The latest conferences for online bankers and financial marketers.
PayPal Mobile Promotion in Print this Fall
Conde Nast's Lucky magazine will use PayPal Mobile technology to allow users to buy products from 18 advertisers in its September issue (see inset). Using PayPal's Text2Buy technology, readers will be able to purchase products from magazine advertisers by simply sending a text message to the number in the ad, then confirming the purchase when PayPal automatically calls back a few seconds later (see NB June 5 for more on how it works).
This is believed to be the first major offline promotion of PayPal's new service. According to The New York Times, the following advertisers have signed on: Avon, Bulova, Dooney & Bourke, Estee Lauder, Ford, Le Tigre, Liz Claiborne, L'Oréal, Perry Ellis, Sephora, Target, and Unilever.
Readers will also be able to order online via a special website <livebuyit.com> that was not operational at press time.
Banking applications
While spur-of-the-moment buying is not a major part of financial services, Text to Buy in financial advertising could be a simple way to order information, such as a loan application, mutual fund prospectus, or a new account kit. Advertisers would list a code in their print ad, billboard, or other offline promotional device (see UNICEF example in the inset; buyers simply text "water" to the 5-digit number to make a $10 donation). This would allow users to request info by simply entering 10 characters into their cellphones or mobile device. The information packet would ship to the "buyer's" PayPal address.
An even bigger application, especially around the holidays, would be ordering prepaid MasterCard/Visa/American Express gift cards. Different codes could be set up for different amounts. For example, text "card25" for a $25 gift card, "card50" for a $50 card and so on. A handling charge could cover the 3% processing fees due to PayPal.
Finally, financial institutions could use Text to Buy for non-financial items such as:
- Donations to community causes
- Entry fees for a community event such as 5k run
- Signups for seminars
- Schwag, e.g., t-shirts, hats and so on
Integrating Gift Cards into Online Banking
Gift cards are hot, accounting for nearly 5% of holiday spending last year. How can banks leverage this interest?
There are two broad categories to consider:
- Prepaid MasterCard/Visa
- Single-merchant gift cards
Most discussions in the industry are centered around prepaid MasterCard/Visas, but we think there is a significant opportunity in the second category: merchant cards. Here are ways for financial institutions to jump onto the gift-card bandwagon:
Easy (requires little investment, primarily customer education):
- Purchase education: Provide consumer education on the pros and cons of merchant gift-card purchases and urge customers to charge the cards to your credit or debit cards. Emphasize built-in protections such as fraud guarantees, tracking, and so on.
- Purchase incentives: If your systems allow it, add an incentive such as a 1% rebate, sweepstakes entry, or purchase protection.
- Directory: Publish a list of stores that are selling gift cards and/or create an online directory where cards can be purchased online.
Harder (requires programming, employee training, and more)
Integrate gift-card account-access into online banking: Using account-aggregation technology, such as that offered by Yodlee, CashEdge and others, link to the merchant's gift-card account-management area such as <starbucks.com/card>. The integrated view would provide a secure and easy way for customers to manage their gift card accounts. - Offer automated reloading via your debit/credit card: When gift-card account balances get low, offer to automatically reload from your credit/debit card. Reloading could be manual or automated, e.g., "Add $25 to my Starbucks card whenever it dips below $5."
- Send low-balance alerts when gift-card accounts dip below a set amount.
- Resell merchant cards via shopping cart such as The Card Cafe <cardcafe.com> (see screenshot below)
Hardest (requires customer training, sales, and website programming)
- Issue gift cards on behalf of merchants
Sponsor your own gift card network with a stored-value card that can be used at multiple sources. For example, the Northampton Chamber of Commerce <northamptonchamber.com> markets a gift card that can be used at 50 local merchants (see inset). The card, which can be purchased, reloaded, and tracked online is powered by Swipe It Technology <swipeit.com> which offers turnkey gift and loyalty packages beginning at $299, plus a $12 monthly fee and $0.23 transaction charge. Other vendors include eCardSystems <ecardsystems.com>, Valutec <valutecardsolutions.com> and Value Gift Card <valuegiftcard.com>.
The business case
There is a surprisingly good business case for integrating gift cards into your online banking service with not one but three potential revenue streams:
- Interchange from loading/reloading: Provided customers load the card via debit/credit, you can earn 1.5%+ on the load, for a $50 card, that's $0.75 per load
- NSF/OD income: Every debit card purchase increases the chance of an NSF/OD item; assuming one of every 300 cards loaded results in an NSF/OD fee, the profit per load is $0.10 ($30/300).
- Merchant commissions: Selling cards at your website could earn $5 or more per card sold.
The program also brings in the usual intangibles: new customer accounts, positive PR, branding benefits, retention and so on.
—JB
Good Landing by WAMU
Washington Mutual, one of the more creative offline promoters, is beginning to apply its talent to online promotions. We're still not particularly fond of the "trapped bankers" creative (see NB April 28), but we like the bank's new "more than free checking" campaign.
We first ran across the promotion July 7 in a skyscraper-animated banner (175 x 500 pixel) on the right side of Rotten Tomatoes <rottentomatoes.com>, the popular film review aggregator (see inset).
The banner was good, but what we really liked was the landing page (see below). The design was clean and fresh (not so hard to do), and the copy was original and user-friendly, with just the right dose of humor (not so easy to do).
Our only criticism is the crucial final step. Users clicking the "Get Started" button are delivered to a much different and more bank-like screen to begin the application. The relatively dull look (see below) is a real letdown after the originality of the landing page. It's so different, it may cause users to stop and rethink their decision to apply.
The bank would likely convert more prospects if they continued the landing page theme through the first page of the application. Overall, we'll score the effort an A-.
–JB
Fee Income Opportunities from SMS Alerts
While most banks in the world charge fees for at least some aspect of online banking, the service has been almost entirely fee free in the United States, at least ever since Bank of America rolled out free bill payment in 2002.
At first glance, it seems like a great deal for consumers; however, the lack of direct revenue has hampered investment in the channel and deprived U.S. customers from the more sophisticated services common throughout the world, such as SMS alerts, multi-factor log-in controls, and so on.
We're always on the lookout for fee-based opportunities (see Online Banking Report 122/123 for a laundry list of online fee opportunities), and we are encouraged by eBay's latest innovation, SMS auction alerts with a fee of $0.25 per auction. This is the first time eBay has attempted to charge fees to bidders. The site has offered free email alerts since the beginning.
Here's how SMS alerts work (see screenshot below):
Select "Get SMS alert" (see red circle in screenshot at above, click to enlarge). - Select mobile phone provider from drop-down list and enter mobile phone number; currently Cingular, Verizon, Nextel, Alltel, Sprint, and TCRcom participate
- Check "Watched item ending alert" or "Outbid alert"
- Click "Continue" which initiates a confirmation message to the user's mobile phone
- Send a text-message reply from the mobile back to eBay to agree to the charges
SMS-alert users pay $0.25 for each auction entitling them to up to 10 alerts. Each 10 thereafter cost another $0.25. It would be unusual for the number of alerts to exceed 10. After receiving an alert, users can submit a new bid via text message by responding to the text message with their new bid amount. Bidding can be protected with an optional PIN.
Instant messaging alerts work in a similar manner (click on screenshot for closeup):
Select "Get IM alert" - Select IM provider; eBay supports the big three: Yahoo, AOL, MSN
- Check "Watched item-ending alert" or "Outbid alert"
There are no fees for IM alerts. After receiving an IM alert, users can submit a new bid via the provided link.
In addition to SMS-alert links in the main auction listings, successful bidders are also prompted to set up an alert on the bidder's confirmation screen (see below).
What it means for financial institutions
There is no reason why banks cannot charge for triggered alerts. Unlike account access, alerts are a value-added service with no s
imilar "free counterpart" in the offline world. You don't see telecom giants giving away any of their specialized services such as caller-id, custom ringing, call forwarding and so on. Banks should work on developing premium service bundles. For inspiration, take a look at your local phone provider's website (see Qwest screenshot right).
Resources:
- Online Banking Report #109, "Pricing Online Banking Services"
- Online Banking Report #122/123, "2006/2007 Planning Guide"
Turning the Tables on the Auto Dealer’s Finance Dept.
Tired of competing with 1.9% dealer financing? Fight back with online car buying services. Many financial institutions, especially credit unions, have offered car-buying services online. With 67% of new car buyers researching online last year according to JD Powers, there's ample opportunity to get in front of car buyers BEFORE they arrive at the dealership. However, for the most part, major banks have stayed away from this area, in part so as not to annoy their dealer-financed customers.
That may change as one big player, Capital One, enters the business, albeit with fewer channel-conflict issues. The credit card giant is already a big player in online auto finance and generated 1.5 million auto loan applications across its 44 million customer base last year alone. It recently launched its new DriveOne <driveone.com> service in several markets (click on inset for closeup).
DriveOne is a slick car-quote service that rivals anything we've seen online. The design is state-of-the-art, easy to navigate, and, with no advertisements, it's much faster than others. The site, powered by Zag <zag.com>, features branded data from Kelly Blue Book <kbb.com>. Furthermore, it's closely tied to the lender, with a slide-bar payment calculator built in to the main user interface (see right-side of screenshot left).
DriveOne will connect buyers to dealers who must agree to sell vehicles at a fixed price no higher than Kelley New Car Blue Book Value. However, dealers are still free to negotiate add-ons, such as security systems or additional warranties. In addition to the fixed prices, buyers receive a $250 (new cars) or $400 (used car) rebate direct from DriveOne, no matter how they finance the purchase. Dealers indirectly fund this rebate with the fee paid to Zag whenever they sell a car through the program.
Powered by Zag
The DriveOne platform comes from Zag, a car-buying service launched early last year by Scott Painter, the founder of CarsDirect.com and BuildToOrder.com. The company used seed money from Elon Musk, founder of X.com/PayPal. One of Zag's investors is Capital One, which led the third round in Dec. 2005.
In Nov. 2005, the company acquired Autoland, the leading auto-buying service bureau for credit unions, with 300 clients serving a total of 8 million members, primarily on the West Coast. Total annual vehicle sales are more than $270 million. The company says it will have approximately 50 of the 300 credit unions using the DriveOne platform by year-end.
Last month, Zag acquired Automotive Invitational Services that serves 6 million members across a dozen AAA clubs. Zag says it will be offering DriveOne in seven states by the end of this month and will be working with 3,000 dealers by year-end.
—JB
Getting Even with the Citibank Call Center
Score:
Tom Brown — 1
Citibank — 0
How many times have you been frustrated by your experience at a call center? Well, if you were a multi-millionaire hedge fund manager with his own blog, you could get back at the company, and then some.
Read today's extremely thorough account (transcribed verbatim from a tape recording) of Second Curve's Tom Brown as he attempts to add a PayPass contactless debit card to his Citibank account <bankstocks.com>.
A couple lessons here:
1. Flag Tom Brown, and other influential VIPs, in your customer database so they get topnotch phone service
2. Be careful with geographic-based product rollouts to avoid irritating customers
3. Simplify call center scripts
—JB
Bank of America’s Expandable Landing Page
Bank of America is back on the MSN front page (see End Notes) using its clever, if somewhat misleading, Keep the Change program to lure new checking account customers (see End Note below). The pitch is similar to the last time we looked at it (see NB 2/13/06), but the bank has redesigned the landing page (click on inset for closeup).
It now features three compelling benefits:
- Free money through "Keep the Change"
- Extra security through Sitekey (powered by PassMark/RSA)
- Free online banking
The bank has found an effective way to keep the landing page concise, but still discuss all the benefits of these three programs. Each of the three main features has a small box on the landing page (see right). Each box has a "more details" link that expands the box yet does not open a new browser window (click on before and after pics below). Finally, for users needing even more info, there's a link in the larger box to another page with full details.
Before expansion
—JB >>>>click below for End Notes
End Notes: Playing the "Keep the Change" game
Although we have mixed feelings about the value of the program overall, there's no doubt it has strong appeal for new account aquisition due to the 100% bank-match during the first three months. It creates a "game" for the user, incenting them to immediately begin using their new debit card to rack up free cash from the bank. That means new customers will need to deposit signficant funds, probably their paycheck, in order to fund the purchases needed to maximize the gains.
Assuming one debit card purchase per day, users will gain $10 per month from the bank, or $30 for the three-month introductory period. After that, the bank match drops to 5%, or $0.50 per month in this scenario.
Hard-core debit card users with two or three purchases per day could earn $60 or $90 during the matching period, And those gaming the system, splitting a $10.20 grocery bill into two $5.10 transactions (earning $1.80 from BofA), could drive their bonus into the $100+ category (the bank caps the rebate at $250, and doesn't pay it until the one-year anniversary).
BofA Banner on MSN Homepage (July 11)
Disposable Debit Cards
Although they've been around for years, with relatively little success, the time may be right for disposable card numbers. However, this time, the emphasis should be on debit, the payment of choice for many younger consumers.
A compelling case can be made for disposable debit which:
- is the favored payment vehicle for the under-30 crowd, and often the ONLY payment option for high school and college students
- differentiates your checking account from 16,000 other U.S. providers
- encourages more debit card usage
- cements account relationships
- adds value to online banking archives
- provides excellent PR (customer advocacy) and branding benefits
But while great strides have been made in educating consumers about credit card fraud protection, the issue is murkier on the debit side.
Consumer appeal
We were reminded of the appeal of disposable card numbers when reviewing Cambrian House <cambrianhouse.com>, a Web-based venture attempting to "open-source" the business-startup process. While we don't see that taking off, the company does maintain an interesting database of user-submitted business ideas. Of the 433 ideas listed, the most popular according to site visitors is:
Self-destructing credit cards submitted by Rohan Pinto
Essentially what Mr. Pinto is proposing is the one-time-use credit card number offered since the late 1990s by Citibank, American Express, and, more recently, Discover Card (see inset). The main difference is the name, which actually is pretty good, if it hasn't been trademarked yet (we couldn't find any business using the term in a quick Google).
—JB
Bank Opportunities with Google Checkout
Yesterday, we posted a lengthy discussion of Google's new universal checkout system, Google Checkout. We are extremely bullish on its future and will follow the developments closely. Just like Google's AdWords first gained traction with small businesses (including Online Banking Report, an AdWords user since early 2002), we expect small merchants to embrace Checkout quickly to realize two huge benefits:
- Lower card processing fees: A certain amount of card processing can be virtually FREE, as long as the merchant can use the AdWords credits; even after that, Google's fees are one-third lower than PayPal, which is considered a relatively cost-effective program for small merchants
- Less shopping cart abandonment: Consumers abandon their online carts for a variety of reasons, but one of the leading causes at smaller merchants is concern about entering personal info and credit card numbers
It will take much longer for larger merchants to come on board since they must cede an important part of the customer relationship to Google, such as the customer's email address.
Financial institution opportunities
All this begs the question: What does this have to do with my financial institution? I'm glad you asked. Here are five ways a bank could leverage Google Checkout (in order from easiest to most difficult):
- Educate customers on Google Checkout with encouragement to enter your credit and/or debit numbers into the wallet: While Google allows multiple cards, most users won't realize that initially since it asks for only one during the sign-up process, so the first one entered has a huge advantage. This would make a great subject for your periodic email newsletter, a feature for your website, and so on.
- Incent customers to enter your card number: As we mentioned yesterday, Citibank has made a significant investment by buying the pole position in the sign-up process. Assuming one million of its cardholders take advantage of the $5 credit, that's a $5 million expense, even without considering what they paid Google for the exposure. You might want to consider a similar program, although an iPod sweepstakes could be just as effective and less expensive.
- Educate small merchants on the program: If you don't offer your own merchant processing, you should tell your business customers about this new way to save on card processing and potentially increase online sales.
- Use it to fund new deposits during your online application: If you accept credit cards to fund new checking accounts, you could offer Google Checkout as a funding option. Provided you can use the AdWords credits, it could be a way to virtually eliminate the cost of interchange on these deposits. In fact, Google may have to erect some barriers here. Again, assuming you are a big AdWords spender, you could offer customers the option of making ongoing deposits via credit card, as long as the total deposited was no higher than your normal AdWords buy. For example, if you spend $10,000 per month in AdWords/AdSense, you could offset up to $100,000 in card-funded deposits.
- Create a front-end to Google Checkout within your online banking area: Using account aggregation technology that saves the user's Google username and password on your server, you could make it easier for users to access their Google accounts. You could even go into full aggregation mode, by automatically downloading Checkout activity and displaying it within your online banking area.
Did I miss anything here? Email me (click on my initials below), if you have other brainstorms or comments.
—JB
Live Chat in Online Banking Grabs Some Ink
Although our readers won't find much new information in today's Wall Street Journal article, Online Banking Strives for the Human Touch, it's significant for two reasons:
- Another example of a leading personal finance writer looking for "the next big thing" in online banking (see also NetBanker June 28); expect a wave of these stories through year-end
- The article included a full-text screenshot of a banking chat session with SunTrust. You might circulate this among your reps so they understand that what they write in a chat session potentially becomes part of the "public record" (by the way, the SunTrust rep, and/or the marketing guru who scripted the canned responses, deserve a raise for their sales technique).
If you make it to the end, you'll find a couple interesting online lending factoids:
- Bank of America claims an 8-fold increase in online-mortgage sales in Q1 2006 compared to the year earlier quarter, with live-chat part of the reason; it also said home-equity loan volume doubled
- Citbank says 90% of its live-chat users complete a home-equity application, presumably at its <myhomeequity.com> site mentioned earlier in the story (see screenshot above); the bank also said it expects to originate $2 billion in home equity loans online in 2006, double that in 2005
—JB
Yodlee’s New MoneyCenter Goes Live
As the rest of the country watched fireworks, Yodlee <yodlee.com> which snagged two mentions in the Wall Street Journal during the last week of June (NB June 28), launched its biggest product improvement since the company went live with account aggregation in 2000 (see OBR 63, "Does Yodlee Make Quicken Obsolete?").
Yodlee's new MoneyCenter is a full-featured PFM operating on Yodlee's server. It allows banks to offer the key budgeting and reporting functions much loved by Quicken and Money users. Throw in real-time bill pay at card-accepting merchants, a suite of triggered alerts, a dose of account aggregation, and lifetime statement archives (the feature that inspired the Saturday June 24 WSJ column entitled, "A financial-data vault online) and you have a feature-set that deserves serious consideration in your 2007/2008 plans.
It's an important online banking development, and we'll take an in-depth look at it in the next issue of Online Banking Report (available in early August).
—JB