Credit Card Solicitations.

Each year, two billion credit card solicitations spread out to U.S. households -- about eight each. Researchers agree that this is a saturation point. The Internet is another channel, perhaps a new source of profit. Datamonitor research shows that over the next four years credit card issuances over the Web will undercut mail solicited credit cards. This type of solicitation will result in fewer conversions to a sale. However, the success of Internet solicitation turns on profitability, not volume. As MBNA has found, four out of five of their applications received over the Internet were from those previously rejected by mail. Bank One's First USA subsidiary leans heavily towards Internet distribution of cards. Bankers still have to remember the basic truth: the Internet is only the newest channel for selling products. But it cannot categorically be superior for new revenues and appreciable profit.

Elasticity of Debit Cards.

There are now 45 million in the U.S. Canadians favor them over checks. Some drawbacks persist. Some users are unable to properly control the amount of spending. Debits can easily dip into money for necessities. Credit cards, on the other hand, defer payment. Online debit card users can feel an immediate cut into disposable income. Issuers know that offering convenience doesn't mean fees. Once there is a fee on transactions, usage drops sharply, particularly when it's for a nominal purchase.

The Merger of Technology and Consumer Banking.

Not long ago, viewers began seeing infomercials and infotainment across various media. Information merged with entertainment. GM cars now have devices for multi-tasking and connectivity. Banking now pervades multiple media channels. Technology allows banking with nearly any type of wired or wireless device. Device-driven banking rests on consumer desire to merge banking with other activity. There may be a limit and no one dares to question that limit. The laboratory's work continues, but time, convenience and reliability dictate consumer preferences. Today, you can surf while ATM-banking, and bank while nuking the food. Conservative bankers ought to draw the line. Certain litigation precipitates the death of common sense; certain technology is unknowingly following suit.

"We may never make banking fun for the customer, but we had better make it efficient, because people don't like waiting in line to get their hands on their money."
-- ." John Reed (1978, when EVP of Citicorp's Retail Banking)

The CEO Footnote...

Today's Biggest Concerns. Heidrick & Struggles asked 107 CEOs of financial services firms for their top three concerns. The two top vote-getters (each cited by 50%) were: consolidations and customer retention. Only 22% named the Internet and 11% cited skill shortages. To some degree, the Internet simply raises the tide for banks as ATMs did 25 years ago -- it just had to be there. The Internet alarms CEOs. But as Web banks proliferate, banks realize they are just that: banks on the Web. A clear disadvantage is that the customer lacks a clear audit trail and, for now, can't get cash out of the PC. E-currency has arisen, but critical mass is yet to materialize. Consolidations and mergers are a concern when unwanted and the bank forfeits control. But customer attrition is always unwanted. This is about the DDA and TDA, because borrowers don't pack up and move down the street. These accounts are so critical because most consumers just have a few TDAs and just one DDA. (With cards, there are plenty to go around -- those in bankruptcy usually have about 10.) It takes a compelling reason for a consumer of business to move a DDA.

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