Academic journal article ABA Banking Journal

Where Will Internet Banking Be in Two Years?

Academic journal article ABA Banking Journal

Where Will Internet Banking Be in Two Years?

Article excerpt

Static Web pages are passe. But merely offering an interest-rate calculator or online loan application won't lift static pages out of the Model 1 class of Internet-banking service. Even going one step further--letting customers vie their statements online--is only a transition to letting them perform such transactions as moving money between accounts and paying bills. Trends suggest that "basic banking" transactions will soon include buying stocks, insurance and other financial products.

This is where Meridien Research thinks Internet banking is today. The Needham, Mass., firm recently surveyed the top 120 financial institutions in North America, Europe and Asia-Pacific and found that 60% now offer static Web pages and 33% offer online transactions. By 2000, virtually all (90%) of North America's biggest financial institutions will be offering transactions over the Internet. European companies aren't far behind; the Asia-Pacific area lags a little. [See accompanying graph.]

Meridien Research is a year-old consulting firm whose principals left the Tower Group to concentrate on the less-understood aspects of electronic delivery, risk management, and customer management.

Octavio Marenzi, who directs research for Meridien, says that when Internet transactions become commodities that everybody offers, banks will have to differentiate themselves in other ways The next wave of online services will be providing customized financial advice he says. From a banker's point of view, the strategy is this:

1. build trusted relationships;

2. learn more and more about a customer's finances and lifestyle;

3. from that knowledge base, launch marketing programs. Meridien's research found that only 2% of the world's biggest financial institutions now have such programs.

But does the Internet strategy of the world's biggest financial institutions also apply to the thousands of mid-size and community banks in America? Marenzi says yes. Big institutions have the big pockets needed to finance research and test new technologies. They set the pace in commoditizing Internet transactions. Large and small institutions have to live in the same customer environment. So, he argues, why shouldn't smaller players want to follow suit? …

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