(IDG) -- The U.S. banking industry has high hopes for the Internet as a sales and service channel in 1999. However, despite the sophistication of bank sites and the general online population, barriers still hinder widespread adoption of online financial services. Several factors are conspiring to dampen the industry's exuberant expectations:

People who perform finance transactions online remain a small, elite group: At year-end 1998, Forrester estimated that 4.3 million of the more than 100 million U.S. households bank or invest online. Only 3.4 million are banking online, 1.4 million are trading and 1.8 million are paying bills.

MORE COMPUTING INTELLIGENCE

IDG.net home page

Industry Standard home page

Industry Standard email newsletters

Industry Standard daily Media Grok

Industry Standard financial news

Industry Standard e-commerce stories

Fusion financial report
Free registration required to access this site

InfoWorld Internet commerce section

Reviews & in-depth info at IDG.net

IDG.net's personal news page

Questions about computers? Let IDG.net's editors help you

Search IDG.net in 12 languages

Subscribe to IDG.net's free daily newsletter for computer industry cognoscenti

News Radio

Fusion audio primers

Computerworld Minute

Demographics, not experience, drive the adoption of online financial services: Though the adoption of online financial transactions appears to increase with experience using the Web, Forrester estimates that only 17 percent of this trend is attributable to the consumer's time online. The remainder of this change in behavior exists because Net veterans are younger, wealthier, better-educated and more optimistic about technology.

Other shopping channels for bank products still beat the Net: Only 8 percent of online consumers turn to the Net to find mortgage information, and only 4 percent look for information about checking and savings products.

Awareness of online banking still lags: Thirty percent of the online population still doesn't know whether their bank offers online banking, and 43 percent doesn't know whether their bank offers online bill payment. More than half the online population has yet to visit a bank's site.

Bank sites still seem complex: Most online consumers still prefer direct contact with their banker when shop- ping for financial products, possibly due to the percep- tion that many financial products are too risky or complex to select without expert advice.

Banks must get busy if they want to realize their big dreams in 1999. The year's challenge will be to refine the strategic goals for a site: Is it there to lure new customers, or to induce current ones to perform more transactions online? Most banks have yet to crystallize these objectives. An easy first step is to kill the complexity. Creating financial products that are more understandable to mainstream consumers may lead to commoditization, but it would also enable people to choose those services without expert advice. Ultimately, if you don't educate that customer, someone else will.

Kenneth Clemmer is an analyst with Forrester Research.

Related stories:

Poll: Many foresee YK2 cash crunch, few fear doomsday - January 10, 1999
Check your credit online - November 30, 1998
Euro challenges IT managers - November 18, 1998
View bills with a browser, pay with a click - November 9, 1998

Latest Headlines

Today on CNN

Related IDG.net stories:

Note: Pages will open in a new browser window

Growing pains for online banking (PC World)
Hacker finds online banking security hole (PC World)
Internet banking: Europeans see pay-offs (InfoWorld)
Tips for safe, efficient, and money-saving online banking (PC World)
Is online banking set to take off? (PC World)

Related sites:

External sites are not
endorsed by CNN Interactive.