Elusive Search for ROI in the CU Online Channel Continues

BOSTON — Much ballyhooed but rarely quantified, online banking is now seen as essential component to both individual and business credit union members.

But does the channel pay for itself, or more importantly, make money? A simple question, it becomes more complex when mobile device integration, CRM and other automated features enter the landscape.

Looking for an answer, Aite Group's Gwenn Bezard surveyed about a fourth of the largest banks in America, asking them to relate ROI experiences stemming from online banking according to six key criteria:

• Perception of benefits in converting customers to online banking and billing.
• Sales trends from key online banking products.
• Projected levels of integration between online banking and key product sales.
• Perceived customer trust and comfort in digitally based banking products.
• Fraud loss trends and concerns.
• Measures of online banking performance.

What Bezard said he uncovered was an unfortunate link between perception and reality; that, indeed, ROI is elusive, and so is acting on it.

“Financial institutions continue to struggle to effectively leverage their different channels and deliver an integrated sales model to serve customers,” he said in a new report.

Looking more closely, however, revealed a fair share of silver linings among specific banking segment groups, Bezard found. Heavy online product users, for example, generated significant gain for financial institutions.

For instance, customers who selected the trio of online banking, bill payment and e-billing produced strong ROI versus their less integrated counterparts. The shift to online bill payment in particular, found Bezard, generated the most financial gain for banks.

Channel integration statistics echoed this segmentation pattern. At these same banks, 65% of channels were integrated but only for simultaneous transaction posting. In contrast, only a little more than 20% of channels were integrated for targeted marketing campaigns or online-initiated changes.

Sales trends of online products reflected these percentages. For instance, among the banks Bezard surveyed, the product that had the greatest share of online sales (when compared to offline sales) in 2007 was high yield deposits at 21%. This was followed by credit cards (15%), loans (5%), home equity lines of credit (4%) and checking accounts (4%).

These statistics, reasoned Bezard, point to a strong need to reorient sales strategy.

“While online sales are gaining momentum, the relatively slow uptake of checking account sales online suggests that, for most financial institutions, developing a truly integrated marketing and delivery strategy will be critical as financial institutions compete for deposits,” he said.

Optimism exists among Bezard's sample in accomplishing this feat. Even with fraud claims up 77%, nearly two-thirds of these banks' customers indicated high levels of trust in purchasing online banking products, dramatically up from only 10% a scant two years ago, the think firm analyst said in his report.

Still, mobile banking remains the black sheep in this banking family, where high levels of trust appear only in single digits (5%) among these same customers. The same statistic was reflected in banks' ability to cross sell products online.

In sum, Bezard proposed that online banking ROI remains a work in progress. Still, it becomes imperative for executives tasked with augmenting these channels to not accept stagnation, Bezard said.

“Online executives,” he warned in his report, “risk losing funding for the channel if they don't strategically close the performance gap in certain areas.”

–mrapport@cutimes.com