Creating Virtual Value

By integrating business channels, consolidating customer histories and beefing up security, banks are improving their online offerings to provide customers with all the conveniences of branch banking in the comfort of their own homes.

In today's mobile society, consumers increasingly equate a bank's value to the services it provides online. With the growing number of Web users, many banks, eager to remain competitive, hope to attract and retain customers with enhanced online offerings. By integrating their business channels and customer views, expanding self-service functionality and improving Web site security, financial institutions are creating a seamless online banking experience.

More than 22 million consumers logged into their accounts online at the nation's top 10 banks in the first quarter of 2004 - a 29 percent increase compared to 2003 - according to comScore Networks, a Reston, Va.-based consultancy that analyzes consumer behavior. But enabling consumers to log into their accounts is the easy part for banks. Consumers are demanding more functionality online and many will choose a bank based on an institution's online offering.

"Online banking is a critical component of any bank's business," says Andre den Haan, CIO and senior vice president of product strategy at Atlanta-based Seagull Software, which specializes in software that integrates legacy systems with Web-based architectures. "This is a competitive weapon for financial institutions," he says. "If banks do not provide services online, ultimately they will lose customers."

Web users want to conduct the same transactions online that they are used to doing at a bank branch, call center or ATM. To ensure this transparency, banks must integrate their business channels to synchronize transactions and deliver results in real-time.

"Banks promote their Web services as a component of their multichannel strategy. By integrating channels, information is pulled from one bucket of data, which eliminates errors and duplicated information," says Ross McKay, VP of product management for S1, an Atlanta-based provider of enterprise software that presents a single view of each customer.

For example, Charlotte, N.C.-based Bank of America ($1.2 trillion in total assets) has spent the past nine months integrating capabilities such as brokerage and mortgage information into its online banking experience. "There is tremendous customer service surrounding this," says Chris Musto, vice president of research for Watchfire, a Waltham, Mass.-based firm that provides enterprise software and services to manage online privacy, security, quality and compliance risks. "Banks that can truly make the banking experience transparent as customers move between channels are more attractive," he adds.

Aggregated View

The next stage of synchronization requires banks to deliver an aggregated view of the customer's existing banking portfolio. "If a company wants to be a leader in online banking, it needs to offer integrated information delivery," Musto continues. Consolidated views of accounts not only help consumers manage their personal or household net worth, they build the value of a bank's brand, he explains.

"If a bank can provide a secure access point to view and manipulate accounts both internally and with outside banks and brokerage firms, they are creating a huge opportunity," says Bill Calpin, president and CEO of Atlanta-based Digital Envoy, a provider of Internet protocol (IP) intelligence solutions. "If customers are willing to rely on your site to view their accounts, they will gain the trust to access you for additional financial needs."

Bank of America recognizes this opportunity. "Customers want an integrated view of their banking relationships as well as tools to help them budget, plan and manage their accounts online," says Gayle Wellborn, the bank's online services executive. "We responded to this demand by offering inter- and intra-bank transactions."

Through aggregation technology from Redwood City, Calif.-based Yodlee, Bank of America provides customers with an aggregated view of their account portfolios. "We enable customers to transfer funds between Bank of America accounts and those held at other financial institutions," Wellborn explains.

One up-and-coming aggregation service being leveraged by banks is online bill payment. "Banking customers tell us that a large percentage of their customer service calls are consumers who want to check on whether their recent payments posted to their checking accounts," explains Jeff Weikert, consumer service provider channel executive, CheckFree, ( Norcross, Ga). "By adding electronic bill payment service to their online offering, banks can post information on more than one-third of their payments," he adds. "Then consumers can view their account activity" online.

Online bank bill payment services grew by 37 percent in the first quarter of 2004 compared to 2003, according to comScore. More than 4.6 million consumers, or about 20 percent of the online banking population, actively used online bill payment services offered by the top 10 banks. More important, "Electronic bill payments are actually a big driver that pushes consumers to use online services," Weikert says.

Sovereign Bancorp, the parent company of Sovereign Bank ($58 billion in total assets), attracts and retains customers with its online bill payment service. With the help of CheckFree, Sovereign provides its customers with an aggregation tool through which they can receive and pay their bills online.

Utilizing the newest version of CheckFree Web, Sovereign's electronic billing and payment service offers a single-point bill management center, fast payment processing, integration with online banking and the availability of payment posting information, according to Marianne Doran-Collins, director of online and affinity banking for the Philadelphia-based bank. Since introducing online billpay in 2004, Sovereign's customer enrollment has increased by 216 percent, she notes. "The number of bills being [paid online] each month by our customers has grown by 126 percent within a year," Doran-Collins adds.

By automating the check payment process, banks are not just providing a higher level of customer service and convenience for their users. Perhaps more important, the services give banks opportunities to connect with users.

For example, according to comScore, the average banking customers log on to their banks' Web sites between nine and 10 times a month. However, bill payment customers visited banking sites an average of 14 times a month during the first quarter of 2004. And the total value of bills paid by consumers online through the top 10 banks during this time frame was nearly $17 billion.

"Some companies may regard billpay as a commodity," says Doran-Collins. But, "By offering electronic billpay, we are one of the most competitive players in the marketplace."

Another way banks are seeking to be competitive is by offering self-service tools online. By empowering customers to conduct business online, banks can reduce operating costs, increase customer bases and positively impact the overall banking experience. However, banks need to be mindful of the applications they choose to offer over the Web.

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