Making Online Banking Fun

By Jim Bruene Posted on
Categories: Advertising & Promotion, ING Direct, Rewards Programs

Is banking ever fun? Not really. The best you can hope for is that it’s "pleasant."

How about online banking? It might have been classified as fun the first couple times you tried it, but it’s not fun anymore unless you happen to have lots of money piling up in your account.

Is it possible to keep it fun? Yes, but you’ll have to continuously innovate. As Seth Godin points out in Free Prize Inside: The Next BIG Marketing Idea, "The price of WOW keeps rising." In other words, what impressed your customers today, no longer impresses them tomorrow.

One innovation that we’d like to see more widely used is rewards programs for online delivery. It doesn’t have to be as expensive as frequent flier programs, more like the free Cokes you can win from time-to-time under the bottle cap.

Examples
1. ING Direct has a monthly raffle for its customers who have opted to receive email statements (which automatically shuts off the paper). Every quarter one of its 2 million customers wins a plasma TV, another wins a laptop, and a third wins a digital camera or portable DVD player. The total prize pool is about $5,000 per quarter, which amounts to one cent per customer per year, less than 1/500 of the cost of mailing a monthly statement.

2. PFF Bank & Trust (Pomona, CA) is running a bill payment usage sweeps during the first three months of the year. The promotion is advertised with eye-Pff_sweeps_1 catching graphics on its home page. Every time a customer pays a bill they are entered into the sweepstakes for a cool electronic "toy," January is the iPod (of course), February is a digital camera and printer, and March is a 19" LCD television. The total prize pool is just $2000 for the entire promotion.

— JB

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Baseline Online Broadband Usage Statistics

By Jim Bruene Posted on
Categories: Metrics & Market Research

Here are the Yankee Group’s baseline PC and online usage forecast, as cited by The Seattle Times today:

2003: 112 mil US HHs >>> 74 mil online >>> 30% broadband
2004: 113 mil US HHs >>> 78 mil online >>> 38% broadband
2005: 114 mil US HHs >>> 80 mil online >>> 45% broadband
2006: 115 mil US HHs >>> 81 mil online >>> 52% broadband
2007: 116 mil US HHs >>> 83 mil online >>> 58% broadband
2008: 117 mil US HHs >>> 84 mil online >>> 63% broadband

How to read: In 2003, 74 million of the total 112 million U.S. households went online through their home computers; 30% (22 million) of those going online use a broadband connection, the remainder (52 million) use a dial-up connection.

See Online Banking Report (#114) for the corresponding online banking forecast.

—JB

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Branchless Banks now Hold 2% of U.S. Retail Deposits

By Jim Bruene Posted on
Categories: Deposits, Checking, Savings, CDs, Direct Banking, E*Trade, ING Direct, Metrics & Market Research

The Wall Street Journal published a story today that marks the growing importance of branchless online banks, Online Banks are Boosting Yields. Our sister publication, Online Banking Report, was the source for the article’s market statistics on branchless banks, which have developed a small, but significant following around the world.

In the United States, there are several dozen branchless banks, but more than three-quarters of the total branchless bank deposits are held by two banks, ING Direct and E*Trade Bank. Total branchless bank* deposits in Q3 2004 were about $65 billion, or 1% of all U.S. deposits, or about 2% of all deposits under $100,000. See below for more specific details.    

Branchless Bank Deposits
As of Sept 30, 2004, the deposit totals of the major branchless banks are as follows:

ING Direct       $26 billion in 1.9 million accounts ($14,000/acct)
E*Trade Bank  $23 bil in 2.3 million accounts ($10,000/acct)
NetBank          $2.7 bil in 200,000 accounts ($14,000/acct)
Everbank         $2.3 bil in 370,000 accounts ($6,200/acct)
All the rest      $5 to $10 billion total
————————————–
Total               $60 to $65 billion

Total US Deposits
The total amount of deposits held in U.S. commercial banks on 9/30/04 was $6.4 trillion including retail and commercial deposits.

If you look only at deposits of $100,000 or less (a proxy for retail deposits), total deposits were $3.7 trillion.

Branchless Bank Deposit Market Share
Branchless banks hold about 1% of all U.S. deposits ($65/$6400).

Looking at just deposits under $100k, branchless banks hold just under a 2% share ($65/$3700), actually 1.8% if you want to be more precise.

Source: FDIC

What it Means
It’s not as big of a splash as Amazon made in books, but it’s a solid start for an niche about 7 years old (Netbank started in 1997). I expect it will continue to grow 25% to 35% per year for the rest of the decade, eg, doubling the branchless banking deposit base every 2 to 3 years.   

*We define "branchless bank" as a separately branded insured depository institution that derives the majority of its business through direct methods (mail, phone, online) with minimal brick and mortar presence. We are excluding direct banking units operating under lending or insurance brands such as Principal Bank, State Farm Bank, IndyMac, MBNA, and so on.

—JB

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FDIC Recommends Two-Factor Bank Authentication

By Jim Bruene Posted on
Categories: Security & Privacy

Now that the FDIC has officially come out in favor of two-factor authentication, it’s only a matter of time before every major bank has upgraded their login procedures.

According to a Dec. 24 New York Times article, E*Trade Bank will be the first US bank offering two-factor authentication for retail customers. They are expected to use a token system similar to that used by AOL and several international banks including ABN Amro, Credit Suisse, Rabobank, and First National Bank (South Africa), winner of Online Banking Report’s Best of the Web in November.

E*Trade’s system is expected in Q1 2005 and will be optional for the customer. It’s already in testing with 200 customers.

US Bank is also said to be testing a token system from Verisign.

Analysis: A simpler solution needed for the mass market
We commend these banks for doing something to reassure frightened users. According to Forrester, 26% of online users have not applied online for a financial product due to phishing fears and 14% have stopped paying bills or banking online. Finally 20% have stopped opening emails from their financial providers.

However, a hardware token is overkill for most retail users. It requires ongoing maintenance expenses, tech support, and is a logistical headache for the end user. It’s kind of like a car alarm. They make sense if you live in a high-crime area, but mostly they are just a nuisance.

Luckily, there are simpler choices on the way. Just yesterday, an interesting company was profiled in The Seattle Times, BioPassword. Its software records the unique typing patter of the end-user and will keep out anyone else attempting to type the user’s password. At a recent conference, the company offered up to $100,000 to anyone who could successfully login to its account, even after they’d been told what the password was. Not one of 1200 attempts was successful.

Entrust_identity_guardAnother interesting alternative to tokens is Entrust’s IdentityGuard which Forrester analyst Jonathon Penn raved about in a November 19, 2004 research note. The EntrusEntrust_identity_guard_2_2t solution is a low-tech version of the token, using a paper-based "bingo card" users are asked to enter digits from certain rows/columns of the card (see card right).

Another solution receiving a lot of attention, partly because ex-Intuit CEO Bill Harris is founder, is PassMark. The company touts its "2×2 factor" program that authenticates users to the bank and the bank to the user. The latter is done via visual aid, hence the company name. They also have an excellent easy-to-digest demo.

— JB

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Citibank’s iPod Offer — Too Much of a Good Thing?

By Jim Bruene Posted on
Categories: Advertising & Promotion, Citibank

Citi_ipodForget about toasters.

Citibank is handing out iPod minis to new online banking customers provided they fund their new checking accounts with at least $2500 and pay at least two bills per month for a year.

Analysis
This raises the ante for online account acquisition. It's a pricey premium, even for Citibank, which has long been aggressive at its website, giving away eye-catching premiums such as DVD players or $100 cash.

There is no doubt that giving away the ultra-hot iPod mini will drive new accounts. But it may be over the top for a checking account offer, even by Manhattan standards.

How many 20- and 30-somethings will game the system just to qualify for the iPod? An even bigger concern is existing customers closing their accounts and reopening online in order to pick up an iPod.

But Citi knows what it is doing, and they must figure the new accounts, along with the publicity, makes the risk worthwhile. It will be interesting to see what this book of accounts looks like a year or two from now.

We think most financial institutions, at least those outside the NYC metro area, should keep premiums in the $50 to $75 range. It's enough to generate interest and applications, but not enough to create a buzz at FatWallet with people virtually salivating at the prospect of picking up low-cost iPod at the expense of a huge bank.

Aside: Kudos to Citi for posting a link to the Red Cross for tsunami relief.

If you'd like to learn more about the financial interactive marketing efforts, check out the Interactive Financial Marketing Database from our sister publication, the Online Banking Report.

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Secure Bank Message Area Grows in Importance

By Jim Bruene Posted on
Categories: Alerts & Messaging, Service

One way around the rapidly declining effectiveness of email communications is to prominently post new messages within the secure online banking area. Not only is it useful to create an archive of bank communications, it also provides reassurance that no message(s) have been missed.

Ebay recently added this capability to its the My eBay platform, where users can login to track account activity. Ebay keeps messages for 60 days. Financial institutions should allow storage for far longer, one year at least.

Because bank messages are often time sensitive, you should also send the message, or a message notification to the user’s standard email account. Better yet, allow users to receive message notifications at multiple email accounts, therefore increasing the chances that one will go through.

Action Item
Many banks already have this capability, but it may be overlooked by customers, as they have become accustomed to receiving messages over the Internet.

Now would be a good time to remind customers to look in their message folder periodically. You might run a sweepstakes or treasure hunt that requires looking into message folders to win.

If you’d like to learn more about the future of online bank messaging, check out the Online Banking & Bill Pay Forecast: Current, future and historical usage: 1994 to 2016 from our sister publication, The Online Banking Report.

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How to Make Your Online Banking Customers Feel Secure

By Jim Bruene Posted on
Categories: Security & Privacy

Link: Citizens Bank.

Most banks could help their customers increase their comfort level with online banking by doing four relatively simple things:

  1. Greet customers by name before logging in, so that users know they have arrived at the correct site.
  2. Post a prominent link to an online security area.
  3. Post an understandable discussion of the customer’s liability for unauthorized electronic withdrawals, preferable with a "guarantee" of zero liability if promptly reported.
  4. Provide hotline phone numbers and email addresses for reporting suspected fraud.

Citizens Bank, the U.S. division of Royal Bank of Scotland, does a good job with points 2 through 4.

Citizens_fraud_center A catchy homepage graphic for its "Online Fraud Prevention Center" directs users into a thorough discussion of online fraud and prevention techniques.

The bank’s Online Guarantee is highlighted with a graphic image and Citizens_onlineguarantee_logoa phone number and special email address, prevention@citizensbank.com are also included.

Finally, copy writing is user-friendly and links to third-party resources, such as the National Cyber Security Alliance, round out the section.

To learn more about how to promote online security and peace of mind, check out Marketing Security: The sensitive issue of publicizing security and authorization enhancements from our sister publication, the Online Banking Report.

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Where’s the Holiday Bank Marketing?

By Jim Bruene Posted on
Categories: Advertising & Promotion, AmSouth, National City, PNC Bank

These days most major online retailers and consumer sites dress up their websites for the holidays.

Unless, they are bank sites.

Each year we surf major banks looking for holiday happenings. We were surprised again this year to find little creativity on bank home pages. On Dec. 21, none of the largest 30 banks in the U.S. had a major holiday theme running.

Two banks, National City (#11) and LaSalle (#15) were running prepaid gift card banners. And two others were running small holiday-themed promotions running, AmSouth Bank (#27) and PNC (#20).

PNC is running a tongue-in-cheek look at the cost of purchasing the items in the popular holiday song, The Twelve Days of Christmas. This year the total cost was $17,300, up 2.4% since last year. The bank has been tracking the cost for 20 years and provides a long-term look at the price increases. It’s very clever, providing valuable publicity and a positive impression of the bank.

AmSouth Bank has an interesting holiday promotion, one that ties directly to online banking a bill payment. Website users can personalize a holiday greeting card and send it to anyone with an email address. Users are encouraged, but NOT required, to use the cards as a notification of a check being sent through AmSouth’s bill payment system. The default "personal" message even says:

A monetary gift is being sent through AmSouth Bank, please look for it in your mail in the next 7 days.

Greeting card users do NOT have to be bank customers. AmSouth doesn’t say whether it is capturing email addresses. We would have to assume not.

Action Items

Add a holiday promotion for your 2005 marketing plan. It’s a great way to jazz up your website for the holidays and you can include a sales promotion at the same time, especially for prepaid cards or gift checks.

— JB

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If you’d like to learn more about the financial interactive marketing efforts, check out the Interactive Financial Marketing Database from our sister publication, the Online Banking Report.

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Self-Employed Totals 10% of Work Force

By Jim Bruene Posted on
Categories: Small Business

Link: SBA Self-employed Research Results

A new report released this month by the U.S. Small Business Administration, estimates that U.S workforce is now comprised of 12.2 million self-employed (9.8% of the total) and 112 million employed (90.2%) workers.

What it Means
The self-employed are a significant market segment on their own right. At approximately 10% of your customer base, they warrant attention and possible product offerings specifically geared to their needs. See Online Banking Report 107/108 for more information on creating compelling online services for small and microbusinesses.

Action Items

1. Review your website and other marketing collateral, especially small-business-oriented material, to make sure it includes references to the self-employed.

2. Create a "self-employed" area on your website.

3. Consider creating special product bundles geared to this segment. Since traditional loan underwriting often penalizes self-employment, look closely at what you might do to enhance the credit aspects of the bundle.

4. Include "self-employed" in your search engine advertising buys and in other online promotional efforts.

5. Create a quarterly or monthly email newsletter specifically targeted to the segment.

— JB

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Online Referrals for Real Estate Agents

By Jim Bruene Posted on
Categories: Lead Generation, LendingTree, Loans & Credit, Mortgage, Refi & Home Equity

Link: WSJ.com – Online Referrals For Home Sales Gain a Toehold.

Here's a way to gain incremental mortgage sales, new banking customers, and potentially a bit of direct fee income from your online services.

Develop an online real estate agent referral program.

Visitors would be able to query your website to find qualified agents specializing in their target neighborhoods. You could do it as a pure marketing play, with no Amexgiftcardincentives or referral fees; or you could provide eye-popping incentives, such as $2500+ gift cards from Home Depot or American Express offered by LendingTree at their realestate.com site.

In the LendingTree program, the value of the gift card depends on the size of the home purchased and/or sold (you receive an incentive for both buying and selling) as follows:

Incentive  Combined Value (bought & sold)
$250         $100,000
$500         $150,000
$1000       $250,000
$1500       $350,000
$2000       $450,000
$2500       $550,000
$5000       $1.1 million
$10,000    $2.1 million

The incentives are funded by the agent receiving the referral, who rebates a third of their sales commission to LendingTree. The consumer ends up with approximately $500 for every $100,000 in home value over $50,000.

LendingTree also tacks on an extra $100 if the buyer gets the mortgage from a LendingTree lender.

Currently, 7% of home buyers say they found their real estate agent through the Internet. (Source: National Association of Realtors study of transactions in 2003 and 2004, as cited by The Wall Street Journal, Dec. 9, 2004)

Caveats
This strategy is not for the faint of heart. While consumers will love it, driving additional business to your mortgage products, most real estate agents will hate it. So you have to weigh carefully whether it's worth the potential heat. If you rely on real estate agents for mortgage leads, you might want to consider the non-incentive version, where you simply forward home sales leads to agents based on zip code.

— JB

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Improving the “Look and Feel” of Bank Emails

By Jim Bruene Posted on
Categories: Email Marketing, Email Samples, Service

In our most recent tests, we found great improvement in the quality and
timeliness of responses to Web-based queries. However, we found that the “look
and feel” of email responses left a lot to be desired. The typical bank response
was a few lines of text and perhaps a link or two to general information. And
because of poor choices in the FROM and SUBJECT fields, the responses looked
spam like and easily overlooked.

 

Compare those bank messages to email responses from leading Web-based
retailers and service providers such as GoDaddy, an Internet domain name
registrar (screenshot below). Most savvy retailers use graphically
appealing HTML messages to get their point across effectively, and when
appropriate, up-sell the user on a solution that solves their problem. In the
GoDaddy example below, I asked a question about website capabilities and
received an excellent response along with an appropriate upsell into their
$3.95/mo hosting option (see note point 4 on the screenshot below).

 

GoDaddy knows shows their savvy in responding to customer service inquiries.
Not only is it good looking and answers my question, it arrived eight minutes
after the question was submitted, beating by three minutes the
expected call center hold time listed on the website. That’s how to deliver
e-service, faster than alternative channels. The email response grabs your
attention with a well-designed layout including the following (see
corresponding numbers above):

1.      Answer to my question (at the top)

2.      A real person responding to the question

3.      Link to a privacy
policy                                                 
                                                                

4.      Banner to select the service upgrade about which I had inquired

5.      Phone numbers for customer support

6.      Repeat of my original question (not visible on the
screenshot)          

My only major complaint with GoDaddy’s message is that it fails to identify
itself in either the email From field (it used “Support”) or the
Subject field (it used: “Other: One page website incident 040506-001360”). 

Bank Examples

In comparison, the typical bank response is delivered in plain text with few
helpful links. Following are examples of banks responses to a general
non-customer query via their websites.  

The question posed: Do you offer overdraft protection that does not
charge for each advance?

Email response from Chase to a question about whether they
offered no-fee overdraft protection: The speedy response, 41 minutes, answered
the question correctly and concisely and provided a phone number for more
information. However, there were no links in case I wanted to sign right up for
the account I asked about. Score: A for service, D for sales. (09 Apr 2004)

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