September 6, 2006

Who Will Win The Battle For High-Yield Online Savings Account Balances?

This is the first document in the "High-Yield Online Savings Account" series.

by Catherine Graeber

with Bruce D. Temkin, Peter Hult

Executive Summary (This is a document excerpt)

ING DIRECT exploded onto the scene in 2000 using the Web to reinvent the savings account — and the high-yield online savings account was born. Traditional banks scoffed at the notion that consumers would electronically move their deposit balances to an unknown bank with no branches. Six years later, ING DIRECT has amassed more than $46 billion in savings and CD balances. And the nay-saying traditional banks? They're now clamoring in an attempt to clone the ING DIRECT approach. But Forrester believes that only E*TRADE and a few midtier banks will be able to replicate ING DIRECT's success on a long-term basis. To counteract the outflow of deposits to these online accounts, big banks will need to offer aggressive pricing to a select group of customers.

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