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Lisa Hronek Posts Tagged ‘Online banking’
Online Banking Rebooted
Some banks in the past have revolutionized consumer banking in terms of service or features. For example, during the 1970s, Commerce Bancorp offered immediate ATM card activation after the account opening, no overdraft fees on debit card usage, and branch locations that were open seven days a week for their customers. More recently, several online banking alternatives have promoted customer service and features that differ from most mainstream banks in the United States.
When is an online bank, not a bank, but an online banking alternative? Simple, or formerly known as BankSimple, is such an example. The company provides no monthly account fees, no overdraft charges, no debit-card fees, and no charges for using another bank’s ATMs, as well as providing great customer service. For example, a real person will answer a customer’s phone call, and ideally, the same person will help answer the same customer with their questions every time they call them (When was the last time you talked to the same person on the phone at your bank?). So how does Simple offer all of these services without being a bank? The account acts like a traditional checking account (with great customer service), but Simple outsources the actual banking to their FDIC-insured partners, like CDW Bank and The Bancorp Bank. Simple also designed their mobile application before their desktop browser version, to make the online mobile experience easier to use and navigate for their customers. The app features real-time updates to accounts and allows a geo-location of transactions (or a map of where the customer made a purchase). The customer’s balances also take into account automatic reoccurring payments, so the consumer knows exactly how much free money is available for spending in their account.
Movenbank is a non-traditional online bank that takes the Simple concept one-step further by leveraging customers’ mobile phones, with NFC (near field communication) technology, to make payments without plastic cards. The bank works without paper, and has no checks, no hidden fees, and no plastic cards. Movenbank has the idea that a cardless, checkless, and cashless society will be a reality sooner, rather than later, and is betting this concept will resonate well with consumers. Currently, Movenbank is in beta testing, but it appears a full launch for the bank will likely occur in late 2012.
It will be interesting to watch the development of these new online banking services and see if they succeed and thrive. Online banking alternatives do not have the high costs associated with brick-and-mortar banks and thus can afford to provide a higher level of customer service and no fees associated with their accounts. However, customer savings and customer service do not always guarantee success, as other online banks have failed in the past. NetBank, one of the nation’s first Internet-only banks, closed in 2007. Regardless, I am all-in for any online banking product or service that enhances the overall customer experience and decreases or eliminates fees associated with the account.
20/20 Vision
I envy people with 20/20 vision, both literally and figuratively. On a professional note, having a clearer vision of the future would certainly make my job easier, but I suppose most people could say that. And on a personal note, it would be useful to wake up in the morning and be able to see.
Fortunately – or unfortunately as the case may be – hindsight is often 20/20 and that can have a positive impact on future decisions. I’m hoping banks can evaluate how they introduced customers to online banking, how it was positioned, and how the pricing model was determined. What price you ask? That’s exactly my point.
Eons ago, I used to use Quicken to manage our checking account. I also balanced my checkbook every month. To. The. Penny. It’s kind of like long division. Incredibly tedious and painful, but you need to know how to do it. At least in my opinion. But I suspect it’s a lost skill these days. With online banking I doubt most people bother to balance their checkbook anymore. Anyone? Anyone?
One of the beautiful things about using Quicken – all those years ago – is that if you were enrolled in online banking, you could download all your banking transactions into Quicken. Duplicate transactions (the ones you already entered) were automatically de-duped. Theoretically anyway.
Now that I think about it, I think I used Quicken for bill pay too. But it’s hard to remember what I was doing last week, yet alone what I was doing a decade ago.
At a certain point my bank implemented a charge to download into Quicken, so I stopped doing it. Then they started to charge to pay bills through a third party. As online banking became more sophisticated I simply stopped using Quicken. I could pay bills through my banks website. Free of charge! 24/7! In my pajamas! It was bill paying nirvana. Truly.
Since I’ve already admitted that my memory of decade old events might be faulty, I checked on the Comperemedia database to look at some really old campaigns to see how banks promoted online banking and bill pay. For the most part online banking has always been free. But banks did start out trying to charge for online bill pay. Back in the last century – okay, 1999 – Citizens Bank offered online bill pay free of charge to its Circle Gold customers, but its Circle customers paid $3 a month for online bill pay and other customers paid $5 per month.
To me $5 a month for bill pay seems really, really expensive. I would have thought, “$60 a year. No thanks.” I’m sure most people thought that. I’m also sure that most people, like me, didn’t think through the economics of it though. In 1999 the cost of a stamp was $.33. If customers paid an average of ten bills a month they were spending $3.30 a month ($40 a year) in stamps alone, plus the cost of the checks. In those terms, $3 a month would allow customers to save a bit of money. For $5 a month, customers needed to pay 15 bills a month to break even. Slightly fewer if you factor in the cost of the checks.
Interestingly I only found one bank that actually put it in those terms. USAA promoted online bill pay by stating in offers, “At just $4.95 a month, Web Bill Pay costs less than mailing a dozen bills every month, which is $5.16 when you total the cost of checks and stamps.” Instead, for the most part online bill pay was positioned as a way to save time and money, with lots of references to easy, simple, 24/7 banking, and stamp free.
Just to be clear, I’m not picking on Citizens – almost everyone was charging for bill pay. At LaSalle bank, customers could pay as much as $9.95 for online bill pay, at Citibank $8.95, at U.S. Bank $4.95…Often the first couple of months were free and sometimes customers could qualify with direct deposit or a minimum daily balance. Hmmmm…sound familiar?
Obviously banks did away with online bill pay fees. With a fee, adoption rates were relatively low. At the time the view was that the entire internet was supposed to be free. Online bill pay went free because the banks wanted customers to do online bill pay – it was cheaper and more efficient than processing checks – and they knew adoption rates would sky rocket if it was free. But I’d argue it was a matter of positioning, marketing and the value proposition. If the banks had gotten those things right, more customers might have been willing to pay the fee.
As banks begin to evaluate what services to offer in the future and what fees they should charge for those services, they should carefully examine the online bill pay scenario. There’s more than one lesson there and, well, hindsight is 20/20.
Answers to reader’s questions…
Below are the questions and answers we received about online and mobile banking. Please email me or contact your account manager if you want more information on any of these topics.
How is direct mail spending different than print spending in the promotion of online services?
Banks tend to rely on direct mail to advertise online banking. In 2010, Advertising of online banking in direct mail was $34.6 million compared to $1.22 million in print spend and an estimated $3.6 million in online spend.
Do you know that those that you surveyed actually understand what an e-bill is (when they responded affirmatively that they use them, etc.)?
When we asked consumers if their bank offers eBills, we defined it as: “An eBill is an electronic version of a paper bill that you can view and pay online. Instead of being sent to your home mailbox, eBills are delivered to the website of your bank or credit union.”
Despite defining Bills, there is still the chance that consumers confused it with online banking. When we asked consumers if their bank offered eBills, we specifically provided a response of “I don’t know.”
Do you envision mobile payment technology affecting banks going forward? Will Apple, Google steal profits from banks?
I think the answer to this is complex, and dependent on a number of variables. I think mobile payments will happen – again, because it’s something that is already happening. (Think Starbucks.) However, the disparate nature of the business in the US has made it difficult to get mobile payments off the ground. Basically there are too many players – the banks, the mobile carriers, handset manufacturers, payment associations, mobile software vendors, merchants and consumers. The slow pace of development by the traditional players leaves the door wide open for Apple and/or Google to get their solution to market faster.
If Apple asks customers to link a checking account to iTunes, the structure would bypass the banks, which would result in a loss of revenue for the banks. But supposedly Apple is going to include NFC chips in the coming versions of the iPhone and the iPad. That type of solution would have to include the bank, but Apple still needs to get the retailers on board which isn’t going to happen overnight.
It’s no secret that Apple is planning to get into mobile payments, and it’s probably easier to work with them rather than against them.
What is the average life of a relationship between a customer and a FI if they have online services?
This isn’t something we track, but in general online services make the customer “stickier.” In other words, they are less likely to leave and more likely to have multiple products with the bank.
What statistics are available, if any, in countries outside the US?, do you have sample letters from outside the US?
We track US and Canadian direct mail, print and online advertising. The majority of the Canadian promotions are done through statement mailings. The US and Canadian bank similar messaging and both promote similar services
Any institutions out there using ‘incentive’ for continued use of the Bill Pay / OLB services as opposed to a one time sweep / incentive?
Ongoing incentives are offered in the form of reward points. For example, Capital One has a rewards program that awards 10 miles for each online bill payment, up to ten per month. (DM: 20110221-011247.) First Merit bank offers activity points for online bill pay. (DM: 20101223-011733.) Regions also awards points for online banking. (DM: 20100728-01186.)
Why are most banks simply focusing on pulling more fees from their declining customer base (the nearly depleted low hanging fruit) to increase revenue, instead of looking at how to generate alternative sources of revenue that can benefit customers and grow their consumer base? A few forward thinking banks are successfully cutting (branch) expenses with improved online services that really benefit customers. Charging online banking fees would seem to be incredibly greedy and counterproductive.
Ultimately I don’t think that banks can charge for online banking. The service has been free of charge for too long and customers have other options that are currently fee. Not to mention that it is in the banks best interest to have customers pay bills online rather than write checks. However, I think it’s interesting that customers don’t realize that writing a check has a cost – the customer must purchase the checks and the stamps. At a minimum writing a check costs the customer $.44 (the cost of the stamp). Perhaps if online banking fees were framed this way, consumers would be more accepting.
Will Smart Codes/2D codes be a tool used in financial services marketing?
Chase has already used a bar code to promote its new Android mobile app. I think this is a great use of the smart code. The codes could also be used in direct mail, print or outdoor advertising to allow people to get more product information immediately. Fifth Third has used them in direct mail. Instead of enrolling online, customers were given the option to use the QR code provided to register their debit card to receive bonus incentives. (DM: 20101202-011873.) Across the sectors tracked my Comperemedia, Telecom uses the QR codes the most, and banking uses them the least. In direct mail, some QR codes directed viewers to a website, while others directed viewers to YouTube and automatically began playing a video clip.
What is the biggest obstacle for consumers to using digital services?
If this refers to online banking, the biggest obstacle is security, but that is primarily tied to age. There are two main challenges in mobile banking: 1) Not all consumers have a “smart phone and 2) consumers have security concerns.
What are your thoughts about creating a dedicated graphical icon for online banking (i.e. MyAccount)
If this can be done so it fits into the overall branding of the bank, then it’s a great idea.
Of consumers who like online banking, what would they like to see improved/see more of/eliminated?
I don’t think consumers know what they want. I think it’s up to banks to figure it out.
Of consumers who don’t like online banking, what can marketers do to overcome their barriers to acceptance?
Security is the biggest obstacle, so to the extent that banks can address this they will be able to get consumers to accept it.
Is there any statistic about on-line spend?
Comperemedia started tracking online advertising in June 2010. We estimate that banks spent $3.6 million promoting online banking services in 2010.
Is bill payment trending towards payments at biller sites or will they remain with the bank online banking bill payment systems?
With the rise of paperless statements more and more consumers are paying at biller sites.