Big Banks Flex Online Muscle

Traditional brick and mortar banks have radically improved their Web sites. Gomez's most recent Banking Scorecard, which measures the quality of e-commerce offerings, reveals that many institutions are investing in functionality and customer service initiatives that demonstrate a better understanding of online customers' needs and behavior patterns and lay the groundwork for future savings.

Here's a first-quarter view:

Large banks push forward; Chase reemerges. While Citibank and First Internet Bank of Indiana retained the top two spots in the Scorecard (Citibank placed first for the fourth consecutive Scorecard), several large brick and mortar banks made site enhancements over the last six months that enabled them to move up the charts.

Wells Fargo moved into the top three after holding the sixth spot in the Q3 2001 Banking Scorecard with a re-launch of its bill-pay functionality which features enhanced alerting. Key Bank's aggregation service, which is integrated within the account management area, helped it jump two spots to number five. Additionally, First National Bank's integration efforts and U.S. Bank's site redesign helped each ascend the ranking.

In the 12th spot, J.P. Morgan Chase makes its first appearance on the Scorecard since Q2 2000, in part by enabling customers to apply online for checking accounts. The new online application features sophisticated messaging and enables customers to electronically fund multiple accounts simultaneously via different options (including internal transfer, ACH and credit card). Finally, newcomer Allfirst Financial, which offers a few sophisticated features including online check imaging, breaks into the top 30 making its inaugural appearance on the Scorecard. Former Scorecard firms Commercial Federal Bank and SouthTrust Bank also returned to the top 30, due in part to site improvements.

Account aggregation,redux. Large banks have made a noticeable effort to offer aggregation services in ways that reinforce the convenience proposition of the online channel. For example, Key Bank, Wachovia, Netbank, and Fleet integrate aggregation within the account management area. Linking the two services within a single authentication process makes account aggregation both useful and convenient. We expect to see more banks finding a new home for their embattled aggregation services alongside this established user behavior path in the future.

Big banks make a statement with check imaging. Six months ago, none of the ten largest retail banks featured online check imaging. Today, check images are getting a vote of confidence from two of the three largest retail banks in the country. The Wachovia Corp. has expanded the availability of the imaging on Wachovia.com by offering it to the bulk of its customers through firstunion.com. Bank of America has rolled out check imaging in Iowa and Nevada and plans to have check images available online to customers in all 21 states by the end of May.

The prospects for check imaging are strong. Nearly 70 percent of online bankers surveyed described themselves as "very willing" to accept cleared check images over the Internet while fewer than 10 percent were "unwilling" to do so. Wachovia and Bank of America's movements are significant because the decision to adopt check imaging affects many offline processes. Thus, these banks are sending a message that check imaging is not only a part of the long-term online banking picture, but isn't cost prohibitive. The investment also suggests banks are taking a longer-term view of the Web channel.

Customer service shows marked improvement. The percentage of Scorecard banks that answered at least 66 percent of phone inquiries in an accurate and timely manner now stands at over 73 percent (a 20 percent jump over the previous Scorecard). While the percentage of banks that answered 66 percent or more e-mails accurately--and in less than 24 hours--is only 40 percent, several institutions have set themselves apart with consistently rapid responses.

During our testing, Key Bank, First National Bank, National City, First Internet Bank of Indiana and PCBanker.com all answered 66 percent or more e-mails accurately within three hours. These improvements are in line with a growing commitment to customer service across all channels. As banks focus on increased customer satisfaction (in ways that are more cost efficient and profitable to the institution), we expect to hear more about service initiatives underway at banks like Fleet and Wachovia, aimed at placating shareholder criticism or combating natural hiccups that accompany acquisitions and mergers.

Additionally, as large banks learn how best to deliver services through the Internet, they are deciphering their customers' Internet behavior and needs. In doing so, they are better prepared to pass this information along to the customer service representatives who in turn are doing a better job anticipating and fielding customers' questions relative to the online offering.

While top-ranking institutions are indeed more effectively leveraging Web technologies, the majority of banks still have some work ahead of them. To be sure, banks are on their way toward building a virtual channel that is more convenient--and potentially cost-effective --than physical world counterparts. Still, there remain opportunities to improve site functionality, particularly in areas such as feature integration, messaging and deployment.

Furthermore, banks need to ensure that site layout, messaging and capabilities support their overall business objectives. Until they take these additional steps, most will continue to operate an Internet delivery channel that meets the majority of customer needs but falls short of achieving long-desired cost savings.

Tim Carpenter and Moriah Campbell-Holt are analysts with Gomez, Inc., an Internet quality research and advisory services firm in Waltham, MA. Carpenter can be reached at [email protected]. Campbell-Holt can be contacted at [email protected].