Direct Bankings Third Act: Brick-n-Click Wins the Day

Direct Banking's Third Act: Brick-n-Click Wins the Day

By 2010, Celent expects, "brick-n-click" banks will garner 19% of the total deposits gathered online洋ore than US$72 billion.

In a new report, Direct Banking's Third Act: Brick-n-Click Wins the Day, Celent analyzes the performance of 20 "click" banks and constructs an economic model of a "brick-n-click" bank. It finds that the tarnish on "click" banks' performance has not yet rubbed off. Most have been unable to make up for their inferior net interest margin through cost infrastructure savings. In contrast, the "brick-n-click" economic model shows strong promise of being superior to both the "click" and the "brick" model. Celent finds that a "brick-n-click" bank sacrifices less than 25bp in net interest margin but gains both efficiency and profit margin if it pulls in 25% of its deposits online.

"Banks will find the brick-n-click strategy effective in today's mature market, in which competitive success depends upon innovative deposit gathering strategies. Internet-only accounts offering significantly above average rates will prove to be an effective tool. The days of offering teaser rates of up to 400bp above average, however, will be numbered because banks cannot sustain a net interest margin below 200bp for long," says Alenka Grealish, co-author of the report and manager of the Banking group at Celent.

Attractive rates will not guarantee long-term "click" banking success. "Successful players in Act III will achieve alchemy with four factors: an integrated channel strategy to capture cross-sell opportunities, marketing prowess, user-friendly technology, and security," comments Madhavi Mantha, co-author of the report and senior analyst.

The report is 42 pages long and contains ten figures and nine tables. A table of contents is available online.