Online Banking and Brokerage

Online Banking and Brokerage

• Online banking was pioneered by NetBank and Wingspan, but they are no longer in existence.
• Established brand-name national banks have taken the lead in market share.
• Two-thirds of U.S. internet users use online banking.
• Early innovators in online brokerage, such as E*Trade, have been displaced by established brokerages like Fidelity and Schwab.

Multi-channel vs. Pure Online Financial Service Firms

• Online consumers prefer multi-channel firms with physical presence.
• Multi-channel firms are growing faster than pure online firms and have lower online customer acquisition costs.
• Pure online firms cannot provide all services that require face-to-face interaction.

Financial Portals and Account Aggregators

• Financial portals offer comparison shopping services, independent financial advice, and financial planning, and generate revenue from advertising, referrals, and subscriptions.
• Examples of financial portals include Yahoo!Finance, Quicken.com, and MSN Money.
• Account aggregation pulls together all of a customer's financial data at a personalized website, but raises privacy concerns.
• Example of an account aggregator is Yodlee.

The Service Sector: Offline and Online

• The service sector is the largest and most rapidly expanding part of economies of advanced industrial nations.
• It concerns performing tasks in and around households, business firms, and institutions.
• The service sector employs 4 out of 5 U.S. workers and accounts for 75% of economic activity.

Service Industries

• Major service industry groups include finance, insurance, real estate, travel, professional services, business services, health services, and educational services.

Service Industries Characteristics

• Service industries are knowledge- and information-intense, making them suited to e-commerce applications.
• They offer personalization and customization, with varying levels depending on the type of service.
• Service industries can be categorized into transaction brokers and hands-on service providers.

Online Financial Services

• E-commerce has transformed banking and financial services, with major institutions deploying online services.
• Most online consumers use financial services sites to check balances, pay bills, and perform more complex financial services.
• The number of people using mobile devices for financial services is surging.

Online Mortgage and Lending Services

• Early entrants in online mortgage services aimed to simplify and speed up the mortgage value chain.
• There are three types of online mortgage vendors: established online banks, brokerages, and lending organizations, traditional mortgage vendors, and pure online mortgage firms.
• The online mortgage industry has not transformed the process of obtaining a mortgage due to complexity.

Online Insurance Services

• Online term life insurance has lowered search costs, increased price comparison, and lowered prices.
• Most insurance is not purchased online, but rather online services influence offline purchasing decisions.
• Online insurance services are geared towards product information, search, price discovery, and online quotes.

Online Real Estate Services

• The early vision of online real estate services was to disintermediate the complex industry.
• However, the main impact is influencing offline purchases through online property listings, loan calculators, research, and reference materials, with mobile apps increasing.
• Despite the revolution in available information, there has not been a revolution in the industry value chain.

This quiz covers the history and current state of online banking and brokerage, including pioneers NetBank and Wingspan, and the market share of established brand-name national banks.