If you lost 100,000 customers in the course of one fiscal year, as Internet-only banks have, what would you do?
Close up shop? Revamp your product line? Perhaps you would take the plunge and pour venture capital into a major marketing push.
Some businesses might study their market to determine what went wrong. Still others would assemble consumer focus groups to hear what potential customers really want from the business.
While those are all viable ideas, for some reason the online banking business gives little indication that it is interested in any of the above. From the outside looking in, it seems like Internet banks are stuck in neutral.
Do the Math
Even though Jupiter Media Metrix research indicates traffic to Internet banks plummeted 8.1 percent from July 2000 to July 2001, there does not seem to be much evidence of any recovery strategy on the part of the virtual institutions.
That 8.1 percent dropoff translates to a loss of 100,000 visitors, down to 1.1 million from 1.2 million. At a time when the online banking industry is struggling just to stay alive, 100,000 people is a huge loss. Consider this: if each of those 100,000 people spent a mere US$100 in the course of that year, how much stronger would online banks be at this moment?
Further, with technology routinely available to track individual customer activity online, wouldn't you expect online banks to run interference and do whatever is necessary to keep the traffic steady?
In short, wouldn't you expect Internet banks to do ... something?
We Want Options
Perhaps the online banks are paralyzed with fear of failure. After all, even if they had aggressively attacked the downslide early, it might not have been a successful endeavor.
Americans have made themselves clear: we want multiple channels. We want to shop online and offline, on the phone and in a catalog. We want more than one way to buy consumer products, and we definitely want multiple channels to do our banking. The idea of banking exclusively on the Internet has not found widespread appeal among Internet users, not to mention among potential Internet users.
Sort of makes you wonder how an Internet bank without, say, a drive-through teller, is supposed to make a stand.
The Allure of Bricks
According to Jupiter Media Metrix, banks with the critical competitive edge are those that exist in traditional channels with an online option. Need some convincing? As usual, the proof is in the numbers.
During that same dismal period where online banking lost 8 percent of its visitors,
brick-and-click banks saw the popularity of their Internet services 
skyrocket. From last
July to this July, visitors to Web sites of existing offline banks jumped a
whopping 110.5 percent, from 6.4 million to 13.4 million users.
Apparently, there is something attractive about knowing you can drive to the bank and touch your money if you really want to.
Privacy, Please
Meanwhile, as it turns out, consumers may be onto something with their active avoidance of online banking. The Center for Democracy and Technology has released findings showing that of 100 online and brick-and-click banks surveyed, only 22 offer clearly posted opt-out rights regarding how consumers' personal data is used by the bank.
That means the other 78 percent of banks either sell or transfer their customers' personal information to outside companies -- or make it tough for customers to exercise opt-out options. Thirty-four banks had few or no opt-out options, the study said.
The study did conclude that Internet-only banks did the best job of offering consumers privacy options. Still, if the banking industry as a whole gains a reputation for compromising customer privacy, the first to suffer will be pure-play banks.
How Special
How will the fittest online banks survive?
According to Jupiter, the future of such institutions depends on specialization. The era of online banking being all things to all people, short-lived as it has been, is coming to an end.
Like so many other dot-coms, every online bank must find a niche, and then forge ahead
with aggressive marketing touting their specialties. If digital signatures ever get off
the ground in a big way, perhaps online mortgage banking may reap the rewards.
In advance of such developments, every bank would do well to tighten up its privacy features and reassure consumers that their personal information is secure once it is disclosed.
And maybe think about adding that drive-through window.
What do you think? Let's talk about it.
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.
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