Online Financial Services: At a Turning Point

Finance companies are aggressively marketing on the Internet, and expenditures are likely to increase-particularly in the area of search-as consumers embrace the idea of managing financial tasks online.

July 26, 2005 – “The increasingly important role of search in the consumer financial decision-making process is causing a shift in ad spending,” says Debra Aho Williamson, Senior Analyst at eMarketer and author of the new report, Financial Services: Advertising & Marketing. Online display ad spending among financial services firms was flat last year at $915 million, but there are numerous signs that budgets in some segments of the industry are moving toward search.

eMarketer estimates that financial services firms could put 40% or more of their online advertising budgets toward search this year.

Among all segments of online financial services, insurance may be the one to watch. It saw the strongest growth in terms of Internet audience in the past year, according to Nielsen//NetRatings. Interestingly, the category of sites that includes Paypal dropped in audience, something Google should take note of given its plans for an online payment system.

Frequency of use is also rising, according to Ipsos-Insight Research. US adults who frequently or sometimes use the Internet for personal banking check their account balance online an average of 6.2 times per month, up from 5 times per month in 2002. Bill paying is also seeing an uptick in frequency.

The number of online banking customers at the top 10 banks has doubled since 2003, according to comScore Networks. There was double-digit growth in late 2004, perhaps triggered by promotions such as Citibank’s offer of a free iPod for opening an online account.

“There is real concern, though,” says Ms. Williamson, “that growth in online financial usage could flatten out as a result of publicity surrounding data theft, phishing attacks and security breaches.”

A study released by Gartner in June 2005 states: “Nearly 30% of the online bankers say that online attacks have influenced their online banking activities. Over three-quarters of this group log in less frequently, and nearly 14% of them have stopped paying bills via online banking.”

“The more wary consumers become, the more likely it will be that the growth in usage of online financial services will stall,” says Ms. Williamson. “But smart marketers aren’t waiting for the sky to fall, they are acting now, researching new ways to communicate to consumers and prospects online, new ways to advertise and market and, above all, redoubling their security systems.”

“This is too big an opportunity to miss,” she says.

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