JULY 2004

Online Banking Popularity Soars

Back in 1996, online banking was in its infancy. According to research by TowerGroup, about 2.4 million U.S. households that year indicated that they had tried online banking. Just seven years later, by the end of 2003, nearly one-third of all U.S. households (29.3 million) had signed up for online banking. In its latest survey, TowerGroup found that 80-90% of these households were actively banking online. Moreover, TowerGroup projects that 42.5 million households (about 37%) will be banking online by 2007.

George Tubin, a senior analyst at TowerGroup, attributes much of the growth to the decision of some major banks to drop the fees once charged for online banking services. Most notable among banks that eliminated fees is Bank of America, which dropped fees in 2002 and has the largest number of online banking customers of any bank in the U.S. Online subscribers at the bank rose from 4.7 million at the end of 2002 to over 10 million active online banking subscribers by April 2004, including 4 million who routinely pay bills through the website. Tubin said that the majority of the bank’s consumer transactions are now initiated online, and noted that online customers tend to carry higher balances and purchase more banking services, which offsets the lost fee income from offering online banking services for free.