A new study reveals that consumers are a lot more bullish about online banking services than previously thought, and that banks need to rethink how they go about segmenting customers and defining their value propositions.
Online banking could grow by as much as 50% during the next year, according to the study, Competing on Supply, Winning on Demand: Recapturing Share of Consumer Financial Services, conducted by Bank Administration Institute (BAI) and The Cambridge Group. Twenty-four percent of survey participants conducted online financial transactions in the last 12 months. Fifty-two percent are online but are not conducting financial transactions, and 24% are offline. However, over the next 12 months, 18% of respondents from these latter segments intend to transact financial services online.
Other key findings are:
- 59% of consumers surveyed are interested in some form of online account aggregation. Aggregation solutions facilitated by screen scraping drew interest from 23%, while OFX (Open Financial Exchange) solutions were of interest to 34%. The most sought after aggregation deliverable was a single electronic statement (53%).
- 76% of consumers surveyed are interested in receiving financial education, advice and planning. Thirty-eight percent are willing to pay for it on a one-time basis, while 34% are willing to pay for it on an ongoing basis.
- 90% of survey respondents are interested in the idea of one-stop shopping for financial services, and banks are viewed as the most capable providers of such a service.
The most common online financial transactions for survey respondents are transferring money between accounts, paying bills, and buying securities. Sixty-three percent of study participants have life insurance. Insurance companies are perceived as the most capable providers (65%), followed by large banks (14%), personal financial advisors (12%), credit unions (12%), full-service brokerage firms (11%), and community banks (10%).
"The research calls for financial services companies to look at their businesses in a new way-through the eyes of their customers-to gain an understanding of the demand in the marketplace," said Thomas P. Johnson, Jr. president and CEO at BAI.
For example, the research shows that banks' efforts to gain wallet share from wealthier consumers may be misdirected. Many of these customers have a lower affinity for banks and have numerous financial companies competing for their business.
However, by satisfying the needs of other customer segments who have a greater affinity for banks, are less demanding, and have fewer institutions vying for their attention, banking organizations can grow revenue from new sources.
The study concludes that banks must focus more intensively on understanding the attitudes and motivations that drive customer behavior, said Navtej S. Nandra, principal at The Cambridge Group. "This approach allows you to predict behavior."