Attracting Gen Y customers who are used to sending 50 or more text messages a day requires a new approach to online banking, one that combines knowledge and control built into simple personal financial management tools—in short all the functionality they expect from Web 2.0.
Thus far, most banks have failed to keep up with the innovation of nonbank financial sites. “The industry as a whole is doing a terrible job,” says TowerGroup senior research director George Tubin. “They’re falling behind on things like having Flash capability to make their Web sites and online banking experience more useable, adding simple to use PFM capabilities, using blogs and podcasts.”
But with the success of nonbank PFM sites like Mint, Wesabe and others, online-only high-yield accounts, and given the sheer size of Generation Y, a handful of banks have been motivated to create new online accounts that are aimed squarely at meeting this group’s Web 2.0 demands.
One of the first out of the gate is PNC Bank, offering a new product set dubbed “Virtual Wallet” that combines checking, savings and high-yield-savings accounts. “For PNC this is all about making sure that we’re easy to do business with for the segment that we call Gen Y,” says Thomas Kunz, svp and director of payments and technology at PNC. “It’s really the first group to grow up with the Internet, and we paid a lot of attention to their banking needs.”
In creating the new product, PNC’s marketing team spent considerable time talking to and observing the target market. They learned two major lessons: this is a very visual group, and they want help in controlling their financial picture. “We heard all about, ‘Help me avoid making mistakes, help me avoid overdrafts or being late on a bill,’” Kunz says.
The result of the focus groups is an online interface for three accounts that lets users view on a calendar when bills are due, and what’s coming up between now and the next payday. A complex back-end allows customers to drag and drop when a bill will be paid from one day on the calendar to another, a feature that Outlook users rely on all the time, but one that “required a lot of technology behind the scenes to make the money movement seamless,” Kunz says.
Pittsburgh-based PNC built much of the application in-house, but worked with partners including Adobe, Yodlee and Andera, and ClairMail and mFoundry to enable much of the functionality on users mobile phones. There are more than 25 patent applications pending on the functionality in the site, Kunz says. “I feel like we’ve picked and bundled together some of the real forces you can bring to bear to enrich the customer experience.”
In San Antonio, Frost Bank has spent the better part of a year developing its Gen Y-focused account, Momentum, which takes product innovation a step further by creating a hybrid account that’s intended to give users the benefit of an everyday transaction account with a high-yield component. Customers can split their deposit balance into different folders that are created with goals in mind—vacation, new car, etc.—and funds in savings categories earn 3.25 percent APY. This rate adjusts upward by five basis points for every 10 debit card purchases the consumer makes each month. The account also offers a debit rewards program.
And though Frost’s Momentum account is the bank’s first effort to woo Gen Y, the institution hasn’t given up its high-touch ways. Execs brag about the bank’s 97 percent retention rate, a number they aren’t looking to see drop just because this is primarily an online account. “At some level, our value proposition is different” from high-yield savings accounts offered by ING Direct and others, says Bobby Berman, group evp of e-commerce, research and strategy at Frost. “They’re all about rate, and we’re about relationships. We had a real challenge that we met to create an initial online product relationship that could connect with a real relationship and real people at Frost.”
Both Frost and PNC are quick to say that they will be judicious about what, and how many, features they add to the product. “We’re going to have a challenge moving forward to keep it straightforward and simple,” Berman says.
This conservative approach is likely to mean nonbank competition remains a step or two ahead. Last week, Wesabe unveiled a feature that allows users to send Twitter messages to their Wesabe accounts to help track purchases. And over at Mint, founder and CEO Aaron Patzer counts 400,000 members on his recently relaunched Web site. Mint is adding increased investment tracking functionality and is considering a partnership with a brokerage back end to enable stock trades. But despite rumors to the contrary, Patzer isn’t planning on making his site transactional for regular bank accounts—yet. Says Patzer, “Banks don’t have to worry for a good year, at least.”