Growing Budgets Seen Pushing Envelope in Online Channel Growth
Despite rough economic times, half of the nation's largest financial institutions expect a budget increase of more than 15% in 2010 for online banking initiatives, according to a new report.
According to research and advisory firm Aite Group, the additional funds will help up the ante in four key areas of online channel development: personal financial management, sales and marketing and account opening and online payments.
The activities of large banks often set the bar for smaller institutions, including credit unions, in terms of product developments that make it to the mass market.
For its report-titled "Online Banking Product Development Roadmap 2010"-Aite Group researchers surveyed senior online channel executives at 20 of the U.S.'s 100 largest banks.
They said they found that the increased commitment to online banking improvement stems from two key trends: the comfort consumers exhibit with online banking activities, and the ever-growing pool of net-savvy Generation Y members who play a large role in the online banking product market-and at the financial institutions themselves.
"Senior management teams in many banks haven't viewed the online channel as the primary channel for customer interactions and transactions," Aite Group's Ron Shevlin said. "The tide is finally turning. Two forces are helping to bring about this change-one, banks are waking up to the reality of consumer behavior, and two, a younger group of managers-with a more accepting view of technology-is entering the executive suite."
At the top of many financial institutions' online channel improvement to-do lists are online personal financial management tools. According to the report, 35% of institutions offer PFM tools, and 60% are considering offering them. By highlighting PFM tools online, financial institutions hope to improve customer retention, but don't necessarily plan to collect and utilize customer data, the report said.
"Many banks are wisely seeking PFM as an opportunity to better engage customers," Shevlin said. "One in four banks cited competitive parity or brand perception as a very important objective for PFM."
However, the think firm believes a logical fallacy it calls "correlation delusion" will determine the PFM tool investments financial institutions make in 2010. Correlation delusion refers to when an institution sees lower attrition rates among the users of an online capability and concludes that the online capability is what's causing them to stay.
"The problem with this thinking is that it's based on correlation-not causation," Shevlin said. "They haven't proven that the online capability causes the drop in attrition."
A portion of financial institutions' budgets will fund online marketing efforts, specifically targeted banner ads, trigger-driven messaging and the use of bill-pay data for targeted marketing purposes, the report said.
Aite Group found that while online marketing endeavors will be plentiful, they're not likely to incorporate channel integration-most bank executives said they plan to manage channels individually. That's also the case for any service-related implementations, a category that is low on many financial institutions' lists for online improvements in 2010, the report said.
"Few banks we spoke to have integrated-or are planning to integrate-their enterprise CRM applications with their online marketing capabilities," Shevlin said. "In addition, integrated service capabilities like co-browsing, escalating online sessions to the call center, or enabling customers to schedule branch meetings online aren't on many banks' development road maps."
Additionally, the ability to make bill payments and open new accounts online has become the norm-75% of the big banks currently offer online account opening services and many offer bill payment abilities as well, namely inbound and outbound ACH transfers, followed by e-bill services. Most financial institutions that are not up to speed with online payment and account opening services plan to be in 2010, the report said.
As the majority of financial institutions make online services a budget priority, Aite Group said they can maximize their opportunities by following two guidelines: Market online services through banner ads and intercepted messages and give online customers the same level of service that in-person customers receive.
"The online marketing capabilities that banks are talking about implementing focus mostly on pushing messages out to online customers in the hope that messages will be the 'right message at the right time,'" Shevlin said. "Banks should define and design online interactions that mirror offline sales experiences-by engaging customers and prospects in an online discussion that identifies preferences and product needs."