Online Banking—APIs Favor the Service
By Debbi Gardiner

Banking online—checking credit card, checking or savings account statements through a modem connection and paying bills electronically—appeals to many busy folk. And Intersurvey’s new 2000 online banking report notes that APIs especially favor the service.

Intersurvey, a Menlo Park-based communications agency, found that more Asian Americans are using online banking services than any other ethnic group in the United States. According the study, 23 percent of APIs bank online, compared to 13 percent of whites, 7 percent of blacks and 11 percent of American Indians, Alaskan Natives or Native Americans. Only six percent of the “other” category, including Hispanics use online banking.

“Asian Americans are at least twice as likely [as other ethnic groups] to be using Internet brokerage and financial sites in the U.S.” said Doss Steruff, Vice President of marketing and communications at Intersurvey. “In the past year, 29 percent of API’s have visited financial web sites,” he added.

Convenience

Banking on the Internet can be as relaxing as playing computer games or sending email. At least that’s the sentiment of 24-year-old Chinese American Benjamin Lau, who conducts his banking online at least once a week. For Lau, an employee at San Francisco media start up On24.com, avoiding the time investment of regular banking was motivation enough to bank online. “I switched because I find it more convenient to check all my balances at home and not have to waste time standing in line at the ATM or waiting for a teller,” Lau said.

For Cia B., editor of GenerationRice.com, an Asian American Internet magazine based in New York, doing her banking in her pajamas while watching “Friends” re-runs and eating dinner is ideal. “Who wants to spend lunch hour in line in a bank?”

The numbers of APIs opting to bank online agrees with the statistic that this group’s comfort level with Internet technology is higher than that of any other ethnic group. In 1999, Forrester Research found that 64 percent of all Asian American households use the Internet, compared with 34 percent of white households. Moreover, while 41 percent of Asian Americans shop online, only 28 percent of the general population prefers e-commerce.

Zan Ng, CEO and founder of Admerasia, a New York-based multicultural marketing solutions firm, remarked that “for Asian Americans, the Internet is one of the main means of communication.”

Bill Imada, CEO and founder of Imada Wong Communications, a Los Angeles-based media relations firm agreed. “Chinese in general like to see their money,” Imada said. “They don’t want to be too far away from their funds… so for these people being able to access their statement data on their bank’s web site would be attractive.”

Lack of Targeted Marketing Campaigns

It seems odd that with an already promising API customer base, the big banks aren’t trying to woo more Asian Americans with flashy online banking campaigns. Imada, whose bigger clients include Washington Mutual Bank and Bank of America, said that typically big banks run complete ad campaigns for new services, spending billions of dollars on culturally appropriate gifts like moon cakes and calendars for the Autumn Moon Festival and Chinese New Year. But thus far, his agency hasn’t seen any online banking campaigns targeted at Asian Americans.

Part of the reason could be that the banks are content with current growth rates. “We aren’t targeting Asian Americans or any segment for an online banking campaign,” said Linda Mueller, a Bank of America spokesperson. “With a sign up rate of 125,000 online customers a month, there’s no real need. Most of the users are coming from our existing customer base or they are new customers coming into our branches and being told about the online banking service,” Mueller added. The Economist offers another viewpoint, explaining away the lack of marketing with the simple answer of competition. If offline customers are already bringing in handsome profits, why push customers to bank online, where they might be exposed to competing services available on the Web?

Jim Breune, CEO and editor of the monthly newsletter Online Banking Report, said that banks don’t market online services because they see it merely as an extension of what they already offer. “For the big banks, online banking is one more thing that they do for a customer. It’s another channel, not something that you market on its own right,” Breune said.

He continued to say that because web banking services are new—many banks launched their online services only one to two years ago—bugs are rampant in the software programs. “Until the banks get those kinks out, the banks will not be proactive with their marketing, to Asian Americans or any other group,” Breune said.

Barriers

Although the convenience of online banking is well-known, there are significant barriers to widespread use of the service. In the API market space, the issue of language needs to be overcome—a significant number of APIs prefer to use their native language in banking, yet most banks don’t offer in-language services. Admerasia’s Ng believes this deters a lot of new immigrants from switching to banking online. “Charles Schwab’s online customers are 50 percent Asian because they are the only bank to offer [Asian native] languages online in the U.S.,” Ng said.

Imada agreed, saying that “for non English-speaking Asian immigrants, there must be some kind of human support for online banking to work.” Imada projected that for immigrants from mainland China—currently the biggest immigrant group in the United States—the online banks will have to offer three languages—English, Chinese in traditional characters and simplified Chinese characters.

Further, as with all online financial services APIs—not to mention the general population—have an acute aversion to offering up private financial information online, no matter how high the level of security technology used.

And paying bills online may save time, but it doesn’t always offer cost savings. According to Breune, most banks do not charge for checking account balances online but for transactions—such as paying bills and transferring money—they will charge a monthly fee.

And others find the touted “ease” of online banking to be convoluted in reality. “My main deterrent for not banking online is that I tried it many summers ago with Wells Fargo and lost the password, “ said DK Song, a UC Berkeley student. “When I eventually got around to calling the bank, I was transferred to different departments, different people and couldn’t stand the hold music. So I hung up.”

Electronic bill paying may not get payments to vendors as fast as you might think. “It is slower than if you send the check through the mail,” said Breune. “The email payment is often processed as an exception item by the [vendor] because it doesn’t have the payment slip outlining the bill owed.”

Projected Growth

Even so, online banking in America is growing at a healthy pace. The Economist reported in its May 27 issue that a total of 74 U.S. banks operate on the Internet—some small, like Delaware-based Wingspan Bank with 100,000 customers. Other online players have massive customer bases like Citigroup with 500,000, Bank of America with 2.3 million and Wells Fargo with 1.8 million online customers.

And Internet banks are saying the rate of growth should continue at a brisk pace for the next 3 years. Virtual Bank, an Internet start-up bank predicts that by the end of 2003, America will have 100 million online bank accounts.

“Online banking has been a bit of a laggard in terms of Internet activities,” said Breune. “Once some learning curve and security issues are overcome, it looks as though online banking will start to catch up”.