Economics
E-Banking snapshot
Digital Economy
March 2005
No. 13
Editor
Antje Stobbe
+49 69 910-31847
antje.stobbe@db.com
Technical Assistant
Martina Ebling
+49 69 910-31710
martina.ebling@db.com
Deutsche Bank Research
Frankfurt am Main
Germany
Internet: www.dbresearch.com
E-mail: marketing.dbr@db.com
Fax: +49 69 910-31877
Managing Director
Norbert Walter
Five online banking trends in 2005
1. Security stays of major importance to online consumers. This is under-
standable but also a very general insight. Firms with online activities will
therefore have to deal with the matter in a more differentiated way. Those who
are concerned about security have identified as the most dangerous threats,
first, the lack of staff awareness and, second, viruses, Trojan horses, and
worms.
This holds for all sectors. The financial industry, however, is particularly
sensitive to the topic. The fear of a lack of security is a higher hurdle to those
internet users who do not use online banking than missing monetary incentives
or insufficient comfort or functionality.
2. Customer retention becomes ever more important. Research shows that the
more services of his or her bank the customer uses, the higher the real and
psychological switching costs will be. Also: the more services the customer
uses, the greater are the bank’s expected profits. Customer loyalty, therefore,
gains importance over customer acquisition, and the value of customer
relationship management becomes apparent.
3. Technological progress will give a boost to existing online banking services
and devices. Their quality will improve. Ever faster and more powerful chips
and the widespread use of broadband internet access make online banking
more comfortable for more and more people without necessarily triggering the
emergence of completely new devices and inventions.
4. Some players will take a second stab at mobile banking. Increasingly faster
transmission via GPRS or UMTS feed the vision that mobile banking merits
another attempt – in spite of the GSM failure. Indeed, many advantages can be
thought of. SMS alerts can disburden more expensive channels (e.g. contact
centres). Also, useful information can be transmitted to the client, and increase
customer loyalty at low cost. Still, a comprehensive business case in
transaction banking and brokerage with cost covering revenues is currently not
in sight.
5. Online research grows. An increasing number of visitors of bank websites do
considerable research before making financial decisions. They shop around for
financial products, and make their own investment decisions – in part without
consultants. Though the chart shown here refers to US customers, we observe
a similar trend in Europe: Researching via the internet is gaining importance in
online banking.
Author: Jürgen Schaaf, +49 69 910-46830 (juergen.schaaf@db.com)
March 2005 E-Banking snapshot

To what extent do the following security aspects apply to

your company?
Lack of security 2005 57%
aw areness (staff) 2004 56%

Viruses/Trojan 47%
horses/w orms 58%

Unencrypted data 37%

storage 26%
Internal
36%
unauthorised
36% 1. Security stays of major importance to
access
online consumers. This is understandable
Insufficient 35% but also a very general insight. Firms with
evaluation of logs 36% online activities will therefore have to deal
Lack of security with the matter in a more differentiated
32%
aw areness way. Those who are concerned about
35%
(management) security have identified as the most
29% dangerous threats, first, the lack of staff
Wireless access awareness and, second, viruses, Trojan
28%
External horses, and worms.
23%
unauthorised
44%
access
Vulnerability of IT 18%
systems 39%

Remote 18%
access/telew orking 31%

Base: n = 84; top-2-box1; Respondents who rank securit y one of t he top 3 IT issues
1
Top-2-box-values " 1" and " 2" on a scale from " agree complety" (1) to " agree not at all " (6)

Source: CapGemini, 2005

Which, if any, of the following would encourage you to bank

online?
Improved security measures 38

Better interest rates than current a/c 24 The importance of security holds for
all sectors. The financial industry,
Easier to use / better functionality 23 however, is particularly sensitive to
the topic. The fear of a lack of security
Low er cost of being online 21 is a higher hurdle to those internet
users who do not use online banking
Reliable customer service if required 19
than missing monetary incentives or
insufficient comfort or functionality.
More services available online 12
%
Base: All internet users who do not bank online (666)
Source: RSA Security / M ORI, M ay 2003

Economics 2
March 2005 E-Banking snapshot

The importance of customer retention

25 450

400 2. Customer retention becomes ever

20 Contribution margin (Index) right
more important. Research shows that
350
the more services of his or her bank
300 the customer uses, the higher the real
15 and psychological switching costs
250 will be. Also: the more services the
customer uses, the greater are the
Number of years w ith the bank 200
10
bank’s expected profits. Customer
(left)
150
loyalty, therefore, gains importance
over customer acquisition, and the
100 value of customer relationship
5
management becomes apparent.
50

0 0
2 or less 3 4 5 6 7 8 or more

Number of services used

Source: St aelin, 2005

Chips are becoming more powerful

Transistors on one chip1

1.E+10
transitors
1. E+09 Itanium 2 CPU

Pentium 4 CPU
1. E+08
Pentium III CPU
Pentium II CPU 3. Technological progress will give a
1. E+07 boost to existing online banking
Pentium CPU
services and devices. Their quality
486
1. E+06 will improve. Ever faster and more
powerful chips …
386
1. E+05 286
8086

1. E+04
8080
8008
1. E+03 4004
1970 1980 1990 2000 2010

1) 1.E+03=1000; 1.E+10=10 000 000 000

Source: Intel, 2005

Economics 3
March 2005 E-Banking snapshot

Broadband households in Germany

100

90

80
… and the widespread use of
Growth in % Broadband % of 70 broadband internet access make
households online banking more comfortable for
60
57 more and more people without
50 necessarily triggering the emergence
47 of completely new devices and
40 inventions.
34
33 30
24
20
19
28 10
12 23 34
9 17
0
2002 2003 2004 2005 2006 2007

Source: BITKOM , 2005

Potential benefits of mobile banking

Leverage
Benefit

Improved image n.a. 4. Some players will take a second

stab at mobile banking. Increasingly
Fees on mobile faster transmission via GPRS or
services 5-10% UMTS feed the vision that mobile
70-90% banking merits another attempt – in
spite of the GSM failure. Indeed, many
Sales Customer advantages can be thought of. SMS
15-20%
increase acquisition alerts can disburden more expensive
100% channels (e.g. contact centres). Also,
Customer useful information can be transmitted
25-30%
retention to the client, and increase customer
Benefit loyalty at low cost. Still, a comprehen-
sive business case in transaction
25-30% banking and brokerage with cost
Cross selling
covering revenues is currently not in
sight.

10-30%
Process cost
5-15%
reduction
Cost
reduction
Fewer cases of 5-15%
fraud

Sources: Georgi, F., Pinkl, J. (2005): Mobile Banking in Deutschland:

Der zweite Anlauf: Die Bank, 3/2005.

Economics 4
March 2005 E-Banking snapshot

Online researching is increasing

Percentage of online product researching

2003 25% 5. Online research grows. An

Home equity loans increasing number of visitors of bank
2004 40%
websites do considerable research
before making financial decisions.
They shop around for financial
32% products, and make their own
Mortgages investment decisions – in part without
39% consultants. Though the chart shown
here refers to US customers, we
observe a similar trend in Europe:
38%
Researching via the internet is gaining
Credit cards importance in online banking.
41%

Base: US online households that applied for, or intend to apply for the product.
Source: Forrester, 2005

© 2005. Publisher: Deutsche Bank AG, DB Research, D-60262 Frankfurt am Main, Federal Republic of Germany, editor and publisher, all rights reserved. When quoting
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