CashEdge Claims 25% Share of 2006 Online Account Openings

By Jim Bruene Posted on
Categories: BAI Retail Delivery, CashEdge, Forms & Loan Applications

I had a good chat with CashEdge <cashedge.com> VP Neil Platt at BAI's Retail Delivery last week. The company is busy working on a much-needed channel integration initiative so that account applications begun online can be completed with a phone call or even a branch visit, with no need to start all over from scratch.

Source: Cashedge CLICK TO ENLARGEThe company hopes it can capture half of what it estimates is 70% of completed online applications that go unfunded
(see chart inset).
If that's true, the payback for the solution, at least at larger financial institutions, will likely be measured in months, if not weeks.

Other projects in the works:

  • Cross-selling other bank products during the new account-opening process
  • Facilitating other types of applications, such as loans
  • Improving risk management by tapping additional data sources outside the credit bureau

CashEdge is a great example of a specialist that carves out a profitable niche in a relatively narrow, but risky area of online operations, new account funding. Thanks to big clients such as Citibank, the company is on track to facilitate one million online account openings this year, about a quarter of the estimated 3.5 to 4 million new checking and savings accounts opened this year online (Note: CashEdge estimates). 

The company ranked number 101 in INC Magazine's list of the 500 fastest growing private companies. According to the published figures, the 177-person company grew from just over $1 million in revenues in 2002, to approximately $10 million in 2005.

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Boeing Employees Credit Union Email: "BECU Gift Cards Make the Perfect Holiday Gift"

By Jim Bruene Posted on
Categories: Credit/Debit Cards, Email Marketing, Email Samples

Boeing Employees Credit Union <becu.org> starts the holiday shopping season off with an email pitch for its prepaid MasterCard gift card. At $2.50 each, they are a bit less expensive than one hanging in Safeway for $4.95. However, the CU neglected to disclose dormant account fees, a significant issue with consumer advocates.

It's too bad you can't order the cards online. Ideally, members should be able to order with a single click (or two) right from within the online banking function. Maybe next year.

Screenshot (click to enlarge)

Boeing Employees Credit Union (BECU) email CLICK TO ENLARGE

Classification

Type: Marketing email for prepaid debit
Product: Prepaid debit cash card (MasterCard)
Offer: None (cost is $2.50 plus the cash value)
Customer Type: Sent to nonmembers
Personalization: None
Links: None
Call to action: Toll-free phone, branch

Header

Date received: Tues 11/28/2006 6:08 AM
From: BECU [reply27974@enews.becu.org]
To: Jim Bruene
Subject: BECU Gift Cards Make the Perfect Holiday Gift

Comments

  • Even if gift cards cannot be ordered online, the credit union should include a link or URL for more information. Since many email recipients will automatically go to BECU's website to purchase, it would be helpful to specifically mention the cards cannot be ordered online, and why.
  • The opt-out and CAN-SPAM disclosures could be better designed.
  • Add disclosures for any monthly fees that kick in if the value is not used by a certain date.

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Wells Fargo to Redesign its Homepage

By Jim Bruene Posted on
Categories: Website Usability & Design, Wells Fargo

In our opinion, the Wells Fargo homepage has been the gold standard for the past three years, ever since the launch of its tabbed navigation in June 2003. It was one of four large-bank homepages earning an A in our Report on Financial Homepage Design in October 2003 (see Online Banking Report, 101/102). The navigation, copywriting, and usability are still top-of-the-line, but the look and feel is a bit dated, especially the banners running along the bottom.

According to a small-text warning at the top of the page, the site is being refined, and users "may see a different homepage for the next few months" (see screenshot below).

Analysis
The bank's homepage design has been essentially unchanged for more than three years, so it's about time for a remodel.

What we don't quite understand is the reasoning behind the cryptic message at the top of the page. With spoofing a continual problem, the bank may not want users to be concerned if they see changes. However, this message probably does more harm than good. 

The main problem is lack of information. The bank doesn't say what type of changes to expect, or even when they might happen. Most importantly, they fail to communicate why they plan to dribble out incremental changes instead of launching a redesigned site all at once. (And a quick search on "home page redesign found nothing at the bank's site.)

There may be very good technical and/or marketing reasons for the iterative process, but they should be explained. At minimum there should be a link to an FAQ page. As it stands, users can't be sure if an odd-looking Wells Fargo is a spoof or a new design. 

Don't leave users hanging! It creates only more uncertainty, not to mention additional emails and calls to customer service. 

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ING Direct to Launch Online Checking Account in February

By Jim Bruene Posted on
Categories: Advertising & Promotion, Deposits, Checking, Savings, CDs, Direct Banking, ING Direct, Strategies

As previously reported here, direct-banking giant ING Direct (U.S.) <ingdirect.com> will soon be in the checking account business with the Feb. 1 launch of Electric Orange.
(No word on whether the German band of the same name will be part of the launch event.)

In an interview published yesterday in Delaware's The News Journal, CEO Arkadi Kuhlmann revealed important details about the effort:

  • It would be made available to about 10% of the bank's 4.4 million customers in December
  • The nationwide launch is scheduled for Feb. 1
  • ING Direct is planning to add 500 workers at Wilmington's headquarters to support the product, an expansion of more than 50% from its current headcount of 900
  • The account will NOT have paper checks, but it will allow customers to print one from their home computer if necessary
  • The interest rate will be 3%, about a third less than its savings rate of 4.4%
  • Surcharge-free ATM access will be provided through the Allpoint network of 32,000 machines

Product postioning
While the account sounds relatively standard for an online-only checking account, the ability to print a check from home is an interesting feature we haven't seen before. It sounds like ING Direct will be marketing ease-of-use benefits, most likely centered on the bill payment function.

ING Direct "cash cow" promotion in ChicagoThe catchy name combined with ING Direct's marketing flair (see picture right from its Chicago cash-cow promotion) should make for an interesting product launch. We'll be paying close attention here and testing the account as soon as possible.

Analysis
There is little reason for most consumers to choose a branchless bank for their main checking account when they can get free checking PLUS branch services at their local financial institution. ING Direct has long understood this and has not squandered resources on a limited-appeal product.

However, with more than 4 million customers, they have a large enough base to make a profit on a checking account, even a (relatively) lightly used one.

Due to the bank's ease of use and well regarded brand, it should be able to convince a portion of its base to use Electric Orange checking as an auxiliary account, perhaps as the household bill-pay account.

If the bank moves 5% of its $47 billion in savings deposits into the checking account, it would save $3.5 million annually in interest expense. Add another $3 billion in net new deposits at a 3% spread and Electric Orange pulls in $10 million per year, enough to cover expenses anyway.

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Bank 2.0: Remaking Your Financial Website for a Web 2.0 World (OBR 135/136)

By Jim Bruene Posted on
Categories: Website Usability & Design

The latest research from Online Banking Report is now available here for purchase ($395) or for subscribers to download here (Online Banking Report is our sister publication).

The 32-page report lays out the toolkit for building your own so-called "Web 2.0" banking site. It delves more deeply into the important tactics of blogging and RSS/XML feeds. Download the full Table of Contents here. 

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Zopa to Offer Lender Guarantees

By Jim Bruene Posted on
Categories: Loans & Credit, Prosper, Zopa

Click for Zopa home pageIn a blog post today, person-to-person lending pioneer Zopa announced several usability improvements in its upcoming release, a new My Zopa screen and Quick Lend area.

But what caught our eye was Zopa's upcoming option to guarantee the return of principal for its lenders. There's no free lunch, of course, so an insurance premium must be paid when lenders choose this option. Even though that will cause returns to fall to a more "normal" rate, it could be a psychological boost that brings in more funds. At minimum, it will generate press coverage.

The new guarantee is still awaiting U.K. regulatory approval. We'll look at it in more detail when it becomes available. 

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Mobile Access May Be New Anchor for Fee-Based Premium Online Banking

By Jim Bruene Posted on
Categories: Mobile Banking, Premium-level Products, Pricing

What's the biggest obstacle to online banking innovation in the United States? No, it's not security, ease of use, or customer education. The biggest problem is lack of fee income.

Unfortunately, online banking came of age in a golden time for U.S. financial institutions, with rate spreads at historical highs, customer loyalty at a peak, and fee income on the rise.

Banks, flush with profits in most business lines, decided not to bother with the difficult task of wringing fee income out of the new channel. So we ended up with near-universal adoption of the FREE model despite little economic justification for the subsidy. Sure, online banking customers are more profitable, but so are safe deposit customers. And you don't offer those free across the board.

The results are predictable. With online banking being cash-flow negative, many management teams have under invested in the online channel, while subsequently over investing in branches (see Online Banking Report #128, The Demise of the Branch). 

Fighting free
There is no way to eliminate free online banking altogether, but you can nip away at the edges, convincing some customers to voluntarily pay fees for value-added services. 

One promising avenue is converting users into a premium, fee-based online banking option, the same way American Express convinces its members to increase their annual membership fee two-fold by trading up to a Gold Card.

But in order to convince customers to voluntarily give up their free service, the fee-based version must have compelling benefits. The following three hot areas could be used to anchor a platinum online banking service. The first two we've looked at before (see previous coverage here), but mobile banking is the newcomer that offers much promise:

  1. Unlimited storage: Taking a cue from Google's Gmail that offers virtually unlimited email storage, banks should allow their gold-account customers to permanently archive e-statements, transactions, and images for no additional charge. Everyone else sees their transactions disappear after a few months. And every month, right before erasing another month of data, provide customers with an opportunity to upgrade to premium banking (see Online Banking Report #118, Lifetime Statement Archives).
  2. Unlimited credit report access: The second most powerful premium benefit is simple online access to credit reports directly from within the logged-in online banking area. Users could assess their previously downloaded report at any time, and order a new one several times per year. In addition, customers would be protected by daily credit bureau account monitoring (see Online Banking Report #83/84, Credit Report Monitoring & Identity Protection).
  3. Full interactive mobile access: While the previous two items are relatively easy to do today, in the United States, the mobile market is just revving up with Cingular's recent announcement to add a banking application to its mobile "desktop." We've seen a live demo using a real bank account, and it's impressive. The partners on the service are Firethorn and Checkfree (see upcoming Online Banking Report #138, due out in late January 2007).

Any premium online banking program should include one or more of these three core, value-added services. Then, additional minor services, such as security alerts, can be layered on to further differentiate premium banking from plain-old banking (POB).

For more information about online banking pricing and premium service offerings, see Online Banking Report #109, Pricing. 

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Texans Credit Union Offers Free Identity Theft Insurance

By Jim Bruene Posted on
Categories: Credit Reports & ID Theft Protection, Deposits, Checking, Savings, CDs, Security & Privacy

Texans Credit Union <texanscu.org> has added complimentary ID theft insurance and help services to their checking accounts. The new service is promoted through a somewhat confusing "Upgrade Now" call-to-action near the bottom and a large graphic (which rotates with two other spots) in the middle section of its gorgeous homepage (see screenshot below; notice how they use drop shadows to highlight the page).

Texans CU home CLICK TO ENLARGE

Analysis
It's an OK perk, but doesn't do anything to help members prevent ID theft. To do that, members need credit report monitoring, which is available for $70 to $140 per year from the credit union's co-branded program with Identity Fraud Inc. (see screenshot below; read the full terms and conditions here).

However, it's not clear on subsequent pages whether members must take action to get the free service and which options they should choose to upgrade to credit report monitoring. We'd like it better if the credit union were more upfront about what is and is not included, and what the member must do.   

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Has Mobile Banking Finally Arrived?

By Jim Bruene Posted on
Categories: BAI, BAI Retail Delivery, Cingular, Firethorn, Mobile Banking, Strategies

During 11 years of publishing Online Banking Report, we've written about 500 words on so-called "mobile banking."

Even though it was a much-hyped topic in the late 1990s, our answer when asked about mobile banking was, "Fix your Web-based banking, add email alerts, and mobile will take care of itself."

Firethorn_homeBut it looks like times may be a-changing. Cingular is throwing its considerable muscle into a phone-centered service using Firethorn's <firethornmobile.com> new platform (see homepage right), and the U.S. market for wireless services is enormous (per MasterCard & Cingular during their Nov. 16 presentation at BAI's Retail Delivery Conference):

  • 2 billion mobile phone users worldwide, including 218 million in United States (per Cingular)
  • Nearly 80% of U.S households own one (per Forrester)
  • $660 billion of revenue for voice, messaging, and data services
  • 75 million U.S. mobile phone users sent a text message in September (per M:Metrics, 20 Nov. 2006)

Even more interesting, ClairMail shared market research showing that nearly two-thirds of U.S. consumers aged 18 to 34 have used text messaging during the past three months, demonstrating that even in the laggard U.S. market, a core group of consumers is ready, willing, and able to use the phone for more than just voice calling.

Analysis
There are three main reasons why mobile banking's time has arrived:

1. It works on common phones: Previous generations only worked on a subset of high-end PDAs; now most mobile phones can handle mobile banking.

2. It has a business case: Mobile banking can both increase fee income by being a core component of a Premium Online Banking service (see Online Banking Report #109) AND lower costs by migrating voice calls away from the IVR and into self-service.

3. The youth movement: Younger consumers interact with each other in real time via text and instant messaging. There is little doubt that they will value the same type of interaction with their bank.

We'll be looking at this subject in much more detail when we publish our first exhaustive report on the subject in January (see Online Banking Report in late January or early February).

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Online Lending Still an Afterthought

By Jim Bruene Posted on
Categories: BAI, BAI Retail Delivery, Loans & Credit

BAI's Retail Delivery Conference continues to offer an excellent array of speakers on almost every delivery topic, from the "branch experience" to "optimizing multi-channel delivery." But one area that's barely covered is loan originations. 

Only one session, out of 36 total, dealt with lending issues this year. And it was a last-minute replacement, not even in the program guide, substituting for NetBank and UPS's Banking on Brown, scrubbed after the announcement last week that the effort was being shuttered (see our coverage here).

Cornerstone Advisor's Steve Williams presented Consumer Lending: It's Not Just a Transaction Anymore. Although lightly attended, due to its placement at the closing moments of the show, he discussed a number of great ideas for improving loan originations, both online and in other channels. We'll look at some of them in more detail in coming weeks.

The presentation is available via email from swilliams@crnrstone.com. 

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