The Challenges and options that face a financial institution when setting up a self-service Internet site are daunting, but they should not be allowed to paralyze an organization's bid to capture high-value customers-college educated, 30- to 50-year-olds of medium to high income.

Even so, moving to the Internet is difficult. The Web represents an interesting hybrid of customer service and sales capabilities. It potentially combines the value add of the retail branch relationship manager with the costs and efficiencies of the automated telephone response systems.

While the cross-selling appeal of the Internet is evident, most organizations wrestle with how to get started. This can often be attributed to confusion over ownership-both directional and funding-of the project. Is electronic service an extension of the call center, thus owned by operations or IT, or is it a new relationship management platform owned by marketing or strategic business development groups?

Tied Up in knots

Working internally to answer this question can lead to significant delays. Each contingency has its own requirements. The result is often a daunting list of full-service features along with personalization ideas, marketing capabilities, and technical specifications. As the requirements grow in features and complexity, time lines and costs increase. Uncertainty around ownership, functionality and costs reinforce the decision to delay the introduction of the self-service platform.

Most financial institutions are struggling to cost-justify Internet self-service projects. There are typically two strategies for justifying expenditures. The first approach is a reduced cost-of-service model, such as FedEx's, to increase customer satisfaction while reducing the cost of service.

The second approach is usually more strategic and is driven by marketing or business development executives. This approach analyzes the added value created by the new channel.

Both of these cost justification approaches have a similar critical variable that is left to speculation: How many customers will use the channel and how often?

There are other critical, behavior-related questions like will customer service calls increase or decrease? Almost all investment analysis tools incorporate these variables and, therefore, organizations struggle to predict answers. Understanding who and how often your customers will utilize the self-service platform will impact your attempt to size the infrastructure to support the channel.

There are enormous options available when designing a self-service site. Unlike traditional IT projects or mainframe-based customer service platforms, Web site's can be frequently updated. This enables institutions to take a less-than-perfect approach to getting a Web site up sooner rather than later. By doing so, an institution can begin to answer the questions of who is accessing the site and how often. You can then track the impact on your call center activity. Based on that information, meaningful economic models can be developed.

There are two types of electronic customer service transactions. The first is data access through a voice response unit (VRU) providing consumers with access to checking account balances.

The second is providing workflow or servicing. Workflow is typically processing that requires the customer to hit zero on their phone in a VRU to talk to a live customer representative. These interactions include change of address, stop payment, transaction dispute.

As you might imagine, providing data access via a self-service channel is much easier than providing workflow activities. A typcial VRU might provide 10 or 15 options, yet half are infrequently accessed. Look for the 80/20 rule: what 20 percent functionality can handle 80 percent of customers' inquiries.

The next thing to think about is the technical platform. There are many heated debates in the financial industry as to whether an institution should base its platform on Windows NT or Unix. The answer for each organization will differ. If an institution is a Unix shop and has some extra hardware already lying around, great. If not, NT boxes are relatively inexpensive and readily available. Remember, the goal is to get to market quickly with a version 1.0 Web offering. As critical scalability questions are answered, future platform decisions can be made.

Another top-of-mind issue is security-a word that often brings a self- service project to a screeching halt. There are several components of security. First is the physical security of your service, notably the question of whether the organization will use firewalls and encryption such as SSL? The second area of concern is within the application itself. This includes user registration and on-going user log-ins.

Most people hold the Internet to a new, higher level security standard. This can lead to paralyzing delays.

To get around this, one approach is to look at the authentication and security procedures in place today in the company's physical infrastructure and replicate them on the Internet. Regardless of an institution's initial approach, each of these decisions can be enhanced over time. Take security very seriously, communicate the institution's policy to customers, and get started.

Some Web site tips to ensure ease of use by customers:

n Keep the pages simple.

n Too many graphics can be confusing.

n Be sure to avoid the use of banking technical terms such as DDA.

Financial institutions need to think about Web banking applications from the consumers' perspective, not their own.

one-to-one marketing

Don't waste time-and potential customers-arguing passionately over the look, feel and navigation of the Internet offering. The customer's opinion is the one that counts, so get your institution's platform to market and simply ask customers what works, and what doesn't-and why. Then make the modifications.

After launching the Internet self-service platform, begin exploring the exciting sales and marketing opportunities this new technology-enabled channel can provide. Explore incorporating new functionality such as electronic bill payment and presentment, one-to-one marketing, on-line incentive programs, and user customization.

There are countless opportunities emerging everyday. Now that you have created a dynamic dialog with your customers, you can include their input into your strategic planning.

Ron Rock is svp of electronic services, Pegasystems, Inc., and a former vp of electronic services, platform development, at Advanta Corp. Rock can be reached at 215.246.3490.

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