Thursday, June 21, 2007

Why Do You Have ING Direct (or Not)?

The Sun's Financial Diary mentioned that ING Direct has lackluster rates but a 52% market share and asks why.

Here are some possible reasons for ING Direct's strong market share:

  • Advertising visibility.
  • Brand-name recognition as a "real" bank without having to check FDIC lists.
  • Ease of setup (How many people bailout in the middle of other banks' applications?).
  • Minimal strings attached (do not have to open a checking account with $10/mo fee, etc.).
  • Customer service and ongoing, consistent ease of use, either online or by phone.
  • The quick gratification of the sign-up bonus.
  • People with low balances rationally value the lack of minimum balances and no fees when compared to the small dollar amount of even an extra 1% on a small balance (it will take a long time before the marginal difference of a higher rate on a small balance will exceed the sign-up bonus).
  • People keep token amounts to keep an open account for the referral bonus, which provides social/viral marketing (see advertising visibility).
What is your explanation?


Anonymous said...

I find the idea of chasing a few basis points a waste of time. I will give up a few for:
1. Outstanding ease of use;
2. Stability - I don't have to worry they will go the way of a traditional bank and offer 1% rates.
3. Outstanding customer service.

J at IHB and HFF said...

Those reasons seem to be part of ING's niche. Thank you.