Banking Report (report here), this time looking at the rollout of mobile payments in North America. The report recommends tactical and strategic options for financial institutions both in the short-term and into the next decade. In addition, several innovators are highlighted including Obopay, PayPal Mobile, and NTT DoCoMo.

The Wall Street Journal published an extra section yesterday on personal finance entitled, Your Money Matters. Online financial tools were highlighted in Jane Kim's, "Check it Out: New online tools from financial institutions can help consumers manage their money." 

Here's the back story on several of the items mentioned in the article:

• Our sister publication, Online Banking Report, was cited as the source of the following statistic: "About 16% of U.S. households used some personal-finance feature at least once in 2006. That percentage is expected to climb to an estimated 33% by 2016, with nearly three-quarters of those households using personal-finance tools offered by their financial institution online."
  
  The information cited in the WSJ story was contained in the report we published last fall in Personal Finance Features for Online Banking (OBR 131/132; see Table 3, p. 3, lines 4 and 10). Current usage estimates were based in part from data provided by Javelin Strategy as shown in Table 2 on the same page. 
  
• In the article, Bank of America's My Portfolio was the first of two existing personal finance tools mentioned. The service, powered by Yodlee, was quietly launched in December and was covered in NetBanker at the time (link here) and received an OBR Best of the Web award in our final report of 2006 (OBR 137) where it was rated the third most important development of 2006.   
  
• The second example cited was Wells Fargo's MySpendingReport (see inset and previous coverage here). The service, which is basically just a consolidated view statement data across the bank's transaction accounts, is a great example of positioning online banking features in a way that resonates with users. It was awarded an OBR Best of the Web in 2005, finishing the year as the tenth most important new development of the year (report here).

The story finished with hints of new services planned for later this year at Everbank, Bremer Financial (powered by Corillian), and a Digital Insight tool that allows users to hand enter additional bill payments in order to their entire payments picture in one place.

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. 

Our sister publication, Online Banking Report, released its latest report, 2007 Online Banking Planning Guide. The 60-page report is packed with more than 1,000 ideas, tactics, and strategies for use by banks, credit unions, mortgage companies, credit card issuers, brokerages and insurance companies.

The report includes the following sections:

• Consumer product planner
• Small business product planner
• Fee-income planner
• Messaging planner

Online Banking Report subscribers may download the free report here. Others may purchase the report for US$495 here.

For more information, download the table of contents here.

Before embarking on new product and marketing strategies,
perform a reality check on users’ expectations.

Source: Online Banking Report, 9/04 Notes: 1We call it the illusion of real-time processing, because users don’t so much care whether a transaction is processed in real-time, what they care about is that they can SEE that you have accepted their transaction and have adjusted balances accordingly; the actual debiting/crediting can occur behind the scenes in batch mode. 2It’s extremely difficult to describe what’s “right” in words, but we know it when we see it.

Looking at the entire universe (including self-employed and contractors), for 2004 we project growth of 2 million new small business online banking users, a slight decline from the 2.5 million who came online in 2003. And the rate of growth, due to the higher base, will slow to 17% from 2003’s 28% (see Table 9, below).

Table 9
Forecast of U.S. Small, Microbusiness, and Self-Employed Online Banking Usage

includes broadest definition of small business users, population estimated at 23 million

Source: Online Banking Report projections based on industry data (+/- 30%), 3/04;
% OLB = percent of total population that is actively banking and/or paying bills online (activity within past 6 months)

Table 10

OBR Forecast: Small Business Use of Online Banking
businesses with annual revenues from $50,000 to $10 million, not including self-employed/contractors

Sources: 1998 to 2002 estimates, TNS Financial Services Small Business Market Track, April ’03; (1) 1995 to 1997 and 2003 to 2013: Online Banking Report estimates plus or minus 33%

The opportunity at your financial institution

For a rough approximation of the small business potential in your market, use the national average business-to-consumer penetration. For example, there are approximately 90 million U.S. households with bank accounts. Therefore about 25% (23/90) are business owners. About 8% (7.3/90) own businesses that are relatively easy to find via identifiable business phone lines, D&B reports, compiled lists and so on. The difference, about 16 million, are harder-to-find self-employed and contractors.

Table 11

Estimating the Number of Microbusinesses in Your Market

Number of banking households in your market                                                     (fill in)

Multiply by the percentage of all households that are microbusinesses                 x 8% or 25%*

Approximate number of microbusinesses in your market                          =                        _____

Source: Online Banking Report, 6/04 *Depends on whether you are looking at all businesses including self-employed/contractors, or just the larger small and microbusiness segment

Total market size of balance-driven banking products

Looking at just the 1.2 million larger small businesses with revenues from $1 million to $10 million (not including self-employed/contractors), TNS Financial estimates total business deposits of $240 billion and the total loans and lines of $160 billion for a total of $400 billion. In addition, we estimated the microbusiness segment ($50k to $1 million) has another $240 billion in deposits and loans. In addition, NFO estimates that small- and microbusiness owners have another $1.6 trillion of deposit and loan balances in their personal accounts, for a total of $2.2 trillion. Assuming a 200 basis point (2%) spread on the balances, the sector is generating about $44 billion in net interest revenues, an average of $6,000 per business/owner.

But, this only accounts the money paid out to financial services companies. It ignores the significant internal and often hidden costs associated with financial management: accounting, bookkeeping, payroll, treasury, and so on. With the Web, banks have an opportunity to compete not just for the traditional financial products, but also for the entire financial operations of the business.

Table 12

Deposit and Loan Balances and Net Interest Margin from Small-and Microbusinesses

Source: Small business ($1 to $10 million) segment and owner balances from TNS Financial Services Group 2003 Small Business Studies, 4/03; Microbusiness balances and average net interest margin are estimates from Online Banking Report, accuracy estimated at plus 100%, minus 50%

¹OBR estimate of $15,000 per microbusiness, n = 6.0 million

²OBR estimate of $25,000 per microbusiness, n = 6.0 million

Table 13

Small Business Assets by Type, Numbers and Balances

Source: Balances from TNS Financial Services Group (formerly NFO World Group) 2003 Small Business Studies, 4/03

Table 14

Small Business Liabilities by Type, Numbers and Balances

Source: Balances from TNS Financial Services Group (formerly NFO World Group) 2003 Small Business Studies, 4/03

Table 15

Misc. Product Usage

Source: Balances from TNS Financial Services Group (formerly NFO World Group) 2003 Small Business Studies, 4/03

Table 16

Financial Products Purchased for Personal Use¹ by Small Business Owners

Warning: Small sample sizes of respondents with large balances may distort the numbers.

Source: Balances from TNS Financial Services (formerly NFO World Group/PSI Global) 2002 SOHO and
Small Business Owner Studies, 4/02; number of small and microbusinesses from NFO’s 2003 Small Business Study, 4/03

Total population (N) = 7.3 million U.S. small and microbusinesses, not including self-employed/contractors, OBR estimate +/- 20%

Does not include the value of the owner’s business, commercial real estate investments, stock options, and other misc. categories

¹Products used personally, not for the business

²Total market = (% using) x (average balance) x (7.3 million micro and small business owners)

³Total balances only, does not include auto leases or insurance

⁴Across all business owners, users and non-users

⁵Net worth = personal assets less personal liabilities, does not include net value of business or non-residential real estate holdings

⁶Total personal assets less value of residential real estate, does not include net value of business or non-residential real estate

The latest report from Online Banking Report was published today, E-Service 2.0: Service with a :)

Subscribers may access the report immediately at Online Banking Report.

Others may download the abstract.

Innovating in online marketing and delivery

Credit cards have always fascinated me. From my first card in 1982, through my stint as a card product manager in the late 80s, I’ve been a student of the industry, watching and learning from the best: American Express, Citibank, First USA, Capital One, and others.

As we entered the Internet era in the mid-to-late 90s, I fully expected the credit card issuers to lead the financial services sector online. For a while, it looked like a good prediction. Many of the early online banking pioneers, NextCard, Providian/GetSmart, Wingspan Bank, C2it, Juniper Financial, had their roots, and business plans, centered on credit cards.

But a funny thing happened as that story was being written. Recession. Whether it was an unseasoned portfolio (NextCard), problems at the parent (Wingspan), or an over reliance on sub-prime (Providian), these pioneers lost their funding and retrenched (Providian, Juniper) or disappeared (NextCard, Wingspan, C2it).

But as card companies recover from the beating they’ve taken during the past three years, we are seeing renewed innovation from the sector. For example, after a decade of struggling to get traction, the card companies have put online bill payment on the map with their convenient card-payment options. As a result, card issuers have some of the largest registered user bases in the financial services arena (Table 1 below):

Table 1

Top 5 Online Cardholder Bases, Year-end 2003
number of online cardholders

Source: Companies, (e) Online Banking Report estimates, +/- 25%, 2/04

We still believe that long-term you are better off wrapping your direct banking efforts around plastic rather than paper ( “Will that be Paper or Plastic?”). If NextCard had been more patient in building its portfolio, they could have been a powerhouse today. So who will take their place as The Internet Credit Card? It’s one of the more intriguing opportunities of the decade.

Table 2

Top 5 Online Cardholder Bases, 2000 to 2003
number of online cardholders

Sources: Companies except, (d) Dove, (e) Online Banking Report estimates, +/-25%, 2/04

Online Card Usage

According to a recent Forrester report,¹ 75% of U.S. credit card customers have online access, and of those 36% (20 million) access their card statements online. More than 60% of those users (12 million) accessed their account regularly. Fisite Research, a company founded by ex-Gomez payments analyst, Paul Jamieson, found even higher usage; with 57% of online cardholders saying they manage some aspect of their card online² (see Table 3, right). Whether the true number is 20 million or 30 million or somewhere in between, we do know that the use of online credit card management has exploded. Three years ago (year-end 2000), fewer than five million households accessed cards online (see full details, Table 5, opposite). Now, at least five individual card issuers have online user bases of five million or more (see Table 2, above).

There is even a greater disparity in estimates of the number of cardholders paying their card bill online. Forrester found that just 36% of online card statement viewers
(7 million HHs) pay their bill online, while Fisite reported 74% of online card managers paid online.² Gartner estimated that 22 million adults pay their card bill online, either directly or through third-party bill pay.³ Based on these estimates and usage numbers from individual card issuers, we estimate 16 and 18 million households pay their card bills online directly at the issuer, up nearly 20-fold since less than one million users at the beginning of 2003.

¹How To Right-Channel Credit Card Customers, by Catherine Graeber, Forrester Research, Jan. 2004, $675, http://www.forrester.com/ , fielded, Q2, 2003
²The TSYS Summer 2003 Executive Online Credit Card Survey, Finite Research, $2495, http://www.fisiteresearch.com/  fielded May/June 2003; the numbers may be higher because respondents included pay-anyone third-party payments in their answers
³EBPP Future Blends Direct Bank Aggregation Models, Jan 13, 2004, by Avivah LItan, Gartner, http://www.gartner.com/  $95, fielded May ‘03

Table 3
U.S. Online Credit Card Usage Estimates

Source: Companies, Online Banking Report, 2/04
*OBR estimates, Fisite reported usage as a percent of cardholders responding
to its online survey fielded summer 2003, household extrapolations by OBR
**Includes online payment direct at card issuer or through third-party bill pay

Table 4
Online Card Evolution