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Online Financial Services Future Bright but Uncertain

According to a recent study, 21 million households will be using online financial services by 2003, despite the fact that a big question remains as to which product or service in the market will draw the most consumers to a franchise.

"Finance Surges On-line," a report issued by Forrester's Research, Inc., said that the financial service market will be largely shaped by the emerging affluent--those well-educated, high-income technology optimists who will demand best-of-breed financial services combined with ease of use when it comes to moving money electronically.

Demand for online financial services will largely depend on security, privacy, and technology, according to the study. These factors will determine what type of value proposition online financial service providers offer consumers. If security and technology concerns progress smoothly, consumers will experience a more compelling value proposition, which will substantially increase demand, Forrester said. This scenario predicts that 20.9 million U.S. households will be conducting financial services online by 2003.

The study also found that the average online consumer currently maintains relationships with four financial institutions for banking, brokerage, investments, and insurance, and would rather "superior products over the convenience of a single provider," said Shelley Morrisette, director of Forrester's Consumers & Technographics research service, and author of the report. There is no one emerging leader in this area, according to Forrester.

Consumer inertia currently favors banks as the leading provider of online financial services, but nearly a quarter of the consumers surveyed said they were "neutral" about which industry or company should be their primary provider in the future, the study explained.

For Net financial services to grow, Morrisette cautioned, vendors will have to "adopt new technologies, like site-centric personalization, improved navigation and analytics, and confidence-inspiring security."