Info from the latest SEC filings,
Internet Industry Background Overview.
The Internet enables millions of people worldwide to access news and information, communicate with each other and conduct business electronically. International Data Corporation reports that the number of worldwide Internet users is projected to grow from approximately 97 million in 1998 to approximately 320 million by 2002. The Internet has become a significant marketplace for buying and selling goods and services. International Data Corporation forecasts that total worldwide commerce on the Internet will grow from an estimated $32.4 billion in 1997 to an estimated $1.0 trillion in 2003. With the emergence of the Internet as a globally accessible, fully interactive medium, many companies that have traditionally conducted business in person, through the mail or over the telephone are increasingly using electronic commerce. Many consumers are showing strong preferences for transacting certain types of business, such as paying bills, booking airline tickets, trading securities and purchasing consumer products, electronically rather than in person or over the telephone. Individuals can now conduct these transactions virtually anywhere at any time. Many consumers have accepted and even welcomed self-directed on-line transactions because such transactions can be faster, less expensive and more convenient than transactions conducted through a human intermediary. In addition to its use as a general commercial medium, the Internet has rapidly emerged as a means of providing financial services. Many companies are increasingly offering a variety of financial services, including credit cards, brokerage services, insurance products and banking services, via the Internet, and finance-related Websites continue to grow in popularity. Electronic Banking. The increasing level of commerce transacted on the Internet has prompted the development of electronic banking delivery systems. These forms of electronic delivery systems provide convenience for customers and allow financial institutions to lower their overhead costs. The two types of electronic banking currently available, PC-based home banking and Internet banking, are very different. The characteristics of each are as follows: 38 o PC-based Home Banking. PC-based home banking requires PC-based financial services software products such as Intuit's Quicken, Microsoft's Money or a bank's proprietary software. Each product carries its own set of instructions that the customer must learn before commencing any banking transactions. The software resides on the customer's PC along with his or her account data and requires a dial-up modem and manual downloading. Consequently, customers must conduct PC-based home banking from the PC containing the customer's software and account data. Customers generally must back up their account data at frequent intervals to counteract the risk of losing data. Because the customer must connect with the financial institution via modem and download his or her account data, real-time transactions are not generally possible. o Internet Banking. Unlike PC-based home banking, Internet banking requires only a secure Web browser for access to the Internet and the financial institution. Internet banking requires no particular software and does not restrict the customer's operations to the location of his or her PC. Instead, the customer accesses the financial institution through the Internet and deposits or transfers funds, pays bills or transacts other business on a real-time basis. Account data remains stored on the bank's secure server at all times protected by technology designed specifically to safeguard such information. No downloading or back-up is required, as the bank's server backs up all data and transactions on a continuous basis. With Internet banking, the information presented to the customer remains current at all times. Customers who use personal financial software retain the option to download transactions for financial or tax planning purposes. The use of electronic banking delivery systems, and particularly Internet banking, is growing as consumers find that electronic banking is both convenient and cost-effective. According to Cyber Dialogue, the number of Americans banking on-line will triple from an estimated 6.9 million in 1998 to an estimated 24.2 million in 2002. Cyber Dialogue further indicates that web-banking customers are active customers. Demographic surveys indicate that Internet users represent an ideal target market for Internet banking. Studies by Jupiter Communications revealed that, in the United States, approximately 49% of Internet users are college graduates and that approximately 30% are engaged in professional or managerial occupations. The survey also indicated that the median age of Internet users is 33, that approximately 61% of Internet users are under the age of 45 and that the average annual income of an Internet user is over $60,000. The attractive demographics of Internet users facilitate the growth of Internet banking. Internet users tend to be young and mobile and thus comfortable with and receptive to the convenience of on-line commercial transactions. We believe that as Internet users enter their prime earnings and savings years, there will be an increased demand for high-yielding savings products. Additionally, Internet users tend to be professionals with limited amounts of discretionary time and are attracted to the convenience of "one-stop shopping" for a full range of financial services. |
