Talk about turning the tables. Now individuals are lending to businesses. Has the credit crunch gotten to that level?

Small business lending, or the lack thereof, was highlighted in today's Wall Street Journal in a column by Jane Kim that ran on the front page of the Personal Journal section, Where Either a Borrower or Lender Can Be: Small-Business Owners Turn to Online Networks for Funds as Banks Tighten Credit (here).

The article includes three examples of small business owners, frustrated with the stinginess of bank lending departments, that turned to person-to-person exchanges for loans. Apparently, all three had excellent credit since Mr. Walsh was able to borrow $22,500 at 10.25% and Mr. Kelley $18,500 at 10.97%, both from Prosper. And Mr. Kalempa received $15,000 from LendingClub for 9.6%. You don't get funded for loans of that size unless your credit is good and your story even better.

Small business owners may not have time to shop for credit, but they do network. And given how unique positive borrowing experience are, these P2P success stories will be told and re-told dozens of times. The credit-crunch induced conservatism of the banking community, especially towards growing businesses, could be an HUGE opportunity for the new P2P marketplaces.

It could be the crossing-the-chasm market niche that the loan exchanges need in order to gain traction and profitability as they position themselves for the mainstream consumer marketplace. The credit markets are huge and complicated and it's impossible to predict how this plays out. But if I worked in small business banking product management, I'd circulate this story to senior management and start working on my response to the P2P lending threat. 

Jeff Bezos may have grabbed the cover of Newsweek for the latest high-tech gadget, the Amazon Kindle, but that's old hat for him. The bigger news in online banking circles is Richard Branson gracing the cover of the December/January issue of Fortune Small Business (click on the inset to read the magazine online). His smiling mug is shown tossing hundred-dollar bills out of a teller cage. 

The reason: Virgin Money USA (previously Circle Lending) is one of six new products/services the magazine included in its annual "The Next Little Thing for 2008" series. To be part of the article, the innovation must be coming from a "small business," although I'm not sure Virgin qualifies as small anymore.

The 1.5 page story discusses the Business Builder "friends and family" loans that Virgin will administer for a one-time cost of $199 to $299 plus $9 per payment. The company says it plans to offer a business loan product later in 2008 or 2009 that will match outside money to the original friends and family loan, provided it's been paid on time. 

Could 2008 be the year of person-to-person lending? Given Branson's track record, there's a good chance the relatively unknown service will take off next year.   

Note:

1. According to my recollection. 

As promised in its teaser print buy, American Express delivered my Plum Card invitation in the wee hours Monday morning (2:06 AM Pacific time, see screenshot below). The message, with my first and last name in the salutation, was short and sweet and directed me back to the main website to apply at <plumcard.com>.

It's all first class work, but the generic call-to-action surprised me a bit since I'd put my name on the "wait list" last week (see post here). I expected a more personalized invitation and link. The website doesn't appear to recognize me either (see screenshot below).

Email Invitation (1 Nov 2007)

Plum Card homepage (5 Nov. 2007)

I don't know how I missed this one, but Advanta, a major credit card issuer with 1.2 million small business customers, launched a new Web 2.0 microsite on Sept. 24 at the high-tech DEMOfall conference (press release here). Just being there amongst the digerati was a coup for the card issuer, but they did much better, managing to come home with a coveted DemoGod Peoples Choice trophy at the conference.

The Web 2.0-laden site is called ideablob, and it's a place where entrepreneurs, inventors, and anyone else can post their business idea and compete for the monthly $10,000 prizes (contest rules here).

One month after launch, the site is generating a fair amount of activity. The eight October finalists showcased on the homepage (see below) have received the following: 

• 691 total votes (must be registered to vote, can vote on more than one idea)
• 216 total comments (must be registered to comment)
• 10,300 total views (anyone can view the idea)

Traffic to the site should grow rapidly once word of the $10k prize circulates. That's a large incentive for the millions of Internet users who think they have a better idea. 

Advanta, which uses fairly subdued branding on the site (see small "inspired by Advanta" under the main ideablob logo), is positioned to gain in three ways:

• By associating its brand with innovation, social networks, and a Web 2.0 attitude
• Assuming a good viral kick, and $10k/mo should do it, the site could generate leads more cost effectively than through other channels
• Publicity in blogs and traditional media

Bank of America launched a good business networking site recently, but without the fun of the $10,000 in prize money (see previous coverage here).

Advanta's ideablob main page (25 Oct 2007)

An idea page

In the past 10 years, we've seen dozens of bank-powered sites targeting small businesses. Citibank ran one for a few years called Bizzed. Back then, they were called "portals." Now, they are "social networks." But the purpose remains the same: Create a destination site for business owners to learn how to run their business better while reinforcing the bank brand as small business savvy.

In general, it's a good idea. But it's extremely difficult to get traction with small business owners who usually lack the time and/or interest to read extensively about how to run their business (note 1).

Bank of America's effort, Small Business Online Community, tries to get around the attention problem by creating forums where specific questions and answers can be posted (press release here). Again, not a new concept, but probably the best way to get something like this off the ground.

Analysis
I registered (see note 2) and spent a few minutes poking around the site. In addition to the forum, the site includes columns by business experts and reader-submitted stories. It will be interesting to see if the so-called user-generated content in the latter category is all self-serving promotions from the small business participants, or meaningful perspectives that allow conversations to begin.

The well-designed site, with Web 2.0 touches, is off to a good start from a registration standpoint. This morning alone (as of noon Eastern time), 300 new members had signed up. They may all be bankers in disguise, but it's still far more than I would have expected.

Other than the small "powered by" link in the upper right corner, the site doesn't appear to have any direct involvement from the bank. Frankly, I'd like to see bank officers weighing in on the financial topics, as long as they take a consultative approach and disclose their affiliation. But I understand the bank's initial restraint.

Note:

1. However, entrepreneurs in the research phase, what is sometimes called "pre startup," often devour reams of material. And since they are often highly interested in financing opportunities, a bank-sponsored site could gain their attention.  

2. A couple nitpicks:

• Usernames are case sensitive; a twist that tripped me up when trying to log in the first time. The bank should remove that stipulation, especially in a less security-sensitive application such as this.
• Lots of the material is available as RSS feeds, but other than the little orange icon, it's not very obvious how to subscribe via RSS or email. 

It's extremely difficult to win the transaction accounts of small businesses. By the time you know of their existence, they already have their bank accounts in place. And most small businesses are too busy to bother switching accounts to save a few bucks a month, or even to get better products or services.  

One way to grab market share is to find businesses when they are in the pre-startup phase, before they've set up banking accounts. In pre-startup, the prospective business owner is in pure research mode, spending little or no cash. To find these businesses, you need to offer online information that startups value and can find at your site, such as new-business planning advice. Then entice the owner to establish bank accounts with a package of services that appeal to a new business owner.

Bank of America is on the right track with its sponsorship of Microsoft's new Startup Center <startupcenter.com>. It's more like a product placement than a "banner ad" sponsorship. The BofA logo is never even seen in the main content area.

However, the bank's content is tightly integrated throughout, especially in the Finances area. For instance, if a business owner wants to "set up a checking account," the links to detailed information such as "compare now," "get a recommendation," and "get a business check card" all link directly to content housed on Bank of America's website (see screenshot below).

MasterCard is also a primary sponsor, but its content is less integrated. The third core sponsor is Startup Nation.

Analysis
It makes sense for Bank of America to be involved in Microsoft's Startup Center, a  beautifully designed tool all decked out in "Web 2.0" colors and graphics. The content seems appropriate and useful for a startup. However, it will be a challenge for the area to gain traction with actual startups, who are unlikely to be looking to Microsoft for assistance, unless they are software developers.

But you don't have to be a mega-bank or mega-software company to provide valuable services to startups. Financial institutions can partner with local professional service firms such as accountants, consultants, and attorneys, to create content for startups such as Webinars, and in-person seminars. A well-priced package of banking services, positioned and priced for startups, will help you grab new business in the startup sector.

Examples of startup products and services at financial institutions:

• CIBC startup area
• Lloyds TSB Business Extra package for startups
• Bank of Montreal business startup package
• Simply Startup Business Checking from First Light Federal Credit Union

For more information, see our Online Banking Report on Small and Microbusiness Online Banking (here). Thanks to Payments News for the link.

I first met Chip Mahan in 1995 when he was at the helm of Cardinal Bancshares and about to launch the first Internet-only bank in the world, Security First Network Bank. That effort eventually spawned S1 Corporation, now a leading banking tech company, with a half-billion market cap. 

Unfortunately, the Internet bank was sold off and eventually shuttered by Royal Bank, in a move I've never quite understood. Why would you take the pioneering brand name in one of the hottest sectors of the last 25 years and just close it down? Royal didn't even bother spending the $9/yr to keep the domain name <sfnb.com>, now a generic link site. 

After his stint at the helm of S1 ended in October, Chip is back in the banking business taking the reins of startup Live Oak Banking Company. The Wilmington, NC-based company is still in formation. But it recently passed a regulatory milestone, raising $8 million in capital from fewer than 10 investors (see note 1, 2). David Lucht, who worked with Mahan as a credit officer for Cardinal Bancshares, is the Live Oak's President.

Live Oak was recently profiled in the local business press (here), and will apparently specialize in lending to veterinarian practices and kennels. 

While a number of banks target health care practices including veterinarians, none appear to be aggressive online marketers with the possible exception of Bank of America, which is the only mainstream financial institutions using Google to market vet practice loans (note 3).  Also, BB&T's Vine Street Financial lists vet practices on its menu of commercial health care lending services (see inset).

With Mahan at the helm, its almost certain their will be a web-based component to the bank's strategy. This is the long-tail of lending at work, targeting a highly specific area that needs a national focus in order to create enough volume to survive. Eventually, we expect to see national lenders targeting hundreds, if not thousands, of business niches online.

For more information on small business strategies, refer to Online Banking Report #107/108 (here).

--------

Notes:

1. It looks like the company may have registered the URL <liveoakbanking.com> as their URL, but its not currently live and the registration info is unlisted.

2. Here's what the North Carolina banking commission has listed for the company:

• Required capitalization: $8 million
• Prospective employees: 15
• Address: 2605 Iron Gate Dr., Wilmington
• Principals: James "Chip" Mahan, CEO; David Lucht, president
• Focus: Business lending to vets, kennels and children's day care operations

3. Source: Google search, 14 June 2007, from Seattle IP address, 2 PM PDT

It takes a long time before a new process or technology becomes "conventional wisdom," something that is accepted at face value without questioning its pros and cons. While we are still years away from that happening with remote deposit technology, at least the mainstream press has picked up on its benefits, one of the first steps towards mass adoption.

The latest example was in today's Wall Street Journal special Small Business section. In "Branching Out," a general article on banks' growing interest in small businesses, author David Enrich prefaced an Aite Group "levels the playing field" quote with this (p. R6):  

Remote deposit makes it less important to select a bank based on its location or number of branches--which many big banks tout as a key selling point.

Analysis
The key take-away here is that banks should make sure remote deposit services are prominently featured in checking/cash management offers aimed at attracting new business clients. 

For example, PNC Bank is currently running a remote deposit promotion with a free scanner for customers who sign up before the end of April (see landing page screenshot below). The service is powered by Bankserv (PNC data sheet here;

The promotion is well-placed on Google, with the fourth-highest AdWords placement giving PNC the top-right slot (see inset).

However, neither the promotion or remote deposit are mentioned on the bank's main business checking account marketing page (see second screenshot below). We like the promotion, the first we've seen advertising a free scanner via Google, but the bank seems to be missing the chance to grab new accounts with the freebie.  

PNC Bank landing page from Google search on "remote deposit capture"
(Seattle IP address, 19 March 2007, 9 AM PDT)

PNC Bank main business checking page (19 March 2007)

Intuit's $1.3 billion acquisition of Digital Insight closed yesterday, marking the beginning of a new era of innovation in small business online banking (previous coverage here). It's a market that's been underserved for years (see Online Banking Report's, Small- and Microbusiness Online Banking, #107/108).

Intuit, which has iPod-like domination of small business accounting and bookkeeping via Quicken and QuickBooks, can now leverage the software relationship into the banking relationship.  The bloggers at Intuit's QuickBooks team-blog expanded on that theme here, discussing their goal of integrating electronic invoicing and payments into the bank site:

Why the purchase? One reason is to try to sell functionality of our record-keeping software as a service through banks, letting small businesses create, send, and get paid for invoices, all online at a bank's site. With millions of QuickBooks customers, we think we have some insight into small business' needs.... We learned from our tax return business how quickly packaged software can move to a Web service. Last year, for the first time, more people used the online version of our Turbo Tax Web service than the desktop version.

This is not necessarily bad for financial institutions. In fact, it probably levels the playing field for the smaller banks and credit unions that are the core of the DI client base. Through integration into Intuit's accounting products, smaller banks will be able to offer sophisticated small business solutions that equal or surpass what Bank of America or Wells Fargo offers today.

Remote deposit capture is one of the most significant new technologies to hit online business banking since, well, online banking. According to Celent, 60 of the largest 100 banks, including 20 of the top 25, now offer it. In addition, hundreds of smaller community banks now offer it.

So why can't I find it through Google? (see note 1)

For two years I've been coveting the service and waiting for my bank to offer it to small businesses such as ours. I'm still waiting.

Today, I happened to see it mentioned on the homepage of a local community bank here, First Mutual Bank (see screenshot below).

Not wanting the hassle of moving my account relationship, especially to a bank on the other side of Lake Washington (a major traffic hassle), I tried a little Googling to see what other banks in the area might have it. 

It fails to show up in the organic results, and only two banks, Wells Fargo and Main Street Bank <mstreetbank.com> are advertising on "remote deposit capture" and the shorter "remote deposits." Main Street Bank is located out of state and Wells Fargo, while just up the street from my office, appears to target its remote capture to larger businesses. I'd be willing to pay $20 to $30 a month for it, but I'm guessing that's not even close to the Wells Fargo commercial customer price.   

Action items (see note 2)

1. If you offer remote deposit capture, make sure you have a dedicated page touting the features and benefits.
2. On the dedicated page, make sure you use the term "remote deposit capture" in addition to any cute name you've branded it with. That will help users find it on search results.
3. Market it through Google and other search engines. At this point, it doesn't appear that there's much competition for ads, meaning your cost per click should be low.
4. Create a landing page that captures leads for your business banking officers. Check out Wells Fargo's approach at https://www.wellsfargo.com/com/boc_campaign
   (see screenshot below)

Notes:

1. I am searching from a Seattle IP address. In other markets, there may be financial institutions using Google to market remote deposit services.
2. We will post an additional article on remote deposit marketing later today

Intuit's bold move to purchase online banking pioneer Digital Insight came as a surprise, both to analysts and shareholders. Reactions were mixed, with shares drifting downward after the 8 AM EST announcement Thursday, ending the week off 3% (see chart here; Intuit presentation on the acquisition here).

Although the software developer has made a few forays into selling bank technology, including owning a bill payment processor in the mid-90s, it has generally stayed focused on packaged software for consumers and small businesses.

Just two weeks ago, I met with Intuit execs at the coming out party for its financial institution services unit at the China Grill down the hall from BAI's Retail Delivery Conference in Las Vegas. They were excited about several new services built on the Teknowledge unit purchased last year (see previous post here).

Analysis
Only time will tell whether the acquisition makes sense for Intuit. It's a savvy company that understands the personal finance space as well as anyone, so I tend to believe they know what they are doing.

Regardless of what it does for Intuit's share price, the merger is bound to shake up the online banking product offerings at banks and credit unions, especially for smaller businesses, the Quicken and QuickBooks crowd.

In September, we published a report predicting significant growth in personal finance functionality in online banking services (see Note 1). This merger should further accelerate that growth. As Intuit integrates Quicken, TurboTax, and QuickBooks features into the Digital Insight line, other platform providers will feel pressured to keep up.

This is good news for U.S. consumers who've generally NOT been able to enjoy the benefits of tightly integrated personal finance and online banking.

End Notes:

(1) See Online Banking Report #130/131, Personal Finance Features for Online Banking: Why MySpendingReport Trumps Free Bill Pay

Break out the bubbly. Twenty years after online banking became widely available, and ten years after it migrated to the Internet, more than half of U.S. small businesses (sales between $500,000 and $10 million) bank online. And one-third of the laggards say they'll move online within the next year.

Online banking usage
Here's the breakdown of online banking usage by business size as reported by BAI Research at the company's recent TransPay Conference:

Small business
48% >>>$500k to $1 million
51% >>>$1 mil to $5 million
54% >>>$5 mil to $10 million

Mid-size
61% >>>$10 mil to $50 million
67% >>>$50 mil to $100 million
89% >>>$100 mil to $250 million

Satisfaction with online banking
These companies are relatively satisfied with the service. Only 2%, a remarkably low number, report dissatisfaction. However, there is room to move users into the very satisfied category occupied by 44% of the sample.

Here's the breakdown, again courtesy of BAI Research:

44% >>> Very satisfied
46% >>> Somewhat satisfied
8%   >>> Neither satisfied or nor dissatisfied
2%   >>> Somewhat dissatisfied
0%   >>> Very dissatisfied

Online banking features
And what are they doing online?

91% >>> Deposit tracking
86% >>> Balance reporting
48% >>> Wire transfers
45% >>> Stop payments
38% >>> Tax payments
36% >>> Initiate ACH transfers

Finally, if you need some market sizes for your spreadsheet, click on the link below to see a good breakdown in payments by business size.

You couldn't miss BofA's bright-red, full-page spread in the business section of yesterday's New York Times (national edition, printed in Seattle, code YT, p. C9). In two-inch reverse type the ad screamed:

Payroll Free.

Below the heading:

Introducing Business 24/7, a suite of remarkable new online banking tools for small business owners.

Then in smaller print under the red box:

Business 24/7 is a remarkable new way to manage your small business finances. Online Business Suite only from Bank of America lets you send invoices and receive payments online so you get paid faster. Easy Online Payroll is the first complete online payroll service that's free.* Visit your nearest Bank of America banking center to open a business checking account and take advantage of these services.

To learn more visit bankofamerica.com/business24-7

Fine print:

*Easy Online Payroll is free when all your employees have direct deposit to a Bank of America  account. Otherwise, there is a monthly fee of $5 per employee up to a maximum of $15 per month.

The landing page specified in the print ad, opens to an impressive Flash animation that's a lot like watching an interactive TV ad. You can see what it looks like by clicking on the screenshot right, but you should look at it live to see how voice and animation are used to create an excellent sales pitch.

To leave the commercial, users select the "Get Started" button in the lower right, which leads to another landing page highlighting five key aspects of the service: Business Checking, Easy Online Payroll, Online Business Suite, Small Business Health Insurance, and Business Credit (see screenshot below right).

The core of the account from an online banking perspective, is the Online Business Suite. It is comprised of three modules, as shown below. The payables and receivables modules are optional, but the online banking is required. The total package runs $35/mo as follows:

1. Online banking for $15/mo
2. Online accounts payables (bill pay) for $10/mo
3. Online accounts receivable (invoicing) for $10/mo

Analysis
Like bill payment, BofA is using FREE online banking services to grab attention, a tried-and-true technique. In this case, the free payroll isn't as free as bill payment, since it requires the employee to have direct deposit with the bank. But with the fee capped at $15 per month, most small businesses won't be complaining about payroll fees.

And the entire account is far from free. In addition to the cost of the checking account, the Business Suite runs $35/mo, payroll for three or more is $15/mo additional, bringing the entire online package to $50/mo. This won't appeal to the microbusiness market, the under-$50,000 crowd of part-time entrepreneurs, but for a full-time business with three or more employees, it's a good value (businesses must be under $20 million in revenue to use this service). When BofA adds remote deposit-capture capabilities, it will be even better.

--JB

The first remote deposit solution using a generic document scanner will launch in July, according to its developer Community Bank Systems <bankimage.com>. Without the requirement of buying a $300+ check scanner, remote deposit services will be able to capture a large number of small and micro-businesses.

Analysis
We'll reserve judgment on CBS's ePosit solution until we have more details, but this could be an important way to grab more share of your area's small business customers. And it will make a good copy point for personal checking accounts, though most consumers won't want to learn a new system to deposit a couple checks every month. Conversely, if you lag on adopting this new technology, you may find yourself vulnerable.

As a matter of fact, we could envision a long-term branding campaign around better deposit taking, from reduced hold requirements, deposit-item images available via online banking, and the convenience of 24/7 remote deposit of paper checks. Read some of the rants at HomeStreet Bank's <mybankdoesntgetit.com> site and you can see that deposit INconvenience creates some strong feelings (see this rant and this one).

--JB

In a novel advertising gimmick, Chase Bank affixed two-foot long banners, each pointing to one of 90 electrical outlets in the Indianapolis International Airport. The unique signage, which also includes four months of exposure on in-terminal flight-information monitors, will cost the bank $65,000 for the year, or just under $200 per day.

The signs and slogans are designed to appeal to traveling businesspeople. They include:

This outlet works. Now you can too.

You and your laptop may sigh with relief now.

Congratulations. You found a charge chair.

Analysis
We'll leave the question of cost effectiveness of "outlet advertising" to the outdoor advertising pros. However, similar tactics could be used throughout a community to market online banking and small business services to users of WiFi-equipped cafes and coffee shops. For example, a bank could sponsor a WiFi directory that included names, locations, and hours of WiFi-equipped locations throughout town. For extra credit, include a map of electrical outlets, desired by many laptop owners so they don't have to worry about having to rely on their batteries which are drained relatively quickly when going online.

Most coffee shops aren't going to want a bank slapping advertising stickers on their walls. However, tent cards or brochures carrying the bank's logo could provide WiFi instructions and locations of wall outlets.

With summer just a few months away, this would be a perfect task for a summer intern. Working with existing WiFi directories, the intern could scout out possible locations, map the electrical outlets, document contact information at each location, and post it all to the bank's website. Alternatively, a bank could contract directly with an existing locator service to carry the bank's advertising message.

--JB

There are several ways to make it easier for business banking customers to find the right area of your website:

• Complete unique URL such as Abbey National's <anbusiness.com>
• Business/biz appended to the URL such as Vancity's <vancity.com/MyBusiness>
• Business added within the URL such as Barclay's <www.business.barclays.co.uk> or LaSalle Bank's <vip.lasallebank.com> for its private banking area
• Use cookies to automatically display the business area when users type your normal URL. Wells Fargo uses this technique. When homepage visitors choose the Small Business area, a small text link asks, Make this the first link you see on wellsfargo.com (click on inset for a closeup) which sets a cookie to redirect users to the Small Business area each time they go to the main bank site.

Analysis
All of these techniques are trivial to program and can help differentiate your business offerings from your personal product line. We especially like Abbey National's unique business URL that can be a memorable device in print ads and direct mail. Also, anyone with a separate business offering should consider the optional user-set cookie approach of Wells Fargo.

--JB

On the front page of today's American Banker and on the cover of its Retail Delivery pullout section (see inset), there is an eye-catching EBANK logo presented in eBay's distinctive font. It's an intriguing lead-in to an otherwise predictable story on eBay's PayPal unit and the extent to which it competes with banks. (Note: For American Banker, the cover graphic gave it more "street appeal" so that the paper was more likely to be picked up by the thousands of attendees at BAI's big technology conference in Orlando.)

This is an old story. PayPal has offered a suite of consumer banking services for more than four years (click on table below) including debit cards, bill payment, credit card (issuer), consumer finance loans, credit card processing, ACH processing, money market mutual funds, international payments, interbank transfers, fraud protection, and insurance for funds on deposit. The only new service this year is the credit card payments gateway business it purchased from VeriSign earlier this year; though that is more of a line extension than a new business.

Analysis
Yes, PayPal competes with bank, primarily in merchant processing, an area most banks got out of more than a decade ago. And we'll see more ecommerce players, such as domain registration services company GoDaddy, offering integrated PayPal payment options (see inset). However, none of PayPal's other financial service offerings have a measurable market share, and are unlikely to be causing any lost sleep by execs at Bank of America, Citi, or any other financial institution.

The American Banker article speculated on eBay's interest in moving further into banking by buying a charter and opening a full-service Internet bank. But no evidence was presented for either side of that argument, nor did the author find any industry analysts to comment.

It reminds me of the "controversy" in the mid-90s about Microsoft competing against banks. Although it was mostly fodder for the trade press, we debunked the notion In the very first issue of Online Banking Report (April 1995). There was no way that a successful software company, accustomed to 50%+ margins, would invite the regulatory scrutiny and compliance hassles of the relatively low-margin banking business.

Although eBay has done some strange things, such as jumping into the telecom business via its recent Skype acquisition, we seriously doubt that the auction giant has any plans to open or even lend its name to a full-service Internet bank. It doesn't need those regulatory and compliance headaches.

However, the company will continue to exploit areas of ecommerce, like auction payments and auction purchase financing, that are not well-served by existing players. But if you've put together a franchise that can hold its own against BofA/MBNA, ING Direct, and Schwab, you have little to fear from eBay or Microsoft. In fact, there are opportunities to leverage these trusted brand names to INCREASE your revenues. For example, PayPal provides developer tools that would allow a bank to integrate with the online payments provider to facilitate financing for bank customers.

Previous articles:

• Online Banking Report #113, PayPal Offers Preapproved Credit Lines to Users, Dec. 16, 2004
• Glenbrook Partners, Beware the Doves: Reflections on the PayPal/GE Consumer Finance Alliance, by Scott Loftesness, June 2004

--JB

Did you see Yahoo's full-page ad in today's Wall Street Journal (or was it the New York Times)? Anyway, it was on the back page of one of the interior sections, and it declared:
                -----
A free website for every small business in America.

Now, everyone reading the paper knew it was a come-on; when you go to the Yahoo Local website they try to upsell you on the $9.95/mo premium version (click on the inset for details). Furthermore, the ad probably cost more than the sum total of "free" websites given away. I don't know if it will pay off, but it certainly got my attention.

Financial Institution Opportunities
I got to thinking, what could a bank give away that wouldn't sound too hokey or cost too much? The free website isn't a bad idea, especially if you wrapped some ecommerce services around it, but Yahoo and many others have been doing that for years.

What about bill payment? If you were willing to open up your bill payment system to allow payments to originate from other banks, you could mimic the Yahoo ad in your market with:

A free online bill payment for every business in <yourtown>!
(exclamation point optional)

But a lot of banks already offer free bill payment, so try this on for size:

Free lifetime storage of your checks* for every business in <yourtown> *images of course

The creatives would have a blast with that one.

Finally, since those both have system implications, here's something anyone could offer:

Free local online directory listing for every business in <yourtown>

To pull this off, you'd need to create a database (ideally) or an even an HTML page that lists the web and business addresses for every business in your market. Bank clients could be given premium listings/linkages. And you'd need to give the directory exposure with visible links off your website.

--JB

Link: SBA Self-employed Research Results

A new report released this month by the U.S. Small Business Administration, estimates that U.S workforce is now comprised of 12.2 million self-employed (9.8% of the total) and 112 million employed (90.2%) workers.

What it Means
The self-employed are a significant market segment on their own right. At approximately 10% of your customer base, they warrant attention and possible product offerings specifically geared to their needs. See Online Banking Report 107/108 for more information on creating compelling online services for small and microbusinesses.

Action Items

1. Review