Yahoo expands financial services
Slowly but surely, the company is building up its financial services to look more like an online bank. Funny thing is, some banks have Web sites that are starting to look a lot like portals.
Yahoo has unveiled a new service allowing customers to transfer money between their financial accounts through Automated Clearing House network, a money transfer system used by 23,000 banks, brokerages and credit unions.
With one click, for example, a person can go to Yahoo online and transfer money from a savings account at Wells Fargo to an investment account at E*Trade.
"Consumers leave too much money in checking accounts that earn too little interest," said Dilip Venkatachari, president of CashEdge, the company that oversees the Yahoo transactions. "This gives them a way to maximize interest earned by moving money into the highest-interest account on a regular basis."
With more people using the Internet to spend, save and invest their money, competition is fierce to become a one-stop banking site. Deregulation has allowed brokerage houses entry into the online financial market, and brokers such as Charles Schwab to E*Trade offer everything from mortgage lending and bill payment to ATM access.
The banks are staking out online territory as well, pushing beyond purely financial services to compete. The online banking industry, valued at $1.5 trillion last year, is expected to be worth $2.1 trillion this year and to grow to $5.4 trillion in 2005.
Both Wells Fargo and Citibank have recently launched Web pages and services that closely resemble those made popular by portals.
In December, Wells Fargo launched MyWellsFargo, a takeoff of Yahoo's customizing service that allows customers to pick and choose the information delivered to them.
MyWellsFargo customers have access to news, weather, maps and even horoscopes, according to Roxy Jones, vice president of interface design at Wells Fargo.
Jones readily acknowledges the changes were a way to combat the portals.
"We want to be a financial portal," Jones said. "The horoscope and other additions are just a little value added to our site...We are still positioning ourselves as a financial destination site."
On the same page, customers can do their banking, pay bills, and track investments, Jones said.
Citibank also has a MyCiti Web page that includes world news along with financial information on debt consolidation and tools to calculate interest rates.
Yahoo Finance, ranked in November as the top online financial site by Jupiter Media Metrix, has community feedback and message boards in addition to its market news and money-management tools.
Banks have a long way to go before they can compete on the portals turf, said Jupiter Media Metrix senior analyst James Van Dyke. But likewise, the portals must combine their time-saving offerings with the ability to make transactions.
"From the beginning of online financial services, what we've seen is a lot of disconnected product offerings that don't help people complete transactions," Van Dyke said. "We are just starting to see the beginning of those services emerge with those capabilities...but we need more in order to attract hordes of customers."
One hurdle that Yahoo and other non-banking companies must overcome is how to make money from services such as the transferring of cash. Yahoo offers the service for free.
Merrill Lynch Internet analyst Henry Blodget said Yahoo is wrestling with how to squeeze more profits from its entire list of offerings, including financial services.
"Some of those are commodity services that will be difficult to charge for," Blodget told CNET Radio.
"But we do think given the power of the platform, Yahoo can do a lot of neat things that people wouldn't mind paying a dollar or two for."