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.