Too Much Information Is Not Enough

There's an age-old tension in retail delivery that has proved a bear for financial services providers to manage online: It's the tension between giving customers enough useful information about their accounts to help them, but not too much information so as to confuse them. Consider some detailed information customers may or may not want to know about their checking account: ACH's can memo post, a balance can be current or available, a merchant may put a $1 hold on a check card followed by a $200 posting. Given the complex interplay of these and other account events, a bank may fear that by promising up-to-the-minute account information within online banking, it will open a Pandora's box.

But little by little, banks are indeed offering more detailed and up-to-date account information through online banking, and there are many reasons to do so. Additionally, there are also useful steps banks can follow to ensure that additional online banking account information does not translate into additional calls to customer service from confused customers. This article will discuss the push toward greater transparency and immediacy in online banking and the drivers behind these changes.

Some trends are firmly entrenched: It is now commonplace for banks to offer consumers both current and available balances online, and almost all large banks and many smaller banks have introduced transaction histories synchronized in real time with ATM withdrawals.

But the introduction of intra-day updates to balances and transaction histories came much later at some banks than others. Some banks, typically the smaller banks, started with Web banking offerings that emphasized everything the other remote channels couldn't offer: check imaging and lengthy transaction histories. These banks typically held off on offering real-time synchronization with other channels. Other banks, usually the large banks, focused instead on demonstrating that Web banking was in step with other channels. Instead of year-plus transaction histories, customers were able to see daily updated ATM withdrawal transaction histories.

With intra-day balance and transaction updates now the industry standard, the emerging trend is itemization of signature debit holds. This development is a classic example of how the evolution of banks' business goals is driving the evolution of online banking: Many banks have aggressively marketed signature debit to their customers. As a result, customer usage of signature debit is rising rapidly. This increased usage means customers now increasingly confront pending authorization holds. Because of these pending authorization holds, signature debit purchases can affect available balances up to several days before showing up in the current balance.

Since online banking now shows available and current balance, the customer can see the effect of the signature debit hold implicit in the difference between the two balances. The confusion starts to mount when that difference doesn't add up to the purchase the customer believes has just occurred. For instance, a customer checking into a hotel may think he just paid $225 for a one-night stay, but the hotel may put a hold on the card for $500. By itemizing the hold, the bank can show the customer that the hotel has a hold for $500 instead of allowing the customer to speculate and worry about another, unauthorized transaction or a bank error.

More than ATM and check card transactions can affect balances. For example, Huntington Bank shows pending transactions at the end of the checking transaction history and then future-dated payments. As payments are issued, the payments move into the pending section, and as they settle, the payments move into the transaction history.

Banks are improving the usefulness of information on pending and recent transactions in other ways, too. Fleet, recently acquired by Bank of America but still offering HomeLink online banking, now shows customers not just that there is a pending credit, but that the pending credit is the result of a deposit at a particular ATM. Meanwhile, First Internet Bank of Indiana gives the time of day for ATM transactions. Both these steps effectively help banks avoid customer service calls.

This brings us to another key driver of online account information: the bank's capability to generate the information in the first place. For years, some banks could cheaply display check images online while others were unable to even display them. Even today, some banks are able to show ATM transactions and other information in almost real time while other banks do not have this information available to them at all. This means that these banks can't display this important information online. Online banking, by acting as a real-time window on banks' back-end processes, is forcing some banks to move more aggressively in improving their back-end processes.

Ultimately, the predominant driver to adding information to online banking, and one many banks still struggle with, is what is the most common question the customer needs answered, and what key online information will quickly and easily answer that question? For checking accounts, the customer often asks, "Do I have enough funds in my account and, if not, why?" An example of the innovation resulting from banks trying to help customers answer this question is the running balance, a feature that shows the impact each transaction had on the account balance. The Q2 2004 Watchfire GomezPro Banker Scorecard revealed that 80 percent of banks now offer running balances, up from 53 percent a year prior.

With all the information available, the information design challenges are daunting. But banks are learning that it is better for their customers, and ultimately more profitable for the bank, to provide all the facts and to simply focus on how best to present these facts than it is to leave customers to speculate as to what is happening with their checking account.

Chris Musto is vice president of research for Watchfire GomezPro, in Waltham, Mass. He can be reached at [email protected].