More than 6.5 million households bank online in the US, according to a report by International Data Corporation (IDC), which predicts that number will rise to more than 32 million by 2003.
IDC’s “Online Banking Forecast, 1998-2003: On the Money” found that online banking is swiftly becoming a mainstream Internet application, as opposed to one used by a select few.
“A combination of factors is driving the explosive growth in online banking,” said Paul Johnson, a senior analyst at IDC. “There has been a proliferation of low-cost PCs and other networking devices in the home market, which is causing a surge in the number of Internet users. Because many of the security concerns have been alleviated, these Internet users are becoming comfortable using the Internet as a transaction-based medium.”
The increasing number of banks offering Web-based banking services is also triggering the market’s growth, according to IDC, which estimates 1,150 banks offered online services in 1998. This number will rise to 15,845 by 2003, and most of the banks will be using the Web for online banking.
IDC’s report claims that online banking is evolving in three phases. The first offers functionality similar to what is available through telephone banking, such as account balances and transaction data. The second phase emphasizes interactive technologies such as online bill payment and personalized reminder services. The third phase involves direct marketing of credit and lending services, personalized financial management features, and services such as securities trading and insurance offerings.
“A strong link exists between banking, bill payments, and the Internet,” Johnson said. “Although there is still uncertainty in the bill presentment market, banks must seize this tremendous opportunity in front of them. Online banking may be the critical service that enables banks to maintain their role as the dominant provider of financial services.”
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