Study Reveals How FIs Could Be Saving Some $8B Annually

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SAN FRANCISCO-A new study from Javelin Strategy & Research has found that the banking industry can save nearly $8 billion dollars by converting non-online customers to online banking and bill pay-at a cost savings of $167 per customer-and by convincing current online-banking customers to get the answers to half their customer-service questions online rather than through branches and call centers-at a cost savings of $8 per customer.

The study, "2010 Online Banking and Bill Payment Forecast: How to Cut $8.3 Billion in Costs Through Channel Conversion," found that approximately seven out of 10 households pay bills online through banks and billers, but regular bill-payers show a strong preference for paying more types of bills through banks rather than at a biller site. "Online-banking holdouts are starting to get more comfortable with the idea of banking online, which gives opportunistic financial institutions an opening to realize these savings," Javelin said.

In 2010-versus 2009-non-online customers were less likely to say they do not find online banking valuable and showed less preference for dealing directly with a person and markedly less fear about unauthorized access to an online account.

"The relevance of online banking is expected to increase further as consumers' expectations for always-on, real-time control grows, regulators prod financial institutions to provide more effective ways to help consumers monitor and manage their money and technological innovations make online banking simpler and more practical," the study found.

Among the other findings:

• Nearly eight out of 10 households bank online, but adoption and usage have leveled off.

• Online-banking customers own more financial products, which presents the opportunity for FIs to deepen customer relationships by cross-selling additional products.

• Household managers who bank with smaller regional banks and community banks are less likely to log in to online banking on a monthly basis and are more likely to pay bills by check.

• Gen Y consumers prefer to pay bills-except for their mortgage-directly at biller sites.

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