E*Trade Launches Real-Time Fund Transfers

In a move that they claim is an industry first for firms that have both proprietary banking and brokerage businesses, E*Trade Group rolled out a real-time cash transfer technology that let its online banking customers quickly put money into their E*Trade Securities brokerage accounts.

Menlo Park, Calif.-based E*Trade said the transfer mechanism, accessed via a “Quick Transfer” tab on the Web site, allows customers to access other sources of funds and rapidly make new stock market investments on the same day, maximizing potential return.

For example, a customer might keep a portion of their cash in a higher yield E*Trade Bank money-market account and transfer it to their E*Trade Securities brokerage account immediately prior to making a stock purchase.

The technology was first put into place last October, essentially in beta. Since then transfers from external accounts to E*Trade Securities brokerage accounts have increased 22 percent, according to an E*Trade representative.

The real-time transfer mechanism can go both ways, allowing customers to move funds from their brokerage account back into the bank once trades have settled.

Customers also can initiate real-time electronic cash transfers from external, third-party accounts to their brokerage accounts, eliminating paperwork and delays and giving them immediate investing power, E*Trade said. To perform a real-time cash transfer from an external account to an E*Trade Securities account, customers simply enter their account number, the institution’s routing number and the cash amount, and the money will be immediately available for trading.

And customers can transfer assets other than cash (such as stock certificates and mutual fund holdings) electronically from external brokerage accounts to their E*Trade Securities brokerage account. By using electronic signatures, assets are transferred in an average of 10 to 12 days as compared to three or more weeks when regular mail and printed forms are used, E*Trade said.

Meanwhile, at least on an international scale, “the online financial services sector is one of last year’s success stories,” according to an analyst at Web measurement firm NetRatings.

Richard Goosey, international chief of measurement science, said that online banks reached more than 30 percent of the active Internet audience in five major markets in November. However, the United States, where the reach figure was only 12.5 percent, was not among them.

The top five countries where online banking has made the best gains are, in order, Sweden, Australia, France, the Netherlands and Brazil, according to NetRatings figures.

No doubt E*Trade doesn’t want to hear this, but Goosey said that “in virtually every market, it is the traditional, established brick and mortar banks that are attracting the biggest audiences.”

There is hope, however, as Egg.com is an exception. Prudential’s Egg.com, a pure-play online bank which is currently the most popular European banking site, “is achieving overlaps of around 20 percent with its major competitors, suggesting that its success is built on being a convenient second account for traditional banking customers,” Goosey said.

E*Trade, which saw its stock price cut in half last year, nevertheless has been continuing with a string of acquisitions, and recently brought institutional broker Engleman Securities Inc. into the fold.

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