More powerful consumer online banking services, including some of the advanced cash management features commonly offered to businesses, are proving their worth, banks and vendors say, by making their users more valuable and more loyal.
Wells Fargo & Co. began offering souped-up online banking in February 2005, and in January added even more advanced elements. The Wells Web site now offers 16 months of account history and can automatically organize customers' spending into 19 categories, using the merchant codes that accompany card and online bill-pay transactions.
Jim Smith, the executive vice president for Wells' consumer Internet channel, says this next-generation service is having an impact that is "really very similar to the early stage of online banking."
"We get some retention benefits, some balance-growth benefits," he said. "The people that are using this and have used it regularly are more likely to stay with us longer."
Though the categorization feature cannot track check payments, Mr. Smith said that is actually turning into an upside - customers want the system to keep track of their purchasing, and are changing their payment habits to make sure it can do so, he said. "We're seeing a shift away from paper-based payment transactions to credit cards and bill pay."
The Wells online banking site was especially popular during tax season, as customers printed out spending reports to provide to their accountants. Mr. Smith said the service is completely automated, and people cannot recategorize the payments.
He said that all the enhanced online banking services are free to customers, and that Wells never considered charging for them. The features were developed in-house, and Wells has a patent application pending.
"We expected that it was going to be a fairly niche product for customers," but 3 million Wells customers used at least one of the features within the first year, Mr. Smith said. The San Francisco company had 7.6 million active online banking customers at the end of March. (It defines an active online banking customer as one who has used the service in the past six months.)
The online banking software vendor Corillian Corp. of Hillsboro, Ore., announced a similar service last month called Personal Money Manager that it says is being used by a top-50 bank (it would not name the bank). Unlike Wells' service, Corillian's can aggregate and categorize transaction data from other financial companies
Alex Hart, Corillian's president and chief executive, said Personal Money Manager is modeled on a service Corillian has custom-built for some banks over the past six years, and is designed to be used with Corillian's consumer online banking software.
Such features have long been available to consumers through personal financial management software, including Intuit Inc.'s Quicken and Microsoft Corp.'s Money. Mr. Hart said Corillian's software is "not as fully functional as Quicken and Money," because "we don't think most people want us to go as far as Quicken and Money go."
Only 15% to 20% of people who use online banking sites also use personal financial management software, Mr. Hart said. Corillian's product "is applicable to a much larger swath of the consumer market," he said.
Online Resources Corp. has been offering an enhanced suite of software for more than two years. Matthew P. Lawlor, the Chantilly, Va., company's chairman and chief executive, said MoneyHQ focuses on moving money, with online bill payment, person-to-person payments, and aggregation. It does not categorize payments or extensively document transaction histories.
"The whole idea is to deepen the relationship with the consumer" by providing more services instead of more information, Mr. Lawlor said.
Banks offering MoneyHQ say that about 10% of their customers use it. Half of Online Resources' banking clients charge for the service, though those that do not say it is used more often. All of them say MoneyHQ users have become better customers.
The deposit balance of the average MoneyHQ user rose 48% after one year of use, and was 115% higher than the balances of those who did not use it, Mr. Lawlor said, citing a study completed in October.
George Tubin, a senior analyst at TowerGroup Inc., a unit of MasterCard International, said the long transaction history is one of the most important features of the Wells Fargo and Corillian products.
"If you have more history and you're presenting that in a useable way, you're making that consumer more sticky to your bank," Mr. Tubin said. Consumers are less apt to switch if they know it means they will lose access to their spending history.
And more people want to see this information than are willing to pay for Quicken or Money, he said. "I don't believe this is something a bank could charge for."
Dan Schatt, a senior analyst for the Boston market research firm Celent LLC, said all of these services are good because each encourages consumers to pay online or with a card instead of by check.
"It's a lower cost to serve, and it means you're going to be transacting with another payment instrument offered by the bank that is going to keep you happy and retained," he said.
Online Resources is in a good position to offer more flexibility and deeper integration because it owns the payment infrastructure its online banking system uses, he said.
