A Look Back : Online Banking Timeline

Table 1

Online Banking Timeline
number of U.S. households using online banking/bill payment


Source: Online Banking Report estimates based on industry data plus or
minus 15%, 12/03


Every spreadsheet and business plan needs a prediction of
future demand. So every year we gather forecasts made by prominent researchers
and analysts, compare and contrast their results, layer on our own insights, and
develop a 10-year forecast. Accuracy is estimated at plus or minus 15% for years
one through three, plus or minus 20% for years four through seven, and plus or
minus 25% for the out-years.

Over the years we’ve demonstrated a respectable track record . Our first
comprehensive forecast made six years ago (year-end 1997), predicted that online
banking usage would increase nearly 6-fold (560%) from 4.5 million in 1997 to 29
million households by year-end 2003. That prediction was nearly dead-on, perhaps
10% low, with an estimated
29 to 35 million households banking online today.



Table 2
Online Banking Evolution



Product Positioning

Primary Market

Beta 1983 to 1996 Beats keying data into Quicken. Outliers
Version 1.0 Novelty 1996 to 1999 Beats calling an 800 number with convoluted menus. Financial geeks and early adopters
Version 2.0 New 2000 to 2002 More efficient record keeping and easier
for routine transactions
Early adopters and early mainstream
Version 3.0 Early mainstream 2003+ Better management of personal finances with
50% of U.S. households

Source: Online Banking Report,


The Forecast Top Management (finally) Gets It


To many long-time bankers, online banking hadn’t proved its worth prior to
2003. However, with usage surpassing 30% of all U.S. households, and with
leaders such as Bank of America pushing past 40%, even the skeptics are
beginning to recognize the potential. By the end of the decade, total U.S.
penetration is expected to approach 50%.


Unlike many new technologies, online banking delivers on three levels:
improved customer satisfaction, increased sales, and cost savings. Now that
these institutional benefits have actually been documented, the rest of the
decade promises to see an extraordinary build-out of online capabilities, much
like the explosion of ATMs in the late 1980s as the channel became profitable.

Looking back at the last year, three changes stand out:

  • The onslaught of email spam and scams causing short-term headaches and
    long-term credibility problems.
  • The change in U.S. press coverage from somewhat negative to very
    positive (except for the phishing problem).
  • The marked rise in awareness (by financial services execs) of the online
    channel’s upside potential.

On the innovations front, it may not have been 1997 again, when seven of the
20 all-time top financial innovations debuted, but there were several
significant developments including:

  • OBR’s Innovation of the Year, premium fee-based online banking (Money
    from Online Resources)
  • Real-time credit of online deposits, both electronic (E*TradeBank)
    and an “honor system” for mailed paper items (PESCU and Pentagon

The next few years promise a whirlwind of activity as financial institutions
implement fixes to email-security concerns, expand the level of email-alert
services, dramatically increase online cross-selling and self-service, and see
tangible benefits from the investments of the past six or seven years. Online
banking initiatives will once again be prominent on the radar screens of top
execs. Enjoy the spotlight.

— Jim Bruene, Editor & Founder