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E-Brokerages Luring Banks’ Most Valuable Customers

Compete, Inc.’s Research Shows That Banks Must Integrate Better Service Offerings Or Lose Older, Wealthier Clientele

BOSTON, MA-- Compete, Inc. has found that on-line banking customers – especially those 55 and older and those whose household income exceeds $100,000 – are increasingly turning to e-brokerages. Banks should enhance their on-line offerings with features such as account aggregation tools, financial advice and simpler site navigation to prevent attrition of key customers. Drawn from the clickstream data of more than 8 million Internet users, the findings are based on customers’ on-line behavior between March and May 2001. Compete delivers recommendations based on customer behavior to help clients improve on-line and off-line sales and profits.

"Banks risk losing their high-asset customers and attractive fee-based income streams," said Derick Sutton, Vice President, Compete Advisory Services. "Companies like Schwab and Fidelity are rapidly improving their financial products and meeting all of their customers’ financial needs on-line. They’ve begun to offset falling trading revenues by offering checking accounts, mortgages and other credit products which were formerly the sole domain of banks."

On average, more than one-third of visitors to a bank site between March and May 2001 also visited a leading e-brokerage during that time. This included 45% of Fleet’s on-line customers, 41% of Citibank’s on-line customers, 38% of Wells Fargo’s on-line customers, 31% of Chase’s on-line customers and 27% of Bank of America’s on-line customers. The most popular e-brokerage for on-line bank customers was E*Trade.

Older and more affluent on-line bank customers were more likely than their younger and less wealthy counterparts to use both their bank and an e-brokerage site. For example, 55% of Fleet’s on-line customers who earn over $100,000, and 47% of Citibank’s on-line customers age 45 and over, also visited a leading on-line brokerage between March and May.

"The most successful e-brokerages have become personalized financial portals, where customers can not only maintain all their financial accounts, but also obtain advice, track news and pay bills," said Sutton. "Banks need to focus less on hawking individual products and more on serving the broader needs of their customers. The opportunity exists for banks to increase share of wallet because they still control the majority of checking accounts, which are the banks’ anchor for selling higher margin products. As brokerages convince bank customers to open checking accounts, banks will struggle to win these customers back."

Customers are drawn to brokerages for items they can’t find on-line at their bank’s site. For example, 12% of E*Trade customers who also bank on-line and 8% of Schwab.com customers who also bank on-line accessed financial research. More than 1 in 5 Fidelity.com customers utilized the My Fidelity or Yodlee feature ("My View"), which offer account aggreagation, analysis tools, and allow customers to personalize their interaction with the site.

Compete Recommendations for Banks

To prevent further attrition, Compete recommends that banks:

* Provide differentiated on-line offerings for customers with assets over $100,000

* Analyze the drop-off points on their site and benchmark successful features at competitors to create more user-friendly web sites that are easier to navigate

* Provide more thorough research and financial planning resources to become more of a destination site and less a transactional center

* Make it easier for customers to pay bills, maintain accounts, transfer money between accounts and apply for loans by extending innovative account aggregation tools

* Promote their existing relationships with brokerages under the same corporate umbrella (e.g., Fleet and Quick & Reilly)

For the full report, please email pr@compete.com or visit www.compete.com.