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Online Banks - US - February 2011

Online banking is by far the preferred method of banking in the U.S. A quarter of respondents to Mintel’s consumer survey for this report say they have an account at an internet-only bank, but only 3% bank exclusively at online-only banks.

  • Security is the biggest concern respondents have about internet banks. But customer-service issues also rank highly, such as the lack of branch offices, concerns about depositing or cashing checks easily and ATM fees. More than a third of respondents who don’t have an internet bank account say they would never use such a bank because they prefer in-person branch service. The rollout of remote check deposit capture services should obviate concerns about depositing checks, but only a handful of banks offer the service, which may be a must-have offering for small, online-only banks.
  • Despite these concerns, customers of online-only banks have a surprising number of accounts at those institutions. More than 10% have a certificate of deposit and a credit card, and nearly one out of ten has a mortgage, retirement account, or insurance policy, in addition to savings and checking accounts.
  • Nearly 80% of survey respondents who pay their bills online say they would stop using their bank’s online bill payment service if it ceased to be free. But banks need to be careful about imposing such fees because consumers have options: More than a quarter of respondents pay their bills at the biller’s website, just slightly below the percentage that pays bills at their banks’ website.
  • Net income at banks and credit unions rebounded sharply in 2010, the result of lower net interest expense and reduced loan losses. But earnings remain significantly below the levels prior to 2008, as loan volume remains weak. In addition, the Federal Reserve and Congress continue to target bank fees. A Fed proposal to sharply limit interchange fees in 2011 may decimate bank debit card revenue, which could mean the end of free checking at many banks. That may give internet-only banks a competitive advantage over brick-and-mortar banks that may be more dependent on debit fees.
  • U.S. banks and credit unions had combined assets of $14.3 trillion at the end of the third quarter of 2010. Credit unions have grown their share of the industry by nearly a full percentage point during the past three years; credit union assets have increased by more than 22% since 2007, compared to just 5% at banks.

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Data sources
        • Consumer survey data
          • VMS
            • Abbreviations and terms
              • Terms
                • Companies mentioned in this report
                • Executive Summary

                  • Industry overview
                    • The consumer
                      • Innovations and innovators
                        • Marketing and advertising
                        • Insights and Opportunities

                            • Key points
                              • Online-only banks need to offer remote check capture service to customers
                                • Internet-only banks need to stress their no-fee competitive advantage
                                • Inspire Insights

                                    • Trend: Security and Finance
                                      • What's it about?
                                        • What we've seen
                                          • Security is still a major issue
                                            • Implications
                                            • Market Size and Forecast

                                              • Key points
                                                • Credit union share increases as growth rate dwarfs banks’
                                                    • Figure 1: Assets and market shares at banks vs. credit unions, 3Q 2007-3Q 2010
                                                    • Figure 2: Banks vs. credit unions, numbers of institutions, 3Q 2007-3Q 2010
                                                • Competitive Context

                                                  • Key points
                                                    • Online is preferred method of banking
                                                      • Mobile banking hasn’t caught on yet
                                                        • Figure 3: Preferred banking channel, 2009 and 2010
                                                      • Debit is now most favored payment device
                                                          • Figure 4: Noncash payments transactions, 2009 versus 2006
                                                          • Figure 5: Noncash payments distribution, number of transactions in billions, 2009
                                                          • Figure 6: Noncash payments distribution, number of transactions in billions, 2006
                                                      • Segment Performance

                                                        • Key points
                                                          • Bank earnings rebound in 2010, buoyed by low rates, reduced losses
                                                            • Figure 7: Bank net income, 2005-3Q 2010
                                                            • Figure 8: Provision for losses at banks, 2005-3Q 2010
                                                            • Figure 9: Total interest expense at banks, 2005-3Q 2010
                                                            • Figure 10: Loans held at U.S. banks, 2005-3Q 2010
                                                          • Credit union net income jumps
                                                          • Marketing Channels

                                                            • Key points
                                                              • Banks should embrace social media sites to connect with customers
                                                              • Market Drivers

                                                                • Key points
                                                                  • Debit fees likely to take a severe hit, but overdraft income may rebound
                                                                    • “Worse than anyone’s worst-case scenario”
                                                                      • Outlook for overdraft income is more sanguine
                                                                      • Leading Companies

                                                                        • Key points
                                                                          • Online-only banks
                                                                            • ING Direct
                                                                              • Capital One
                                                                                • USAA
                                                                                  • Discover Bank
                                                                                    • American Express
                                                                                      • HSBC
                                                                                        • Ally Bank
                                                                                          • Charles Schwab Bank
                                                                                            • E-LOAN
                                                                                              • E*TRADE
                                                                                                • SmartyPig
                                                                                                  • PayPal
                                                                                                    • FNBO Direct
                                                                                                      • First Internet Bank
                                                                                                        • Bank of Internet USA
                                                                                                          • Presidential Bank FSB
                                                                                                            • UMB
                                                                                                              • EverBank Direct
                                                                                                                • Green Dot
                                                                                                                  • Large mainstream banks
                                                                                                                    • Bank of America
                                                                                                                      • JPMorgan Chase
                                                                                                                        • Citigroup
                                                                                                                          • Wells Fargo
                                                                                                                            • U.S. Bank
                                                                                                                              • PNC Financial Services
                                                                                                                                • TD Bank
                                                                                                                                  • BBVA Compass
                                                                                                                                    • SunTrust
                                                                                                                                    • Innovation and Innovators

                                                                                                                                      • Key points
                                                                                                                                        • Developer of mobile check deposit extends idea to bill payments
                                                                                                                                          • New mobile payments app says: “Pay with Your Face”
                                                                                                                                            • Credit union allows customers to Tweet through online banking
                                                                                                                                              • New technology platform helps banks develop their own apps
                                                                                                                                                • American Express lets card users redeem points for online games
                                                                                                                                                  • SmartyPig offers no-fee prepaid MasterCard with rewards, partners with BBVA
                                                                                                                                                    • First Internet Bank launches purchase debit rewards through online banking site
                                                                                                                                                      • Deposit@Mobile and Auto Circle from USAA
                                                                                                                                                        • Quick Deposit and QuickPay from JPMorgan Chase
                                                                                                                                                          • Quick Payment by Bank of America
                                                                                                                                                            • Paperless ATM receipts from Wells Fargo
                                                                                                                                                              • First Data gears up to offer e-wallets in U.S., Canada, and Mexico
                                                                                                                                                                • Mobile giants team with banks to develop smartphones for payments
                                                                                                                                                                  • Citigroup tests shopping app tied to its credit cards
                                                                                                                                                                    • Cimbal launches barcode mobile payment system
                                                                                                                                                                      • Shopkick app transmits rewards, discounts to in-store mobile users
                                                                                                                                                                      • Marketing Strategies

                                                                                                                                                                        • Key points
                                                                                                                                                                          • Online banks address only some consumer concerns in their advertising
                                                                                                                                                                            • Notable direct mail, print, and email advertising
                                                                                                                                                                              • Figure 11: USAA email ad, November 2010
                                                                                                                                                                              • Figure 12: USAA email ad, September 2010
                                                                                                                                                                              • Figure 13: ING email ad, November 2010
                                                                                                                                                                              • Figure 14: Everbank direct mail ad, October 2010
                                                                                                                                                                              • Figure 15: FNBO email ad, October 2010
                                                                                                                                                                              • Figure 16: HSBC email ad, August 2010
                                                                                                                                                                              • Figure 17: Capital One email ad, October 2010
                                                                                                                                                                              • Figure 18: American Express email ad, November 2010
                                                                                                                                                                              • Figure 19: Discover Bank e mail ad, October 2010
                                                                                                                                                                              • Figure 20: Ally Bank email ad, November 2010
                                                                                                                                                                              • Figure 21: BBVA direct mail ad, November 2010
                                                                                                                                                                            • Television advertising
                                                                                                                                                                              • Notable television commercials
                                                                                                                                                                                • Figure 22: ING, October 2010
                                                                                                                                                                                • Figure 23: HSBC Premier, October 2010
                                                                                                                                                                                • Figure 24: Charles Schwab Bank, December 2010
                                                                                                                                                                                • Figure 25: Capital One, August 2010
                                                                                                                                                                                • Figure 26: Capital One, January 2011
                                                                                                                                                                                • Figure 27: Ally Bank, October 2010
                                                                                                                                                                            • The Consumer

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Three-quarters of respondents perform online banking activities
                                                                                                                                                                                  • Satisfaction with online banking services is generally high
                                                                                                                                                                                    • Nearly 80% would stop using online bill payment if banks charged for it
                                                                                                                                                                                      • Nearly as many pay at biller’s website as at bank’s
                                                                                                                                                                                        • 25% have a relationship with an internet-only bank
                                                                                                                                                                                            • Figure 28: Incidence of having an account at an internet-only bank, by gender, October 2010
                                                                                                                                                                                            • Figure 29: Incidence of having an account at an internet-only bank, by age, October 2010
                                                                                                                                                                                          • Highest earners are most likely to use online-only banks
                                                                                                                                                                                              • Figure 30: Incidence of having an account at an internet-only bank, by income, October 2010
                                                                                                                                                                                              • Figure 31: Incidence of having an account at an internet-only bank, by gender and income, October 2010
                                                                                                                                                                                            • Asians are most likely to bank at online-only banks
                                                                                                                                                                                              • Figure 32: Incidence of having an account at an internet-only bank, by race/Hispanic origin, October 2010
                                                                                                                                                                                              • Figure 33: Incidence of having an account at an internet-only bank, by census region, October 2010
                                                                                                                                                                                            • ING, Capital One, American Express are most popular online-only banks
                                                                                                                                                                                                • Figure 34: Bank where respondent has an account, by gender, October 2010
                                                                                                                                                                                              • Respondents with highest incomes favor internet-only banks
                                                                                                                                                                                                • Figure 35: Bank where respondent has an account, by income, October 2010
                                                                                                                                                                                                • Figure 36: Bank where respondent has an account, by gender and income, October 2010
                                                                                                                                                                                              • Customers of internet-only banks tend to be young, Asian
                                                                                                                                                                                                • Figure 37: Bank where respondent has an account, by age, October 2010
                                                                                                                                                                                                • Figure 38: Bank where respondent has an account, by race/Hispanic origin, October 2010
                                                                                                                                                                                                • Figure 39: Bank where respondent has an account, by census region, October 2010
                                                                                                                                                                                              • Customers of online-only banks have multiple accounts there
                                                                                                                                                                                                • Figure 40: Types of accounts at internet-only bank, by gender, October 2010
                                                                                                                                                                                              • Highest earners have the most accounts at online-only banks
                                                                                                                                                                                                • Figure 41: Types of accounts at internet-only bank, by income, October 2010
                                                                                                                                                                                                • Figure 42: Types of accounts at internet-only bank, by gender and income, October 2010
                                                                                                                                                                                                • Figure 43: Types of accounts at internet-only bank, by age, October 2010
                                                                                                                                                                                              • Blacks less likely to have savings accounts and CDs
                                                                                                                                                                                                • Figure 44: Types of accounts at internet-only bank, by race/Hispanic origin, October 2010
                                                                                                                                                                                                • Figure 45: Types of accounts at internet-only bank, by census region, October 2010
                                                                                                                                                                                              • Internet banks drawing customers from other types of banks
                                                                                                                                                                                                • Figure 46: Types of accounts at internet-only bank, by type of bank, October 2010
                                                                                                                                                                                              • Online security is a big issue, but so is customer service
                                                                                                                                                                                                  • Figure 47: Main concerns about internet-only banks, by gender, October 2010
                                                                                                                                                                                                  • Figure 48: Incidence of not using an internet-only bank, by gender, October 2010
                                                                                                                                                                                                • Youngest groups worry about service, older ones about security
                                                                                                                                                                                                    • Figure 49: Main concerns about internet-only banks, by age, October 2010
                                                                                                                                                                                                    • Figure 50: Incidence of not using an internet-only bank, by age, October 2010
                                                                                                                                                                                                  • Highest earners worry about ATM fees, less so about security
                                                                                                                                                                                                      • Figure 51: Main concerns about internet-only banks, by income, October 2010
                                                                                                                                                                                                      • Figure 52: Incidence of not using an internet-only bank, by gender and income, October 2010
                                                                                                                                                                                                      • Figure 53: Incidence of not using an internet-only bank, by income, October 2010
                                                                                                                                                                                                    • Blacks, Hispanics most concerned about security
                                                                                                                                                                                                      • Figure 54: Main concerns about internet-only banks, by race/Hispanic origin, October 2010
                                                                                                                                                                                                      • Figure 55: Incidence of not using an internet-only bank, by race/Hispanic origin, October 2010
                                                                                                                                                                                                    • Online-only bank customers like convenience as well as savings
                                                                                                                                                                                                      • Figure 56: Reasons for banking at an internet-only bank, by gender, October 2010
                                                                                                                                                                                                      • Figure 57: Reasons for banking at an internet-only bank, by gender and income, October 2010
                                                                                                                                                                                                      • Figure 58: Reasons for banking at an internet-only bank, by race/Hispanic origin, October 2010
                                                                                                                                                                                                      • Figure 59: Reasons for banking at an internet-only bank, by area, October 2010
                                                                                                                                                                                                    • Three-quarters of respondents perform online banking activities
                                                                                                                                                                                                        • Figure 60: Activities conducted through bank’s website, by gender, October 2010
                                                                                                                                                                                                        • Figure 61: Activities conducted through bank’s website, by gender, October 2010
                                                                                                                                                                                                      • Highest earners most likely to bank online
                                                                                                                                                                                                        • Figure 62: Activities conducted through bank’s website, by income, October 2010
                                                                                                                                                                                                        • Figure 63: Activities conducted through bank’s website, by gender and income, October 2010
                                                                                                                                                                                                      • Activities by type of bank
                                                                                                                                                                                                        • Figure 64: Activities conducted through bank website, by type of bank, October 2010
                                                                                                                                                                                                        • Figure 65: Activities conducted through bank’s website, all types of banks by race/Hispanic origin, October 2010
                                                                                                                                                                                                      • Satisfaction with online banking services is generally high
                                                                                                                                                                                                          • Figure 66: Satisfaction with bank’s online services, by gender, October 2010
                                                                                                                                                                                                          • Figure 67: Mean level of satisfaction with online banking services, by gender, October 2010
                                                                                                                                                                                                          • Figure 68: Satisfaction with bank’s online services, by age, October 2010
                                                                                                                                                                                                          • Figure 69: Mean level of satisfaction with online banking services, by age, October 2010
                                                                                                                                                                                                          • Figure 70: Satisfaction with bank’s online services, by income, October 2010
                                                                                                                                                                                                          • Figure 71: Mean level of satisfaction with online banking services, by income, October 2010
                                                                                                                                                                                                          • Figure 72: Satisfaction with bank’s online services, by gender and income, October 2010
                                                                                                                                                                                                          • Figure 73: Mean level of satisfaction with online banking services, by gender and income, October 2010
                                                                                                                                                                                                        • Asians are most satisfied, but still may expect more from online banking
                                                                                                                                                                                                            • Figure 74: Satisfaction with bank’s online services, by race/Hispanic origin, October 2010
                                                                                                                                                                                                            • Figure 75: Mean level of satisfaction with online banking services, by race/Hispanic origin, October 2010
                                                                                                                                                                                                          • Respondents use positive words to describe banks’ online services
                                                                                                                                                                                                              • Figure 76: Attributes describing online services, by gender, October 2010
                                                                                                                                                                                                              • Figure 77: Attributes describing online services, by type of bank, October 2010
                                                                                                                                                                                                            • Youngest have the most positive opinions about online banking
                                                                                                                                                                                                                • Figure 78: Description of bank’s online services, by age, October 2010
                                                                                                                                                                                                              • Highest earners are the most positive
                                                                                                                                                                                                                • Figure 79: Description of bank’s online services, by income, October 2010
                                                                                                                                                                                                                • Figure 80: Description of bank’s online services, by gender and income, October 2010
                                                                                                                                                                                                              • Asians have highest opinion of online services, Hispanics least so
                                                                                                                                                                                                                • Figure 81: Description of bank’s online services, by race/Hispanic origin, October 2010
                                                                                                                                                                                                              • Suburban, rural respondents stress convenience
                                                                                                                                                                                                                • Figure 82: Description of bank’s online services, by area, October 2010
                                                                                                                                                                                                              • Nearly 80% would stop using online bill pay if banks charged for it
                                                                                                                                                                                                                  • Figure 83: Resistance to paying fee for online bill pay services, by gender, October 2010
                                                                                                                                                                                                                  • Figure 84: Resistance to paying fee for online bill pay services, by income, October 2010
                                                                                                                                                                                                                  • Figure 85: Resistance to paying fee for online bill pay services, by gender and income, October 2010
                                                                                                                                                                                                                  • Figure 86: Resistance to paying fee for online bill pay services, by age, October 2010
                                                                                                                                                                                                                  • Figure 87: Resistance to paying fee for online bill pay services, by race/Hispanic origin, October 2010
                                                                                                                                                                                                                • Nearly as many pay at biller’s website as at bank’s
                                                                                                                                                                                                                    • Figure 88: Where respondent pays bills online, by gender, October 2010
                                                                                                                                                                                                                    • Figure 89: Where respondent pays bills online, by age, October 2010
                                                                                                                                                                                                                  • Highest earners prefer to pay at bank’s website
                                                                                                                                                                                                                    • Figure 90: Where respondent pays bills online, by income, October 2010
                                                                                                                                                                                                                    • Figure 91: Where respondent pays bills online, by gender and income, October 2010
                                                                                                                                                                                                                  • Asians prefer bank’s website
                                                                                                                                                                                                                    • Figure 92: Where respondent pays bills online, by race/Hispanic origin, October 2010
                                                                                                                                                                                                                    • Figure 93: Where respondent pays bills online, by census region, October 2010
                                                                                                                                                                                                                    • Figure 94: Where respondent pays bills online, by area, October 2010
                                                                                                                                                                                                                • Cluster Analysis

                                                                                                                                                                                                                    • Monitors
                                                                                                                                                                                                                      • Demographics
                                                                                                                                                                                                                        • Characteristics
                                                                                                                                                                                                                          • Opportunity
                                                                                                                                                                                                                            • Virtuosos
                                                                                                                                                                                                                              • Demographics
                                                                                                                                                                                                                                • Characteristics
                                                                                                                                                                                                                                  • Opportunity
                                                                                                                                                                                                                                    • Realists
                                                                                                                                                                                                                                      • Demographics
                                                                                                                                                                                                                                        • Characteristics
                                                                                                                                                                                                                                          • Opportunity
                                                                                                                                                                                                                                            • Cluster characteristics
                                                                                                                                                                                                                                              • Figure 95: Online banking clusters, October 2010
                                                                                                                                                                                                                                              • Figure 96: Banking activities conducted on bank website, by online banking clusters, October 2010
                                                                                                                                                                                                                                              • Figure 97: Primary concerns about internet-only bank, by online banking clusters, October 2010
                                                                                                                                                                                                                                              • Figure 98: Attributes used to describe banks’ online services, October 2010
                                                                                                                                                                                                                                              • Figure 99: Bill payment and shopping activity, by online banking clusters, October 2010
                                                                                                                                                                                                                                              • Figure 100: Mean for degree of satisfaction with bank, by online banking clusters, October 2010
                                                                                                                                                                                                                                            • Cluster demographics
                                                                                                                                                                                                                                              • Figure 101: Online banking clusters, by gender, October 2010
                                                                                                                                                                                                                                              • Figure 102: Online banking clusters, by age group, October 2010
                                                                                                                                                                                                                                              • Figure 103: Online banking clusters, by household income, October 2010
                                                                                                                                                                                                                                              • Figure 104: Online banking clusters, by race/Hispanic origin, October 2010
                                                                                                                                                                                                                                            • Cluster methodology
                                                                                                                                                                                                                                            • Key Drivers Analysis

                                                                                                                                                                                                                                                • Key drivers
                                                                                                                                                                                                                                                  • Market landscape
                                                                                                                                                                                                                                                    • Figure 105: Key drivers, by online bank attributes
                                                                                                                                                                                                                                                    • Figure 106: Online banking satisfaction, by type of bank
                                                                                                                                                                                                                                                  • Key Driver Methodology
                                                                                                                                                                                                                                                    • Figure 107: Key driver analysis, October 2010
                                                                                                                                                                                                                                                • Appendix: Trade Associations

                                                                                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                                                                                  • Ally Financial Inc.
                                                                                                                                                                                                                                                  • Banco Bilbao Vizcaya Argentaria, S.A.
                                                                                                                                                                                                                                                  • Banco Popular North America
                                                                                                                                                                                                                                                  • Bank of America Corporation
                                                                                                                                                                                                                                                  • Bureau of Economic Analysis
                                                                                                                                                                                                                                                  • Charles Schwab Corporation
                                                                                                                                                                                                                                                  • Consumer Bankers Association
                                                                                                                                                                                                                                                  • Credit Union National Association
                                                                                                                                                                                                                                                  • Diners Club International Ltd
                                                                                                                                                                                                                                                  • Discover Financial Services Inc.
                                                                                                                                                                                                                                                  • Federal Deposit Insurance Corporation
                                                                                                                                                                                                                                                  • HSBC USA Inc.
                                                                                                                                                                                                                                                  • JPMorgan Chase & Co
                                                                                                                                                                                                                                                  • Mortgage Bankers Association (MBA)
                                                                                                                                                                                                                                                  • Research In Motion (USA)
                                                                                                                                                                                                                                                  • Retail Industry Leaders Association (RILA)
                                                                                                                                                                                                                                                  • The American Bankers Association
                                                                                                                                                                                                                                                  • The American Financial Services Association
                                                                                                                                                                                                                                                  • Walgreen Co

                                                                                                                                                                                                                                                  Online Banks - US - February 2011

                                                                                                                                                                                                                                                  £3,277.28 (Excl.Tax)