The year is 2001. One of your sales representatives, analyzing a customer's total financial profile, notes that this customer has a revolving balance of $15,000 on a credit card, carrying a 21 percent interest rate. The rep e-mails the customer immediately, suggesting a switch to a home equity loan for a lower interest rate and tax savings and then suggests investment in a mutual fund-manufactured by a competitor.

Sound outrageous? It ought to; bankers have traditionally shuddered at the thought of selling customers on their own lower fee products-let alone those of competing providers. But market dynamics suggest that banks will have to do a far better job of managing customer relationships, positioning themselves as financial advisors rather than proprietary product providers. Continued industry-wide consolidation, coupled with the Internet, will spur both greater consumer awareness and product and service innovation leading to the next phase in banking: something Forrester Research refers to as Open Finance.

Open Finance calls for banks to offer consumers easy electronic transfer of funds between institutions. It means attracting the affluent customer segment by selling best-of-breed non-proprietary products. It also requires greater IT investment to enhance efficiency of remote delivery channels, says Forrester Research's David Weisman, director of money and technology strategies.

With Open Finance, the real advantage will be in owning customer information and having the opportunity to be first in offering tailored products and services that appeal to your customers.

And while banks are not used to helping customers manage their money outside the bank, says Weisman, "they have to learn to change their mindset."

Take Pittsburgh-based PNC Bank; it has opened up its pipelines to allow customers to transfer money from its own accounts via automated clearinghouse (ACH) and a customized version of Meca's Managing Your Money (MYM) to the coffers of competing banks and brokerages, says PNC's Martin Evancoe, vp and manager of on-line banking. The bank further offers customers free Internet access to its Web site; the price of basic internet access is bundled into the product. And PNC customers get a discount off MCI's best price for full Internet access. "People might want to go to Schwab's Web site. They might want to go to Fidelity's site, and we'd just as soon they use a PNC browser," says Evancoe. He also understands that his nonbank rivals don't have any qualms selling non-proprietary products., so he might as well beat them to it.

And Open Finance creates revenue opportunities. In addition to charging monthly or annual flat-rate fees for financial consulting services, like Merrill Lynch and Smith Barney do, banks can earn referral fees for linking customers with outside products. "We're taking a calculated risk that the net impact will be more people seeing the benefit of consolidating accounts at PNC Bank than people will think about moving their money to other places. It's a risk. But if you don't take risks, you don't move ahead."


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