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Bank Websites 2011

By: Lee Wetherington

More than 70 percent of banking takes place outside the branch via online, mobile, ATM and interactive voice response systems. Moreover, the online channel offers the biggest opportunities for generating new fee revenue and cutting costs.

Durbin, Fee Revenue and the Online Channel

By converting more offline customers to online services — and achieving more intensive usage among existing online clientele — the banking industry stands to save $8.3 billion, or $167 per customer per year, according to Javelin Strategy & Research of Pleasanton, Calif. And $8.3 billion could come in handy as banks face a projected $10.8 billion loss in debit card interchange when the Fed’s proposed rule implementing Dodd-Frank’s Durbin amendment is enacted in July.

The online channel is also where banks will find their lowest-hanging fee-revenue opportunities. Unlike online consumers, commercial customers are ready and willing to pay for services that deliver conspicuous value. Two-thirds of U.S. small-to-medium size businesses do not have a business checking account, much less a dedicated SMB billpay, cash management or mobile alert service, all of which SMBs are willing to pay for.

To tap fee-revenue and cost-saving opportunities online, banks must evolve their websites in ways that meet the unique and dynamic demands of both consumers and businesses in 2011. So, where to start? Here are five ways to position your bank’s website to maximize cost efficiencies, customer service and new fee income in the months ahead.

Integrate, Widgetize & Mobilize Online Financial Management

After the Great Recession, consumers are looking for more than a balance update from their banks. They want the meaning of their account data up front — without having to do math in their heads to get it. Online financial management is the second generation of online banking and the most direct way of compelling consumers and businesses alike to use your online channel, helping your bank realize the substantial cost efficiencies of the self service that results.

OFM not only aggregates all of your customers’ bank data in one place — even data from other financial institutions with which your customers hold accounts — it visualizes that data in ways that give customers a clear understanding of where they stand with their finances, how their spending/saving/budgeting compares to previous months (or similar households), and what they should consider doing next.

For the bank, OFM boasts solid ROI. Active users of OFM are 31 percent less likely to switch banks, 26 percent more likely to carry higher balances, 23 percent more likely refer friends and family, and 17 percent more likely to open new accounts, according to the Aite Group, a Boston-based consultancy.
In 2011, OFM is going mainstream. The real differentiator will be how OFM is integrated throughout the online experience your bank provides. Rather than being relegated to a single tab of your transactional website, the various OFM components (e.g., charts, graphs, alerts) will be widgetized, i.e., rendered in individual application components, that can be placed wherever customers want them — on their account homepages, mobile devices or even social network sites.

Monetize Consumer Relationships Online without Charging a Fee

Though consumers are reluctant to pay fees for online services, they all clamor for a deal. In 2011, banks will partner with companies like BillShrink and Cardlytics to integrate merchant-funded rewards and bill-savings offers into the bank’s online account transaction detail.

As customers peruse their statements online, they will see discounts and rewards from the merchants with whom they already have relationships. Banks that parlay these targeted rewards online will share in the revenue from the merchant sponsoring the rewards. Voila! Deals for your customers. Fee revenue for your bank.

Offer True Small Business BillPay Online

Small-to-medium size businesses are generally ignored by much of the financial services industry today. The owners of SMBs are making due with consumer online banking services that do not begin to address the needs of even the smallest of businesses; no help with payroll, taxes, remote deposit, funds transfers, wires, nothing.

The most immediate online need of the average SMB is a bill payment offering that enables the electronic payment of employees, multi-user authorities for office staff, transaction limits per employee/payee, electronic invoicing and collection of payments, integration with the SMB’s accounting system, and the ability to track unpaid receivables.

Moreover, according to Aite, 49 percent of businesses are willing to pay a premium to access an SMB bill payment or micro cash management service on the mobile device. Specifically, the average SMB owner prioritizes two-way actionable alerts that allow her to monitor and approve the movement of money in and out of the business in real time.

Extend Online to New Devices

We are migrating from a PC-centric to a mobile-centric world. Already, more smartphones are being sold in the United States than personal computers, and tablet devices are now opening up new categories of use and access. Fifteen million iPads were sold by Apple within the first nine months of the iPad’s release, and Gartner now projects 65 million tablets will be in circulation by the end of the year, most of them iPad 2s.

The explosion of iPhones, Androids and tablets gives many banks pause and some paralysis. How can the bank possibly keep pace in the online channel if it must develop a new banking app for each new device or platform that arises? The answer is simple. Powerful middleware and API libraries now allow the deployment of “one app everywhere,” i.e., standard, widgetized components of legacy online banking and OFM that can be deployed on any device or platform anywhere.

Tap the Power of Social Networks

Finally, many banks today do not understand how social networks intersect banking in ways that are meaningful and relevant, not to mention safe. If, however, you accept that the online channel is already the dominant banking channel, and that Facebook is the biggest gathering place online — 600 million by last count — then the connection between the two becomes clear.

To succeed in the online channel, banks must generally make their websites easy to find and easy to use. To be easy to find online, a bank must dominate the search rank for given key words used by prospects looking for the products and services that bank offers within its market’s geography. And the only way to dominate search rank is either to pay for an ad at the top of the search results or to earn a spot at the top of search results organically through significant traffic on the bank’s website.

To earn significant traffic on your bank’s website these days, however, you must have a strategic presence in social networks that drive traffic back to your website for more detailed information on products, services and financial education. In short, to be easy to find online, you must go where the people are online, and the people online are on Facebook.

Online Means Innovation

To survive the current economic, regulatory and demographic challenges facing our industry, banks must get the online channel right. The pace of change and innovation, however, means “getting it right” is an ever-moving target. Those banks that make the effort will be rewarded. In a recent BAI & Finacle Index of Bank Consumer Sentiment study, 93 percent of consumer respondents who say their banks are innovative also say their banks are worthy of trust. Banks perceived as innovative tend to gather larger deposit balances from their customers and sell them more products and services.

And, who knows, they may even drop by the branch to say hello.

Lee Wetherington is director of strategic insight for ProfitStars, a Dallas–based division of Jack Henry & Associates Inc., that provides website solutions to community banks of all sizes.

Copyright © May 2011 BankNews Media