Online banking has been on a rollercoaster ride in its 10-year history but, thanks partly to increases in internet use and broadband access, is showing signs of maturing.
The internet is now established as an important delivery channel offered by most banks worldwide.
A survey conducted by the Pew Internet & American Life Project revealed that of all the leading internet activities, including buying books and travel tickets, banking has seen the fastest growth in the US over the past five years.
It also found that the spread of online banking coincides with the spread of high-speed broadband connections: 63 per cent of those with broadband at home in the US have tried online banking, compared with 32 per cent of those with dial-up connections.
Paul Bulmer, principal banking consultant at Atos Consulting, points out a similar trend in the UK: “Broadband usage is playing a key role in the growth of online banking. Because of broadband, in the UK nearly 50 per cent of customers do online banking from home these days.”
But another key factor in the increased adoption of online banking is the better understanding banks now have of online consumer behaviour and of the internet as a unique delivery channel. Online banking sites have evolved from static brochure-ware to sophisticated financial portals that enable customers to access accounts, trade online, and make mortgage payments.
These sites are also becoming more user-friendly. For example, Barclays Bank in the UK recently introduced paperless online application forms to enable customers to sign up for a current account in 10 minutes.
And banks are trying to provide an intuitive graphical user interface (GUI) that matches the online experience provided by popular websites such eBay and Amazon. David Newman, Director of Marketing Management for Smile, the first internet-only bank in the UK, says: “It is important to focus on the user experience and provide a clutter-free online banking user interface.
“Navigation should be reduced to a minimum number of clicks, ensuring all the time that the GUI remains customer-friendly as well,” he says, adding that Smile has refreshed its online banking platform three times since its launch in 1999.
Wachovia, a leading US bank, has also recently overhauled its online banking and bill-paying platform to provide simpler and swifter navigation and seamless integration of money management functions.
Recognising that online customers are becoming more sophisticated users, some banks are designing services specifically for the internet, rather than merely replicating traditional delivery channels. Real-time alerts, customer support via online chat and account aggregation are some of the recent online features offered by leading banks.
Some banks have also introduced an online personal financial calculator, such as the free online tool offered by US internet pioneer, Wells Fargo, that is proving popular. This gives customers a picture of their spending pattern by combining transactions from various accounts and credit cards in one place. “The availability of such interactive and innovative tools heralds a new phase in online banking, where banks have a deeper knowledge of the customer, who in turn has better control over the application,” says Mr Bulmer.
Experts say, however, that across the sector, there is a vast disparity between banks’ online offerings. Alenka Grealish, senior analyst at research company Celent, says of the US market: “Although all large and mid-sized banks and a growing number of small banks offer online banking, their offerings are far from equal – user-friendliness is uneven, support varies, and features menus differ notably.
“Big gaps still exist with many small banks not yet offering online service and funds transfer capabilities.”
Such variations are noticeable elsewhere: the Scandinavian region is ahead of most in online banking and the nature of services.
Bo Harald, who was head of e-banking for part of his 30 years at Nordea, and who is currently head of executive advisors at Tietoenator, the Nordic technology vendor, says that innovative features such as online student loans and e-signatures for mortgage loans have long been available in the region and the next wave will focus on e-invoicing.
He says bill payments, however, are already one of the most popular online banking functions, with Nordea being a world leader in online payment transactions.
In other regions, too, bill payment is almost de rigeur for any online banking service. Ms Grealish of Celent says: “Bill pay and funds transfer functionality continue to be some of the more sought-after functionality in online retail banking, since few features are as attractive in retaining end-users.”