Study: Consumers Skittish About Online Financial Services

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Most consumers are not willing to purchase financial services online, according to a study by Mercer Management Consulting, New York.

Mercer found that although visitors to financial services Web sites jumped 150 percent in a year, most people will not purchase financial services online.

Only 5 percent of 1,200 consumers surveyed bought insurance online, while 3 percent had taken out online loans or mortgages.

"Consumers still prefer to conduct a large percent of transactions over non-digital channels," said Mike Riley, vice president at Mercer.

The Mercer study also rated the top online financial services firms. Brokerage houses, including Charles Schwab and Ameritrade, received the highest ratings, followed by banks and insurance companies.

Brokerage firms have benefited from a high customer acceptance rate for online trading, but not all have taken advantage of this, Mercer said. Charles Schwab and Fidelity, however, have leveraged their online trading platforms to create value for their customers and companies. For example, 65 percent of Charles Schwab's trades are conducted online.

The study characterized insurance companies as traditionalists -- slower movers whose digital investments have not been directed at improving core business design. Fewer consumers visit their insurance company's Web site than visit their bank or brokerage company site, and they spend much less time on insurance sites. Insurance Web sites also have the lowest customer retention rates, according to the study.

However, some banks have developed an online presence that caters to loyal customers. Wells Fargo, for example, provides online customers with an array of services, from tax preparation to deposits. The banking company's efforts have resulted in a fourfold increase in monthly unique visitors to Wells Fargo's site during the fiscal year that ended last June.

Established financial companies will probably be most successful online, the survey concluded. Merrill Lynch, Charles Schwab and Fidelity, for example, have successful digital business designs that emphasize multiple channels and "open architecture," giving customers choices.

Although the market for online financial services is much smaller than originally forecast, Mercer consultants believe some companies will be successful.

Consumers are open to buying financial services online when they are given a competitively priced product from a reputable, accessible source, Riley said.

Companies that embrace an open model, allowing customers to select from among numerous products and providers through clicks-and-mortar distribution, will be particularly well-positioned.

Internet-only companies will likely find themselves relegated to educating consumers about product rates and features, only to see those consumers make their purchases via a competitor's bricks-and-mortar business.

This is a 40 Under 40 Profile. Click here to see all profiles as well as previous year's winners.

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