Online Strategy Matrix Designed for your Business Planning Process

By Jim Bruene Posted on
Categories: Strategic Planning

The following matrix is designed to assist your business planning
process. Consumer strategies are divided into three broad categories:
product, general marketing (on- and off-line), and customer
satisfaction/service. Each broad category is further divided into groups of
tactics aimed at a common goal. Finally, every tactic is categorized as
either:

·         Best Practices (column 1): Required
features that every competitive financial institution should support

·         Competitive Advantage (column 2): Top-rated
features that differentiate you from the competition

·         Others (column 3): Other optional features to
help set you apart and/or support other company objectives

 

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Source: Online Banking Report, 9/04
Notes: (1) Features to put you at parity with the best online banks; (2)
Differentiating strategies that provide either a competitive advantage,
incremental profits, or both; (3) Other optional tactics to create competitive
advantage and/or support other company goals.

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Small and Microbusiness Strategy Matrix

By Jim Bruene Posted on
Categories: Small Business

In theory, small and micro businesses represent one of the most lucrative,
and relatively untapped, sources of incremental business. The reality is that
most small and even mid-size businesses are too busy to spend much time changing
banking relationships, unless they are a pre-startup1
and/or shopping for a credit line or loan. As we outlined in OBR 107/108, a
product offering optimized for business will differ somewhat from one built for
consumers. The following chart summarizes the product options for small- and
microbusinesses. See our prior report for more detail on each feature. The
options are divided into nine categories:

1.       Statement data: viewing and organizing balance

2.       Customer service: customer care delivered over the Internet

3.       Accounting services: financial management tools

4.       Payments and billing: e-checks, bill pay, email payments, ACH,
wires, invoicing, card processing

5.       Security/privacy: privacy, security, permissions, guarantees

6.       Lending: business tools, news, information

7.       Website content/features: non-financial tools and information

8.       Alerts: email, fax, telephone, and mail activity- and balance-level
alerts

1Pre-startup: The time immediately preceding business startup
phase. One of the first things an entrepreneur will do is open separate bank
account(s) for a new business venture; it helps keep records straight for
tax-reporting purposes. So it does little good to target any startup, since
most will already have business banking relationships established; you
really need a foot in the door in “pre-startup” mode, when the kernel of an
idea is just forming (see OBR 107/108, for ideas on how to target
pre-startups).

  

Online Services for Microbusinesses
checkmark = must have feature; R = recommended feature; O = optional feature


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Source: Online Banking Report, 9/04 checkmark = must have feature; R =
recommended feature; O = optional feature

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Six Steps to the Big Idea of Effective Planning

By Jim Bruene Posted on
Categories: Planning

A crucial part of the planning process is reaching deeply to find the
best ideas. Many companies already have a process in place, but if you are
looking for inspiration, consider the following six-step approach.

Six Steps to the Big Idea

1.       Do Your Homework (Immersion): Study the situation, visit
competitors, read new research, talk to customers, interview employees,
attend a conference, poll your customer base, and so on.

2.       Optimize the Environment: Clear away constraints to
thinking, go off site, stockpile the food and coffee, play music; do
whatever it takes to let your thoughts flow freely.

3.       Rattle the Brain: Perform “thinking exercises” to
limber up the brain before tackling your specific problem (see our ideas,
left, or Jump Start Your Brain by Doug Hall for 37 more).

4.       Generate Idea Nuggets (free form): Think of every
possible solution to the problem, regardless of how crazy; write them down
without judgments or justifications.

5.       Assemble Idea Nuggets Into Strategies and Tactics:
Transcribe each nugget on a
3×5 card and arrange the cards into bigger concepts and ideas.

6.       Be Bold: Don’t immediately dismiss strategies that seem
too big for your budget; winners
could be shopped to strategic investors or other financial institutions for
additional funding.

Source: Adapted from Jump Start Your Brain by Doug Hall, Warner
Books, 1995. A new version, Jump Start Your Business Brain was
published in Sept. 2001. Both are available in paperback from Amazon for
about $12 each.


 

Do Your Homework

To see potential opportunities in a new light, look beyond your normal
circle of peers, subordinates, and other industry sources.

1

Observe First-Hand: Find out how consumers really use online
financial services and observe how the services could be improved. For
example:

  •               Enter into a far-reaching conversation with an
    important vendor, preferably in person
  •                Arrange for a classroom of MBA students to debate the
    pros and cons of online services
  •                Attend a focus group on online financial services
  •                Hire a consultant for a brainstorm session
  •                Sponsor focus groups for branch and call center staff
    to discuss serving/selling customers online
  •                Post a short questionnaire on your website; have a
    copy of each response forwarded directly to you (no staff filters)
  •                Issue an RFP (request for proposal) for the
    development of a “next-generation” service
2

Attend an industry conference: Away from the daily grind,
surrounded by the latest technology and bombarded by new ideas: a perfect
prescription for breakthrough thinking. The two biggest U.S. online banking
conferences take place in the fall, the American Banker’s just-completed
Financial Services Technology Forum and BAI’s Retail Delivery
which will be held next month in Las Vegas.

3

Dive in to third-party research: Grab a few research reports, head
to a quiet table in your favorite coffee shop, and turn off your Blackberry.
Now, really read the whole report, skipping the executive summary
until the very end. Take notes and highlight pertinent pages. At the end of
the day, create your own executive summary with a list of possible action
ideas and questions to share with your team.

4

Commission your own research: Research culled from your own
customers and in-market prospects is infinitely more believable than
national studies. If research budgets are nil, you can still post a short
survey on your Web for next to nothing and have results tomorrow. The data
won’t be applicable to your entire customer base, but it might provide a
number of good ideas and insights.

Or if you’d prefer to take a quick reading of consumer sentiment without tipping
your hand to the competition, consider tapping into the preassembled panels of
Web research companies. At InsightExpress  http://www.insightexpress.com/
 it’s possible to ask 200 consumers what they think of your idea for an
out-of-pocket expense of about $1,500. Questionnaires are easily
composed using online templates, and you’ll have results back within hours. All
results are stored online where you can run your own reports and cross
tabs.                     

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Building the Case for Increased Investment

By Jim Bruene Posted on
Categories: Investment Products

 

Every year it’s a battle to win approval for your business
plans. This process, though far from perfect, is a necessary evil to ensure
that only the most promising plans are funded.

Online banking, which in the U.S. generates little direct
revenue, often requires creative spreadsheeting to show a positive
NPV. Following are some of the positives to incorporate into a winning
business case.

  •       Stay competitive: improving account retention and
    increasing sales

  •       Improve sales by differentiating your products and
    services with online functionality

  •       Increase cross sales, especially credit/loan
    products

  •       Increase online banking and bill payment
    transaction fees

  •       Create a new stream of monthly and/or annual
    service fees with a premium service option

  •       Use marketing dollars more effectively through
    targeted online promotions

  •       Reduce costs through self-service

  •       Improve customer satisfaction, retention, and
    cross sales

Allocating scarce budget dollars

If you are looking for the biggest bang for your buck, look
to online lending and small- and micro-business initiatives. According to
Celent’s study across 1.5 million Digital Insight users (in 2001),
online lending generates four times the combined value (NPV) of banking/bill
pay. Business services were even more valuable, resulting in returns of
nearly six times that of banking/bill pay.

 

Everbank made a sizable investment in a new online
banking platform, a highly customized mix of Metavante and Teknowledge
software. Previously, the bank used the S1 online banking platform.

Table 1

NPV from various online banking products

 

$ Return (NPV)1

Product

5-Yr Total

Per Cust2

Index

Banking, statement info.

$6,000

$0.12

1x

Bill pay

$17,000

$0.33

3x

Lending

$83,000

$1.65

14x

Small business

$123,000

$2.45

20x

  Total

$228,000

$4.56

38x

Combinations

 

 

 

Banking and bill pay

$23,000

$0.45

4x

All except small business (lending, banking, bill
pay)

$105,000

$2.10

18x

Source: Celent, 10/01  For a better understanding, read
Celent’s Customer Retention and Cost Savings Drive Online Banking ROI,
Oct. 17, 2001
(1) NPV over 5 years at a 50,000-customer bank; includes direct revenues,
cost savings, and retention. (2) Per-customer figures are across all
customers, on- and off-line, consumer and small business.


 

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2005/2006 Planning for Premium Online Banking

By Jim Bruene Posted on
Categories: Planning

As we discussed last month , there’s a real void in the marketplace when it
comes to premium online banking services. In today’s retail environment,
where you can choose from hundreds of varieties of every product on the
shelf, it’s shocking that Bank of America provides just a single flavor of
online banking to its 11+ million subscribers. Granted, users choose which
features to use, so the service isn’t truly identical for all.

But surprisingly, everyone still pays a single price: $0. For Bank of
America, that price point has been an important and highly visible component
of its strategic branding message. However, we view 100%-free online banking
as a temporary aberration. U.S. banks have had their hands full during the
past few years complying with new regulatory initiatives and fighting
fraudsters from around the globe.

And it’s a relatively recent phenomenon that online banking penetration
has surpassed 20% at many banks. Below that point, there aren’t enough
customers to make a segmented offering profitable. So even though it will
require extensive buyer education, we believe that by this time next year,
at least one, and possible two or three, top-10 U.S. banks will offer
premium online banking options.

The pioneer in this area is Online Resources, which began offering
MoneyHQ, a premium online banking option, late last year. Early
results are mixed. While Online Resources admits that client adoption has
been slower than expected, it is pleased with consumer adoption, which
stands at 9% of bill pay customers across the 45 clients who’ve been live
for at least four months. In total (as of Sep. 29, 2004), 120 clients are
signed, with 90 operational, representing 33% and 25% respectively of
eligible clients.

Strategically, we have no doubt that MoneyHQ is the right
direction, and the 9% initial adoption rate is encouraging. However, it’s
difficult for ORCC’s community bank and credit union clientele to
successfully educate the market on the benefits of premium online banking.
It may take the multi-million dollar advertising budgets of the big players
to really jump-start the service. We should know a lot more as 2005 unfolds.

Jim Bruene, Editor & Founder


 


 

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Pricing Online Bill Payment

By Jim Bruene Posted on
Categories: Bill payment, Epayments

We just sent our latest report, “Pricing: The Fee vs. Free Controversy” to the printer. It should arrive in your mail in a week to 10 days.
In the report we look at the widespread practice of offering of online bill payment free of charge. You can read the report for our detailed conclusions, but suffice it to say, we are not wild about this trend. Online banking and bill payment provides significant value. And without a tangible revenue stream, it’s difficult to make the appropriate investments in the channel. We think bank customers will actually be better off in the long run if they shoulder at least a portion of the extra costs of a robust online banking service.
Free bill payment is particularly vexing. Here’s a service that runs circles around the paper equivalent. Users can save time, save money (postage, late fees, and check printing fees), can improve bill tracking and budgeting, and make their financial life easier. And, if the electronic payment doesn’t post at the biller on time, the bank and/or processor will go to bat for them to resolve the problem. Try doing that with a paper check that’s “lost in the mail.”
So why do banks insist on providing this beneficial and costly service free of charge? They are doing it for the “relationship” value. No doubt users love getting something for nothing. And we won’t dispute the correlation between bill pay users and higher household profitability. But so what. You can correlate higher profits with any service designed for a well-heeled audience.
The bigger question is this: Is free bill payment, costing $50 to $100 per customer per year, the best way to gain more loans and deposits from your best customers? It may be, but there may also be less expensive ways to achieve similar results, such as lifetime transaction archives or more account security options.
It’s a tough call.
If you’d like to learn more about the future of online bill payment, 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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Widespread Misuse of Gartner’s Online Banking Fraud Estimates

By Jim Bruene Posted on
Categories: Fraud Prevention

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By now you’ve probably dealt with the repercussions from the June 14 MSNBC
report by Bob Sullivan entitled, Survey: 2 million bank accounts robbed,
followed by the subhead, Criminals taking advantage of online banking,
Gartner says. A consumer (or senior banking manager) reading the article
would likely come away believing that two million U.S. consumers lost money from
their checking accounts due to online banking. 1

 

In fact, here is what Gartner actually said in
its report2:

 

Illegal access to checking accounts is the fastest-growing type of
consumer fraud, and may be proliferating through online channels.
(emphasis mine)

 

The report goes on to say that most consumers do not know how their checking
accounts were robbed: Only 17% believed their info was stolen off the Internet;
another 10% reported wallets stolen; and only 5% recalled giving up personal
info to phishers.

 

Gartner also said that 70% of the online consumers reporting losses also
report that they banked or paid bills online, “which exposes their (codes) to
the Internet.” However, what Gartner failed to point out was nearly 70% of
online consumers that weren’t robbed also bank or pay bills online, so
it’s a meaningless correlation.

 

Finally, consider the research methodology. It looks staggering in the
headlines to say that two million people were robbed. But my
back-of-the-envelope calculations indicate this huge number was extrapolated
from fewer than 75 respondents reporting a recent unauthorized checking account
withdrawal (from Gartner’s survey of 5,000 online adults). Some fairly large
errors can occur generalizing a small sample size to the entire population. I’m
not saying it’s wrong, but one should be wary.

 

As bad as the MSNBC article looks for the online banking industry, the NBC
Nightly News with Tom Brokaw got even more carried away. They took an even
bigger number, 4.5 million, which Gartner said is the number of people who have
ever had an unauthorized checking account withdrawal, and mistakenly said that
all those people were robbed via online banking. Here’s MSNBC’s synopsis of the
TV feature posted online next to the Sullivan article (see inset):

 

An estimated 4.5 million Americans have had money stolen from their
Internet bank accounts. NBC’s Bob Hager reports.

 

This is a great example of what happens when a respectable piece of research
is taken out of context. It begins to have a life of its own as other news media
echo the original broadcast.

 

While many subsequent news articles echoed the conclusions of the original
MSNBC piece, some dug deeper. For example, NBC affiliate WEEK-TV quoted
Peoples Bank (Bloomington/Normal, IL) CEO Ed Vogelsinger as saying that
despite having 20% of their base using online banking, so far no one has
reported any Internet banking fraud. Way to go, Ed.

 

We urge our readers to take appropriate steps through their PR channels to
set the record straight. At a minimum, be prepared to rebut the MSNBC numbers if
approached by the media, and feel free to send any reporter our way to
corroborate your position.

 

Contact: Jim Bruene, Editor, Online Banking Report, 206-517-5021 or email
jim@onlinebankingreport.com .

 

1 Reference: <
http://www.msnbc.msn.com/ /id/5184077/>

2 Banks Must Act
Urgently to Stop Account Hijackers, by Avivah Litan, Gartner, June 14,
2004

 

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