Published: 12 July 1999
Analyst(s): Laura Starita
Management Summary This Context Overview Report addresses the subject of Internet banking and the technologies related to banks' use of the Internet to deliver retail financial services. Internet banking refers to the use of the Internet as a channel in the delivery of banking products and services. For a bank's Internet initiative to be categorized as "true" Internet banking, the program must, at a minimum, enable consumers to: access account balance and account data for at least five historical transactions, and transfer funds between existing accounts. Today's banking environment is one of intense competition, driven by the trends of industry consolidation, globalization, competition from nonbank players, product diversification, and automation of customer contact. Concurrent trends in the consumer market toward the adoption of technology to manage financial services is creating a new generation of more self-sufficient consumers who expect more clearly defined value from their financial services relationships. Together, these two dynamics are driving banks' interest in the Internet as a channel that can capitalize on the self-sufficiency of this customer segment, while adding value and fostering customer loyalty. Banks are primarily interested in the Internet as a tool to facilitate access, foster customer loyalty and enable the sales of additional products and services. The prospect of saving money is not a primary justification for Internet investments for banks. Internet banking offerings fall into four main categories, from "Level 1," minimum functionality sites that offer only access to deposit account data, to "Level 4" sites, highly sophisticated offerings enabling integrated sales of additional products and access to other financial services, such as investments and insurance. By definition, 100 percent of banks with Internet programs have achieved Level 1 status, whereas no bank to date has met the criteria of integrating access to all...
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