Brett King

Archive for August, 2010|Monthly archive page

Does your Internet Banking suck?

In Customer Experience, Internet Banking, Offer Management, Retail Banking on August 25, 2010 at 07:44

Is it just me or have you noticed that the pages behind the login for your bank haven’t changed much in the last 5 or 6 years?

According to the omnipresent Wikipedia, Stanford Federal Credit Union was the first financial institution to offer online internet banking services to all of its members in October 1994. Interestingly, while the Gramm-Leach-Bliley Act introduced some important elements to support internet banking, it wasn’t until 2002 that the The Office of the Comptroller of the Currency issued final regulations on the use of Electronic Banking for US-based banks. This informs another key innovator’s dilemma. That of trailing regulation. In fact, it’s also indicative more broadly of the speed at which the banking industry adapts to changes of the significance of the introduction of the Internet. Far too slow for the rate of change that is occurring these days.

Excuse me sir, your Internet banking is looking a little tattered…

I wrote recently on The Finanser’s Blog about the problem of lack of investment in Internet banking by the mainstream banks. The issue is that when you categorize Internet banking internally as a channel where you migrate customers to reduce cost, the initial impetus for investment in Internet banking is just getting the required functionality in place – once in place, and cost savings on-track, it’s hard to get further investment in the customer experience behind the login because it’s already doing its job.

The problem is – it isn’t doing its job.

The assumption that internet banking behind the login is about transactional costs savings for the bank is a very bad assumption. It assumes that customers are using the channel to save the bank money, when customers are actually using the channel for convenience and to increasingly engage the bank on the fundamentals of day-to-day banking. The increase of online banking usage just doesn’t want to slow down because of this behavioral shift, and unless banks understand and adapt to this shift, their internet banking platforms will increasingly isolate customers who want more convenience and control. Here’s how comScore, who has been measuring this since 2006, characterizes the relentless take-up of internet banking:

Since the inaugural comScore online banking report in 2006, the number of DDA customers visiting the top 10 online banking sites has increased from approximately 40 million people to more than 58 million people. In any given quarter, nearly 60 percent of the total U.S. Internet population visits at least one of the top 20 financial institution (FIs) sites.
Comscore: 2010 State of Online Banking Report

This is played out across the world. In looking at data on major website and internet banking redesigns, the fact is that since the launch of Internet banking in the last 90s and early 2000’s most banks update their public website’s look and feel every couple of years, whereas they’ve only updated behind the login capability every 3-5 years at most and in general the last round of updates was largely cosmetic. And yet, the growth keeps coming…Look at the statistics for Commonwealth Bank of Australia for monthly logins between 2007-2010 as reported in The Age of August 12th, 2010.

Year CBA Monthly Logins
2007 18.5mil
2008 22.9mil
2009 29.3mil
2010 35.6mil

See more details at CommBank Investors site

That’s a 92% increase in usage between 2007-2010. This trend is borne out the world over. Internet banking usage is increasingly not only in that a larger portion of the population is logging in, but that existing customers are logging in more frequently. So if Internet banking needs more than just a facelift, what exactly does Internet banking need to become to capture the behavioral needs of the customers who are using it?

More than bill pay – my financial control tower

What I need more than a transaction dashboard, more than pure functionality is something that helps me manage my finances. Right now Internet Banking is to intelligence, what an old mainframe dumb terminal is to an iPad. Extremely primitive. There are some solutions out there right now that do an admirable job of personal financial management, I’d rank Geezeo’s and Yodlee’s toolset and Mint as solutions every bank should be looking at. Geezeo has taken it once step further of recent times with their customizable widget/dashboard approach.

The thing is most banks are not yet using PFM and many claim the jury is out on whether or not PFM really generates strong ROI. Intuit certainly sees differently, their acquisition of Mint late last year for US$170m is telling – they see the future in managing the finances of individuals.

The top three activities within Internet banking are still checking account balances, transfers and bill payment. But just adding PFM functionality is not necessarily going to be the answer to solve the flagging, lagging development of the world behind the login. More is needed.

The future of the login

What customers will be looking for from their Internet banking portal moving forward is more control. More than just offering the ability to pay bills, customers will be looking for integrated bill management – this is not just direct debit services. Customers will be looking to see a consolidated view of their billing relationships, and have their internet banking dashboard help manage bill payments automatically. This will require banks to be integrated in respect to data with utility companies, telecomms network operators, cable companies, and the usual suspects. The Internet banking dashboard will become the place I go to see my aggregated monthly expenses, drill down on individual accounts and statements, and setup rules for automated bill management.

On the products side, banks are going to have to start to get a lot more proactive. For example, if I have a lump sum sitting in my savings or deposit account, the bank could show me how much interest I could be earning if I invested that in either a term deposit, CD or in something more exotic like an equity-linked investment. On my credit card statement, that large ticket item purchase you made last month…the bank could offer to put that on a 12-month payment plan at a lower interest rate. Observing that you do a lot of travel, the bank could proactively upgrade your credit card to a deal that gets you free air miles with your favorite airline.

In addition to those more obvious elements, the whole multi-channel thing will start to come into play here too. For example, the dashboard will also let me manage alerts. Increasingly we’ll have to handle of whole lot of messages in respect to ingoing and outgoing payments, warnings about upcoming bills where your balance is short, location-based offers for retailers that you frequent and where you get a discount for using your NFC mobile enabled credit card, and other trigger-based alerts or offers that you subscribe to.

Mobile has to become one of the primary acquisition tools that banks will use in the future, but to ensure that this channel is not abused by overeager marketers, we’ll need a filter mechanism. That means that you’ll need somewhere to tell the bank what you will and won’t accept being sent either by SMS or to the the apps that you utilize on your smartphone. The Internet banking dashboard will need to manage all of this – it will be a critical tool in managing the multi-channel relationship.

If you’re a bank you better get serious about investing behind the login – you’ve got a long way to go.

If you are on the corporate banking side, stay tuned…I’ll talk about corporate Internet banking dashboards next

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The Shrinking Branch Value Exchange

In Branch Strategy, Customer Experience, Retail Banking on August 19, 2010 at 05:52

I don’t know about you, but my time is one of my most valuable assets these days. I work long hours, I travel a lot, when I’m home I am struggling to find quality time (and quantity) with my kids, and I am increasingly trying to eek out a few minutes each day for myself. So anything that adds an additional demand on my time, better be worth it. So when a bank asks me to come down to the branch, or even presumes that I want to visit the branch – the question really is Why would I visit a branch?

Read this personal finance ‘forum’ comment from a customer in respect to the branch. This sort of thing is increasingly common these days, and is representative of many customers these days:

I’m a full time worker and rarely have the time to get out of the office during the day to eat, let alone do my banking.

Last week I finally got my act together and booked an appointment to see my local in branch advisor for an account review – more in their interest than mine I would have thought. Anyway, when I arrived the queues back from the counter seemed endless, not enough staff behind the desk; nothing seemed to be moving AT ALL – and, tear my hair out time – the advisor turned out to be off sick that day!!!

Why did no one bother to call me to let me know? No one seemed able to give me an answer. The experience has left me wondering why I bother having a local branch at all. It also made me realise that I’m actually pretty happy doing all my banking online or on the phone.
So can someone tell me, WHAT is the need for a ‘local’ bank branch these days exactly?
They seem a complete waste of space if you ask me…
sezzie33MoneySavingExpert.com Forums

Deloitte’s Centre for Banking Solutions attempted to answer why customers were less interested in the branch experience in this way…

For decades, most people visited the branch for credit approval, to conduct transactions, learn about products and services, and for customer service. However, most credit approval processes moved out of branch networks over a decade ago. Today, many of the core transactions that were once conducted in branches are shifting to electronic forms or are being captured elsewhere.
Adapting to a changing environment Evolving Models of Retail Banking Distribution, 2009

So with seemingly a real psychological challenge to why I would invest the time to visit my branch, and with a shift of core transaction types outside of the branch – what is the value of the branch today?

The value exchange concept

At the heart of marketing and customer theory is a concept of an exchange of value that occurs between two parties, this is compared with the intrinsic value that lies at the heart of a product, service, relationship, etc. In fact, believe it or not Karl Marx was one of the first to recognize this concept in his 1859 Contribution to the critique of Political Economy. It is the exchangeability of ‘value’ that contributes to economic interactions in society. But value has they annoying habit of changing over time.

Take two examples of modern businesses whose value exchange has shifted.

Pay Phones versus Mobile Phones
I was in New York City for the BANK 2.0 launch a couple of weeks ago and I when I was walking the streets I saw something that I can’t recall seeing for, well years actually – a New Yorker using a public phone. Yes…a public phone. They still exist in small numbers in various locations – but the numbers are dwindling.

Pay Phones are going the way of the Dodo due to mobile phones

The reason that Pay Phones are simply not popular anymore is that it is just far too convenient to carry around your mobile phone. Let’s face it. If you meet someone today that doesn’t own a mobile in the western world, it is somewhat anachronistic.

So if you are a telephone company, how would you defend the ‘value’ of using a Pay Phone in today’s modern society? It’s tough… there certainly is no value proposition that is unique. In times past you’d say it was about convenience, but with mobile phones you could hardly defend the convenience of Pay Phones. Thus, Pay Phones are already virtually extinct.

Blockbuster versus NetFlix
If you are a Blockbuster Franchisee right now, you must have a pretty pessimistic view of the world. Blockbuster sprang into existence in the mid-80s to compete with the small mum and pop video stores which were around back then. Today Blockbuster operates about 6,500 video stores, serving more than 87 million customers in the United States, and 25 other countries. The thing is, that today with digital distribution through vehicles like iTunes, Hulu, Amazon, Playstation, Wii, etc and with NetFlix’s approach to both digital distribution and DVD-in-the-post, Blockbuster is in severe trouble. Blockbuster has already closed 1,300 stores last year, and has announced another 545 stores will close this year. However, this is just the start – in the near term physical stores for Blockbuster just don’t make sense.

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What is in a Twitter name? That which we call a customer…

In Customer Experience, Retail Banking, Social Networking, Strategy on August 13, 2010 at 02:10

Apologies to Shakespeare for the modified Romeo and Juliet reference, but the question is valid – what is in the ‘name’ of a customer these days? I’m on Twitter, I’m on Facebook, I have various other profiles online on sites like LinkedIn, etc but none of this information appears relevant to most of the service organizations I interacted with daily. But if this identifies who I am – why is that no one asks me for my Twitter name in customer interactions these days?

Why is it that today that there are many banks who won’t let me open an account unless I have a home telephone number (a landline) – which quite frankly I haven’t used for a number of years now (in fact I don’t even know my home phone number) – and yet in respect to mechanisms which I use a whole lot more frequently than a home telephone number for communication, namely FB and Twitter, they completely ignore me? I have to say these days I’d probably be a whole lot more likely to talk about my bank on Twitter, than I would wait for their call on my home telephone number, which I don’t use.

Customer profiles are out of touch

Understanding customer behavior and how we are ‘tribally’ connected to our peers in the social networking landscape is a pretty fundamental requirement for service organizations these days if they want to influence brand perception. At a minimum, a bank should be ready to respond to me via Twitter, Facebook, Mobile or similar mediums, but in respect to traditional customer profile information like my home telephone number, my home address (which is increasingly irrelevant to my bank relationship), my employer’s telephone number, and such – this type of data is practically useless from a behavioral or service enablement perspective these days.

Your customer profile today is about two things for a bank, namely KYC and Segmentation. KYC is a industry compliance term which refers to “Know Your Customer” – it is seen as the basic information or data set that a bank needs to know to assess your risk profile as far as likelihood of issues around AML (Anti-Money Laundering), etc as is required generally as part of a process by regulators for new customers. On the segmentation front, the classic method of segmentation these days is still based around demographics such as age, salary, where I live, how many kids I have, etc and informs classic marketing campaign development.

Increasingly both of these outcomes are out of touch with the reality of the digitally enabled customer. I am here to tell you that despite all the KYC information my bank has captured about me, that in respect to my risk on a financial basis this data is almost certainly irrelevant. Far more important for them would be information on where I am travelling to, which partner ATM machines I use when I travel, how I conduct cross-border transactions, who is having access to my basic information that could threaten the safety of my identity, and how I manage my finances on a daily basis. The fact is, I’ve never been asked about any of this stuff, which is far more informative to my transactional risk profile than what my monthly salary and deposit patterns are.

Bank's often talk about customer knowledge as a differentiator...

The role our digital footprint plays

The key information for a bank moving forward is not demographic data, it’s not about where I live or what my home phone number is, it is about what I do…

In that respect, the data trail I leave for banks is extremely informative. The interactions I have with the bank are likewise hugely instructive from a future service and risk perspective. For example, my bank has data on which retailers I like to shop at, which airlines I travel, the cars I drive, the laptop I own, the mobile devices I utilize, the properties I own, the property I live in, and a bunch of other extremely useful information in respect to offers they could present me with. However, this data is just never used.

I get credit card usage offers from retailers I never frequent – why doesn’t the cards team send me offers for retailers where I’ve shopped before? I get offered personal loans and increased credit card limits when I don’t need them – when I might be interested these offers are nowhere to be seen. I get offered opportunities for new credit cards for airline loyalty programs that I’m not affiliated with – why can’t they work out which airlines I use and proactively offer to transfer my credit card points to my airline program?

Recently the team at Abu Dhabi Commercial Bank in the United Arab Emirates were looking at ways they could improve the suitability of offers for card usage for customers. There were suggestions around using location-based messaging technology through telecommunication providers to target you when you were at various shopping malls around the Emirates, but the Telco network operators proved to be light on this capability. So ADCB looked at behaviors – how did customers behave when they went shopping?

Behavioral analysis suggested that a customer who went to a mall was almost always certain to do one of two things. Initially go to an ATM machine upon arrival and pull out cash, or alternatively use their credit card to make a purchase. So ADCB worked out they didn’t need the mobile operators to work out WHERE customers where, they only needed to look at live transaction data for location triggers. So now ADCB can provide you with a time sensitive, location sensitive offer based on your behavior and can simply send it to you via SMS. Far more constructive than flooding me with broadcast messages that are more miss than hit.

Conclusion

Today banks don’t know me. The data they choose to use in respect to my profile is largely irrelevant. The data they have on me and could have utilize in respect to my behavior is much more relevant to how I’ll interact with the bank in the future.

So if you are a bank – do you know my Twitter name, have you friended me on Facebook? Do you know my mobile number and what type of phone I use? Are you matching offers for services and products to me based on what I’ve done or am likely to do? If I talk about you on Twitter, would you know that I’m a customer and could you engage me on this issue next time I call the call centre? If not – you really don’t know me at all.

Online Fraud and Privacy is not that big a deal…eventually

In Retail Banking on August 4, 2010 at 20:34

I hear a lot of individuals in the financial services space expressing concerns about the risk of conducting business online, the lack of privacy in social media, the issues of identity theft and so forth. I’m not sure what these proponents of the ‘high-risk involvement’ model hope to accomplish, but if they realistically think that flagging concerns about privacy and online fraud will make ANY sort of dent in the progress of digital engagement through online, mobile, or social media – their mental health may need to be assessed. The best they can hope for is increased awareness of the issues.

Dealing with the digital landscape as far as payments and identity is inevitable. The issue becomes how to manage your online presence moving forward, and not if you should be conducting commerce digitally or participating in social networks.

It’s easier to commit fraud offline

While we hear lots about online fraud, the fact is that when it comes to things like credit card fraud, it is still far, far easier to commit fraud when a physical card or physical process is involved. Recently I was in London launching BANK 2.0, and at every restaurant where I presented my card, the waiter would come to the table with a wireless POS terminal to present my card. This is undoubtedly because of the simple risk associated with letting my credit card out of my sight. It takes just seconds to run a card through a mag reader and replicate that card physically. Even with CHIP and PIN, which is common throughout the EU, it would not be that hard to shoulder surf your PIN number if I really wanted to.

I used a foreign credit card in the UK, however, so I am not afforded the protection of PIN when I’m visiting the UK. In most instances I was actually asked to show my card to verify the signature, but in reality if someone had duplicated my card, then the signature they’d be using would be one they had created in any case. In the US , there is not even the protection of CHIP and PIN, and the physical processes allow for easy access to copy a credit or debit card.

The fact is, the weakest link when it comes to fraud is always the physical medium. Granted, phishing attacks designed to glean your account number and password for Internet banking is today a major issue, but again the weakest link is not the technology but the customer who willing submits his information to a fraudulent site.

Many markets have already solved this problem through two-factor authentication (TFA). The markets who have moved slower on this innovation, are obviously now reaping the reward for their lack of innovation. It is, in fact, not that fraud is easier online, it is that card issuers, retailers, banks and regulators simply are not keeping up with the behavioral shift to digital and have not leveraged the quite simple technologies that actually make digital more secure.

The US is only now moving to new POS infrastructures around contactless cards, and the fact that the EU still has yet to broadly adopted TFA are just examples of lack of innovation in fraud management. Customers move with innovations in the digital space, banker’s don’t and fraudsters exploit the gaps while they can.

Increasing digital interactions are inevitable – deal with it.

I find it amusing that those that are strongest in vocalizing the risks in online privacy are often those that in reality have the most to gain. For example, while check (or cheque) fraud is less frequent today, the fact is that the check in itself is an outmoded payment mechanism. It is not an efficient way to pay in almost any measure that makes sense today. Checks are cumbersome to carry, error prone, easily corrupted, costly and are increasingly difficult to handle, especially if you are trying to cash a check issued cross-border for example.

I’ve heard bankers argue till they’re blue in the face that checks are here to stay, and yet in the same breath they admit that they don’t know how they are going to continue to afford to process checks and admit data increasingly shows that in developed markets checks are in terminal decline.

So why aren’t banks rushing to embrace person-to-person payment capabilities, improving interbank connectivity, and trying to integrate better, simpler security mechanisms into electronic interactions? The only thing I can figure is that there is so much organizational inertia around traditional mechanisms like checks and TT’s that is often just seen as too hard to change.

The fact is today that no government, no bank, no threat on the planet, could viably stop the adoption of social media, mobile phones, payment technologies like P2P and other such innovations. It is simply a question of how soon – not if.

How digital will be far safer

Commercial interactions in the digital realm are instantaneous, completely auditable, measurable and can occur anytime, anywhere without the requirement of any specific physical instrument, except a browser or mobile phone. The fact that I can pay you in real-time, without any special process or instrument is ultimately the big draw-card.

So how do we make it safe. Embedding payments into the phone is the first step. The combination of the phone SIM, the ownership of the physical platform (handset) and the payment process will be safer than today’s credit card process. However, the simple incorporation of biometrics, the most promising being fingerprint, voice or facial recognition, will make such transactions magnitudes safer than current physical payment processes, including cash.

The likelihood is that Apple, Google or the handset manufacturers will likely be the ones to lead with these technologies, rather than banks working to incorporate such into the platforms. But the patents are already out there, we’re just waiting for the commercialization.

Biometrics are the ultimate solution to digital privacy

What about privacy?

The reality is, I don’t know of one individual who has stopped using Facebook, Twitter, email or their mobile phone as a result of privacy concerns. That doesn’t mean as individuals we should be complacent. The fact is, that we’ll probably end up with two distinct personas when it comes to the digital space.

  1. Our public persona, where we accept a compromised privacy level in respect to our personal details (email, profile, date of birth, etc), and
  2. A secure persona, which we will protect fiercely because of the financial implications or risk.

The biggest risk to our secure persona today is identity theft. Recent twitter hacks, facebook scams, hotmail account takeovers and other examples occur because it is still relatively easy to get someone’s credentials through an App, phishing site, or other such methods. Again, the answer here is that our secure persona needs to be linked to biometrics and not weak mechanisms around an ID and password. I don’t see anyone working on this as yet, but it is the obvious answer and the core technology is pretty much there. We just need one of the big Social Media networks like FB or say Apple with their iPhone/iPad to embed it and it will become ubiquitous fast.

But one thing that won’t happen is a mass exodus away from digital innovations through privacy concerns.