E-Commerce Update

Each passing month seems to bring new evidence that consumers increasingly prefer the Internet for making a variety of transactions, especially those related to financial services. The rising popularity of online banking is evident despite rising costs (at least temporarily) of high-speed access. Here is a sampling of the latest trends.

• High-speed, "always on," broadband access to the Internet is rising steadily. Forrester Research estimates that the broadband usage rate will rise from 2 percent of online households in 1999 to 50 percent by 2004. Forrester thinks this will reshape the way financial institutions deal with their customers. Customers who switch from dial-up to broadband connections are 46 percent more likely to receive or review bills online, 33 percent more likely to check bank-account balances, 23 percent more likely to make transfers between accounts, 11 percent more likely to pay bills online, and 2 percent more likely to trade stocks. Jeff Kolko, a senior analyst at Forrester Research said that the impact of "always-on" Internet is changing the way consumers use the online channel. Broadband drives customers to richer information. It makes the online (distribution) channel the right channel for customers, even if it wasn't before or wouldn't be with dial-up."

• A good website can actually shift customer transactions and contact away from higher cost channels, and draw new customers. The American Banker reports that Wells Fargo has found that many of its customers prefer to conduct their transactions through the company's website. For example, after signing up for online banking, the average retail customer conducts 17 percent fewer transactions over the phone. Thirty percent of all home equity applications that Wells receives over the Internet are from new customers, while only 17 percent of the applications received at branches are from new customers.

• Retail online sales totaled $53.1 billion in 2001, up 21 percent from the previous year despite a slowing economy. Leading categories were computer hardware and software (17 percent) followed by books, event tickets, music and video, travel, toys and consumer electronics. Online sales now make up over 5 percent of all retail sales in seven retail categories.

• Real estate agents are shifting their listings to the Internet, at the expense of newspapers, magazines and even yard signage. A survey by the National Association of Realtors found that 53 percent of agents use the Web for marketing purposes. Moreover, in 2001, as many people used the Internet to search for a new home as used newspapers. Specifically, 41 percent of homebuyers used the Web in their search, up 4 percent from 2000 and 41 percent used print, a decrease of 2 percent from 2000.