Amidst bill pay and funds transfer innovations that allow online bankers to more easily make use of the money in their bank account, most online bankers still spend much of each online banking session simply looking for information. As part of the Q4 2004 Banker Scorecard, Watchfire GómezPro reviewed which banks are providing the best experiences for online users seeking account information. The two banks that scored the highest for this task, which the Scorecard calls "Check Accounts," are E*Trade and Bank of America. Although these two banks occupy opposite ends of the spectrum in terms of branch presence, their practices reveal a common understanding about what creates an effective online banking experience.
With the Q4 2004 Banker Scorecard, Watchfire GómezPro divided online banking into five principle tasks: Open Accounts, Check Accounts, Transact, Get Service and Learn and Plan. For each task, we considered relevant functionality and ease of use conveniences, as well as privacy, security, quality and availability measures. "Check Accounts," focuses on online bankers seeking information on account balances, transaction histories and account documents. This task, along with the "Transact," task, is one of the two most heavily-weighted tasks on the Scorecard.
E*Trade and Bank of America finish first and second, respectively, in part because they display information on so many kinds of accounts within one account management area, and because both have created online offerings that are particularly well suited to seeking information on checking accounts. For instance both online bankers and those Internet users who do not yet bank online have prioritized online document delivery (primarily the ability to see statements and check images online) over almost any other potential feature they'd like to see in banking. Both E*Trade and Bank of America offer check images, online deposit statements and even paper suppression to their customers.
Check images or account statements or both are available at bank sites serving the majority of online bankers. But fewer banks offer both check images and account statements along with paper suppression, as E*Trade and Bank of America do. Further, both banks make an effort to make their services easy to use, showing that they are committed to getting customers to actually use the extensive account information they make available online and aren't adding content simply to be able to say they offer it. For instance, E*Trade doesn't just both show check images and also allow customers to record the name of check payees for display in the transaction history, it also puts the text input box for the payee name right on the check image window, something other banks don't do. This is a key detail that illustrates how E*Trade didn't simply add these two features--payee name and check imaging--to its site, but actually took the time to understand how to make them most easily used.
E*Trade, the largest Internet-centric bank offering checking accounts, focuses on what has been a niche market for branchless checking, since most customers prefer to house their primary checking account at a bank with convenient branches and ATMs. Not all consumers feel this way, and those already customers of E*Trade's brokerage and other services may find it more convenient to take care of checking needs at E*Trade anyway. But convenience is a feature that consumers look for in a checking account. When it comes to looking up account information E*Trade creates this convenience online with an offering that ranks as the most functional of all Scorecard offerings.
There's an indirect but compelling way to consider the strategic importance to E*Trade of creating an effective and convenient online account management area: to consider the ways in which E*Trade is not competing for checking accounts. As previously highlighted, E*Trade is not competing on the convenience of its branch network, as it doesn't have one. But neither is E*Trade competing solely on price: While competitive with those offered by large banks, the interest rates E*Trade pays on checking accounts, are not as high as those rates offered by some banks advertising nationally. And while billpay is free at E*Trade, it is also free at most of the ten largest U.S. retail banks.
This strategy has evolved at E*Trade by design. Over the last couple of years, E*Trade has been increasing the interest margin it generates on bank deposits. Highly convenient checking account products supports this move by allowing E*Trade to pitch customers and prospects on a virtue other than a high interest rate. Then, through ongoing usage of bill pay, checks and transaction registers, E*Trade can increase switching costs where customers with an E*Trade checking account become even less sensitive to the interest rates that might be available at another bank.
For this strategy to work, E*Trade can't simply try to win a features race. Nor can it simply boast about the availability of online documents, free bill pay and the like. Rather, it has to entice the customer to adopt these services. It's no accident, therefore, that E*Trade not only wins the Functionality component of Check Accounts on the Scorecard, but also finishes in fourth out of 30 banks for the Ease of Use component of Check Accounts.
Bank of America, which finishes second for Check Accounts, actually wins the Ease of Use component of Check Accounts in a tie with Wachovia. At Bank of America, the convenience starts with a site that remembers the username, which is a feature not found at most Scorecard banks. The system displays extensive information on credit cards and other credit products that an online user might hold with the bank, in the same format, within the same online banking session. Users have the ability to conveniently nickname these accounts and are able to toggle between different accounts according to a particular view. For instance, users can view the transaction history for each deposit account in rapid succession. Almost every ease-of-use convenience that Bank of America designs into its online banking site is available from a number of banks. But Bank of America's online banking offering leaves almost no stone unturned in making information easy to find and use.
At Bank of America and E*Trade, online banking doesn't just cater to checking customers and other online bankers, it has become part of the value proposition that helps sell these products.
Chris Musto is vice president of research for Watchfire GómezPro, in Waltham, MA. He can be reached at [email protected].