Internet Banking: Relevance in a Changing World

Surprising, but true – Internet-based activity is not the preserve of the young “digital native” generation alone. A 2008 study says that Generation X (those born between 1965 and 1976) uses internet banking significantly more than any other demographic segment, with two-thirds of Internet users in this age group banking online.

Gen X users have also acknowledged that they prefer applications like Facebook, to share, connect and be part of a larger community.

This is a certain irony in this, as online banking, as we know it today, offers minimal interactivity. Unlike in a department where the convenience of two-way interaction facilitates the execution of a number of different transactions, the one-way street for e-banking has only managed to enable the more routine tasks, such as balance checks or money transfers.

It’s not hard to put two and two together. There is a clear opportunity for banks that can transform today’s passive Internet banking offering into one that provides a more widespread and interactive customer experience.

Therefore, it is imperative that banks transform their online offerings to meet the new customer expectations. In addition, Internet banking should travel to popular online customer Hangouts rather than wait for customers to come.

There are clear indications that the shift towards a “next generation” online banking environment is already underway. It is only a matter of time before these trends become the norm.

Utilizing social networks

Forward-looking banks are leveraging existing social networks on external sites to increase their visibility among interested groups. They also implement social software technology on their own websites to engage the same communities in two-way discussions. Their online banking has thus assumed a more pervasive personality – customers engage with the bank along with its products and services, even when they are not actually shopping online.

Increasing visibility apart, banks can gain huge customer insights from such unstructured, informal interactions. For example, a discussion about the uncertain financial future of a group of 18 to 25-year-olds may be a signal to banks to offer long-term investment products to a segment previously not considered a target. Going one step further, a positive buzz about a recently launched service can create valuable word-of-mouth advertising for the company.

Collaboration through Web 2.0

The collaborative aspect of Web 2.0 applications has enabled banks to pull customers into their folds more than ever before. Traditional methods such as focus group discussions or market research suffer from the disadvantages of high costs, limited scope and potential for introducing bias. Feedback forms only serve as a post-mortem. In contrast, Web 2.0 has the ability to carry a large audience with it right from the start and continue to make it lasting. Thus, an interested community of prospects and customers participate in collaborative products and services that can meet their expectations.

Web 2.0’s transparency enables e-banking delivery across multiple online locations and web-based gadgets such as Yahoo! Widgets, Windows Live or iPhone. This means that the next generation of online banking customers will enjoy increased access and convenience

A New York-based company of analysts found that 15% of the 70 banks tracked by them had introduced Web 2.0, a number of which had done so within the last 12 months.

Standard Chartered Bank employees connect with their colleagues via Facebook and use the platform to share knowledge, clarify questions and participate in discussions about ongoing business activities.

Bank of America, Wachovia Bank and Commonwealth Credit Union have built a presence in interactive media to raise awareness and continue a dialogue with interested communities. They have used a variety of methods, from creating YouTube communities to launching campaigns on Current TV, a channel where viewers determine content.

Personalization of Online Banking

Vanilla e-banking divides customers into very large, heterogeneous groups – typically business, retail or SME companies with one type of internet banking site for each. This is in sharp contradiction to how banking organizations would like to see their clientele. Banks are moving toward customer specificity and see almost every single client as a “segment of one” across other channels, and online banking is set to follow suit. For example, one particular website for home loan customers and another for private bank customers may very well be an option in the future.

Interestingly, the National Bank of Kuwait had the foresight to do this several years ago – they enabled customers to decide which products they would see and access, and were rewarded with a dramatic increase in online transactions.

Yes Bank Money Monitoring allows customers to choose their landing page – for example, they can set “all transactions”, “net worth” or “portfolio” as their default view. Other features include the ability to categorize transactions according to customer convenience and print custom reports.

Empowerment Online

Without a doubt, Internet banks have created a more informed, empowered class of customers. This is set to climb to the next level when customers are allowed to proactively participate in many more transaction-related processes. The Internet has already enabled customers to compare product loan offers, simulate financial scenarios and design customized retirement plans. In the future, they would be able to execute related transactions – meaning that after comparing interest rates, they could originate a loan online, and once secured, they can also start repaying it online.

Porta Lisa Tion

The advent of Web 2.0 technology, coupled with the desire of banks to customize their e-banking to the highest degree, is likely to result in “portalization” of Internet banking. The idea of ​​bank customers being able to create their own space online, filled with everything relevant to them, is not so long-term. Customers can customize their Internet banking page to reflect the location of multiple accounts across different banks; they could include their credit card information, subscribe to their favorite financial news, consolidate their physical asset position, share their experiences with a group and do more – all from a “place”.

Money Monitor allows customers to add more “accounts” (from a choice of 9,000) to their site. Accounts can be savings or loan accounts with major Indian banks or those with utilities, credit card companies, brokerages and even frequent flyer programs. Users can customize their pages as described earlier.

When banks try to develop their Internet banking vision for the future, in parallel, they also have to tackle the key issues of security and “proper defense”. While it is every marketer’s dream to get clients to work as ambassadors, appropriate precautions must be taken to prevent the spread of malicious or fake advertising. Therefore, before a person is allowed to join a network forum, he or she must have built a favorable track record with the bank. The individual must be a recognized customer in the bank, after using a minimum number of products over a reasonable period of time. Qualitative information about the person’s interaction with the bank’s support staff (for example, the frequency and type of calls made to their call center, the outcome of such interaction, etc.) can be invaluable in profiling the “right” type of customer that can be recruited as a possible spokesman.

Collaborative Web 2.0 applications may be required to open banks’ websites for external technology and information exchange with third-party sites, increasing the range of data and infrastructure security. A robust monitoring mechanism must be established to ensure that third-party websites are secure, appropriately certified and pose no threat to the home banks’ websites. Also, before a third-party widget is allowed to be moved to a location, it must have passed through rigorous security controls.

Proper care must be taken before allowing users to place a link to another site to protect against the possibility of accidental download of malicious software, which at worst may even result in phishing arising from the banks’ websites.

It is equally important for a bank to protect its customers from invasion of privacy, data theft or abuse. The concept of portalization means the use of technology to bring information from other banks’ or financial service provider’s websites into the home bank’s website. The home bank must ensure that its customers’ personal or transaction-related information, which can be shared with the other providers, is not susceptible to leakage or direct abuse.

Banks will do well to partner with an Internet banking solution provider who has the expertise not only to translate their vision into a pioneering e-banking experience for the user, but also the foresight to define security boundaries. With security concerns appropriately addressed, next-generation Internet banks are full of exciting opportunities. Opportunity banks may find that Internet banking can become a means of differentiating themselves from competitors rather than a purely cost-saving tool. Providing a more powerful and interactive e-banking experience is clearly the way forward.