A recent Booz-Allen & Hamilton Inc. study seems to confirm what banks have long feared — that Web portals may be coasting to an easy victory over banks in account aggregation mere months after entering the market.

Though estimates vary, portals seem to have captured more than half of the million or so aggregation customers to date. And if aggregation grows as expected — winning three million users by 2003 and more than 10 million by 2005 — banks could be the big losers.

Fortunately, first-mover advantage is no longer what it used to be. Banks should capitalize on aggregation’s slow start and rethink who they are.

They should also learn from last year’s failed forays into independently branded sites — Citi f/i, WingspanBank, and OnMoney.com among them.

Those costly experiments proved three key things:

• Bank brand is still a variable, if not a key differentiator.

• Banks need to weave Internet strategy throughout everything they do, not relegate these functions to a subsidiary.

• It’s not about just being a portal. It’s about being better than a portal on the key issues that affect your customers.

Banks should think like portals on issues of neutrality, innovation, and relevance — and trump them on issues like personalization, service, and trust.

Portals have it right when it comes to their neutral stance. AOL, Yahoo, and MSN provide their users with a vast menu of financial service providers. Banks should do the same, but also realize they have to help customers discern between them.

Buoyed by convergence, banks should package diversified banking, brokerage, and insurance offerings with solid, tailored advice.

While advice is not a well-paid commodity now, it will be in the near future, as more customers move their assets online to diversify their holdings, exploit the powers of financial planning tools, and try out time-saving services like e-billing. And banks, with their incredible expertise and deep data files, are in the money seat when it comes to advice.

Banks need to be innovators rather than reactionaries. Can you name one area where banks have led the pack over the past few years?

In areas like online brokerage, B-to-B facilitation, aggregation, the wireless Web, e-billing, and auctioning, banks have usually waited until their competitors — usually the portals — have committed to an innovation, then launched a desperate countersalvo.

As a result, banks are becoming increasingly irrelevant to the customers they covet. Customers can now stash funds at brokerages, Internet banks, and credit unions, and they can transfer funds wherever they want.

Competitors can smell the money: Charles Schwab and others are aggressively positioning themselves as full-service financial management shops for the wealthy.

Compounding this problem is the portals’ success in selling themselves as one-stop resources for their customers, many of whom now visit their portal every day. Why can’t banks do the same thing?

With innovative services, banks could reposition themselves as browser bait for customers or, even better, become their primary portal. Banks could offer the same aggregated services that portals provide and trump them with better financial planning tools and state-of-the art customer support.

But why stop there? What if banks offered to act as their customers’ Internet service provider by bundling financial services and bandwidth? Customers would be willing to pay for these services if they felt they truly added value.

An independent survey of 500 North American banking customers commissioned by American Management Systems last year found that 78% wanted access to third-party products, and 60% strongly desired relationship-based pricing.

Flummoxed — and in many cases battered — by the Nasdaq’s mood swings, customers are ready for guidance again. Banks should be there to provide it to them.

Banks also need to regain their former glory in personalization. Customer relationship management and online advertising technologies have paved the way for real-time information and offerings. Now banks need to carry the banner.

Subtle and highly targeted cross-selling is the way to go. Wearied by the relentless product placement of the big portals, customers are ready for appropriate offers.

But banks are failing to close the deal. A recent survey by O’Connor & Associates, which rated customer service at 150 of the nation’s top banks, found that while bank reps are getting high marks for friendliness and helpfulness, their rate of cross-selling has fallen to an abysmal 14%, from 31% in 1998.

Solve this problem, please! Ninety percent of your customers want personalized pitches, according to Booz-Allen.

Banks also need to bolster their core services. Frequent mergers, technological change, and constant call center turnover are all reasons that banks are consistently scoring poorly on customer service. Customers who are fed up with unreturned e-mails, day-old data, pointless call transfers, and long telephone hold times are taking their business elsewhere.

In fact, AMS’ survey found that bad service was a consistent killer. Eighty-nine percent of the customers surveyed said that error-free service was critical. A full 46% had left their previous primary financial services institution because of service problems.

Finally, banks need to play the trust card right. While trust hasn’t been a factor in customers’ choices, it will be again — soon.

Highly sensitized by the media to privacy and security violations by online vendors, including the big portals, customers will once again start factoring trust and confidence into their financial services decision-making. Banks, which have been largely absent from the most recent privacy wars, stand to win these disaffected customers.

Is aggregation a challenge? Absolutely. Is it a microcosm of many of the challenges banks have been facing online? Undoubtedly.

But by solving these challenges — by crafting a new identity based on neutrality, innovation, relevance, personalization, service, and trust — banks will find their way back into customers’ hearts, minds, and wallets.

Mr. Stockmal is a senior consultant in the financial services group at American Management Systems, a Fairfax Va., technology consulting firm.

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