Report Shows That Banks Are Losing Out To E-Brokerages

by Philip Morton, Investors Offshore.com

23 July 2001

According to a report released last week by the US-based customer analysis firm Compete Inc., online banks may be losing out to e-brokerages, especially with their older, higher net worth customers. The results, which offer a rare glimmer of hope for the otherwise stricken online trading sector, are drawn from the clickstream data of more than 8 million internet users, and give an insight into customers' online behaviour between March and May 2001.

According to Compete, during that period, more than one third of bank customers also visited a leading e-brokerage. This figure took in more than 45% of Fleet's online customers, 41% of Citibank customers, 38% of Wells Fargo's online customers, and 31% of Chase customers.

'Banks risk losing their high asset customers and attractive fee-based income streams,' warned Derick Sutton, Compete Inc.'s Vice President. 'Companies like Schwab and Fidelity are rapidly improving their financial products and meeting all of their customers' financial needs online. They've begun to offset falling trading revenues by offering checking accounts, mortgages and other credit products which were formerly the sole domain of banks.'

The results also showed that older and more affluent customers were less likely to stay faithful to their online banking site, preferring to use an e-brokerage service as well. Mr Sutton said that banks need to concentrate on serving the broader needs of their customers, and increasing their 'share of wallet', as opposed to focusing on individual products. He observed that the banks' main advantage lay in the fact that they still control the majority of checking accounts: 'As brokerages convince bank customers to open checking accounts, banks will struggle to win these customers back,' he warned.

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