On-Line Banking Revolutionizing the Financial Universe - Brief Article - Statistical Data Included

Information Superhighways Newsletter, Nov, 2000

When it was first introduced in the 1980s, PC banking was supposed to revolutionize the way people handled their personal finances. Optimistic industry analysts posited that by the year 2000, nearly everyone in the US would do their banking on-line. Even though this revolution has not materialized at the pace first envisioned, the proliferation of the Internet has given on-line banking a fresh transfusion of growth. Nonbank companies have taken advantage of the low baniers to entry made possible by the Internet to encroach into the banking and bill presentment marketplace.

According to a soon-to-be-released study from Business Communications Co. Inc. (BCC). In 2000, 13 million US households will access their checking accounts via the Internet or closed-end on-line services offered by the banks, with an expected average annual growth rate (AAGR) of 25.2 percent of the total in 2005.

In terms of active accounts, the total on-line financial universe currently stands at 43.6 million. Expected to grow at an AAGR of 21.6 percent through 2005, the number of accounts is expected to total 115.8 million in 2005.

BCC forecasts that total US banking households (on-line or otherwise), is expected to grow at a mere 1.7 percent AAGR during the five-year forecast period. This would imply that the share of households banking on-line will rise from 6.6 percent in 2000 to 38.6 percent of the total in 2005.

In terms of active accounts, the total on-line financial universe currently stands at 43.6 million. Expected to grow at an AAGR of 21.6 percent through 2005, the number of accounts is expected to total 115.8 million in 2005.

There are 17 million on-line checking accounts in 2000. This is expected to increase to 46 million as the number of checking accounts on-line grows at an AAGR of 22 percent from 2000 to 2005. All other transactional on-line accounts, which comprise individual on-line brokerage, loan, insurance, bill presentment and credit card accounts currently stand at 26.6 million. With an estimated AAGR of 21.3 percent during the five-year forecast period, this total will reach 69.8 million in 2005.

Over the next five years, on-line banking will grow slightly faster than the on-line transactional universe as a whole, as some banks scramble to add an on-line presence to their distribution channel bank checking accounts is a key factor, as is the larger number of banks versus other institutions (i.e. insurance companies, brokerage firms, and non-bank lenders).

BCC observes trends towards households consolidating the number of on-line bank accounts. Hence, by 2005, one sees a convergence between number of households banking on-line and the actual number of on-line bank accounts, as households aim to have one bank account per household.