The Bright Future of Direct Banking in the US

December 22, 2003




New York, NY, USA December 22, 2003

The Bright Future of Direct Banking in The U.S.: Going Against the Tide of Branch Banking

Celent predicts that the top direct bank could boast 5-10 million customers by 2010, up from half a million today. Declining check volumes will contribute to direct banking痴 dramatic comeback.

In a new report, "The Bright Future of Direct Banking in The U.S.: Against the Tide of Branch Banking," Celent examines reasons behind the unusually low adoption of pure direct banks in the U.S. compared to other developed countries. Celent痴 research reveals that the huge volume of checks that must be deposited by consumers, and the low automation of this process, are precisely why uptake has been sluggish so far. As the check goes away, tremendous opportunities for direct banking ventures will develop in the next 5-7 years.

"So far, the success of direct banking ventures has been hampered by low levels of payment automation and electronification,"

comments Gwenn B騷ard, Celent Senior Analyst and author of the report. Unlike in the U.S., direct banks have gained significant momentum in Canada and in a number of countries in Western Europe. In these countries, the number of customers at the largest direct bank is equal to more than 1% of the total population, compared with a paltry 0.2% in the U.S. As the U.S. dramatically reduces its reliance on checks, particularly the payroll and casual checks that generate so much teller activity, direct banking will get a significant boost. Ultimately, the U.S. is very likely to catch up with the U.K., Germany, and Canada in direct banking adoption. "The top U.S. banks might think twice about ignoring the potential of direct banking and putting all their eggs in the multi-channel basket," cautions B騷ard.

The 31-page report contains 27 figures and 1 table.

The report mentions the following companies: Allstate Bank, Banque AGF, Axa Banque, NetBank, American Express Bank, E*Trade Bank, State Farm Bank, ING Direct, First Direct, Entrium, Amicus, Sainsbury痴 Bank, Spaarbeleg, Tesco Personal Finance, Egg, and Intelligent Finance.

A is available online.




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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents


  New York, NY, USA December 22, 2003

Direct Banking in the US

Return to report Abstract


  Branches are Transaction-Centric 5
  Migration to Alternative Channels 8
  The Role of Check Deposit 10
  Direct Banking Succeeds in a Number of Countries 17
  Americans are Comfortable With Direct Shopping 18
  The Resilient Check Hinders Direct Banking 19
  Opportunities for Outsiders 21
  Severing the Last Connection 24
  Branch Over-Capacity 26




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