Key for customers is user-friendliness, design bank of america's nearly eight million active on-line banking customers are enough to convince executives that its Web initiatives are paying off in terms of customer satisfaction.
But Bank of America, often cited as one of the easiest-to-use on-line banking sites, has more than just warm customer feelings to support its efforts. The bank recently finished a 31-month study comparing on-line bill-pay customers and their off-line counterparts. Those paying their bills on-line stayed with the bank longer, with 80 percent lower attrition rates, and they had deeper relationships with the bank-38 percent higher deposit balances and 45 percent higher loan balances, according to spokeswoman Betty Riess. While it's still tough to make the case that user-friendly on-line banking sites help acquire new clients, many banks are finding that their on-line offerings help retain customers and increase the amount of business with the bank. And while the evidence is only anecdotal, some are even convinced that on-line banking is becoming more of a factor when customers choose banks.
"I don't think you can be a bank today without having Internet banking," says Barb Page, vp of information delivery and payment systems at Minneapolis-based U.S. Bancorp, which was ranked the world's No. 1 on-line bank by Speer & Associates. "Customers are getting to the point where they expect it. The customer retention value of Internet banking and an Internet bill pay customer is very high. They are very loyal customers."
Having a Web site isn't enough, adds Chris Musto, vp of research at Watchfire Corp.'s Gomez Pro unit, which provides annual rankings of on-line banking sites. If banks invest any time or money into their Web sites, they need to go the extra mile and design an easy-to-use site that anticipates who's going to use it, what that person is trying to do and what the bank would like him to do, then actively walk that customer through specific functions, such as opening a checking account.
"If you don't think about those things ahead of time, save your money. Shut down your site," says Musto. "The whole point is that it's supposed to be convenient, so if you don't make it easy to use, then it basically tears apart the whole point of doing it."
Despite its claim of being an on-line banking leader, it was clear to Rob Shenk that E*Trade Financial had some deficiencies. Just a few years ago, it was a few dozen spots down on Gomez's on-line banking scorecard. "We said, 'This has got to work if we're going to work,' " recalls Shenk, vp of retail banking at E*Trade. "It really is our lifeblood. It's not like some ancillary service. We cannot afford to be in 14th or 15th place."
E*Trade launched a redesigned site last June, and certain features make it stand out from its peers. Its quick-view boxes, for instance, show customers available balances and their likely balances for the next seven days as they're pay bills. E*Trade also lets customers sign up for account updates sent to their E*Trade inboxes, their personal e-mail accounts or their wireless devices. E*Trade's quick-transfer account aggregation feature lets them move money between accounts with different institutions.
E*Trade has since moved up Watchfire's ranks to the No. 7 site in on-line banking. And with so many big changes throughout the bank, it's hard to isolate the cause, but E*Trade has seen a jump in its checking accounts, Shenk adds.
There is also a lot of cross-selling between the banking and brokerage divisions of E*Trade, he adds. People still think of their money as segmented, but as banking sites further integrate their offerings, more customers will likely manage their money as an integrated portfolio.
If on-line banking's evolution to date is any indication, Shenk is onto something. When U.S. Bank customers try on-line banking for the first time, they tend to stick to checking balances or verifying whether a recent transaction has cleared, says Page. Eventually, they try a transfer. Once they're comfortable, they start paying bills. Only the most sophisticated customers use money management tools, she says. But over time, that may change.
Page doesn't believe customers choose a bank because of its Web site, but she does see consistent quality across channels- branch, ATM, on-line and telephone banking-as a way for a bank to differentiate itself. "I think the branch is always going to be the core," she says. "But I think the fact that we have good Internet banking helps."
In the last year, the number of billing customers at Bank of America's has doubled and the number of e-bills (on-line bills from 325 institutions) delivered through the site has more than tripled. Like other leaders in the field, BofA has eliminated its on-line banking fees and added a zero-liability guarantee to attract customers.
At National City Corp., the number of new account applications submitted on-line grew 108 percent between 2002 and 2003. Between January 2003 and January 2004, the number of customers who signed up for personal on-line banking increased more than 45 percent, and the number of small businesses that signed up for on-line banking increased 70 percent, according to bank figures.
National City is on its third on-line banking platform, says Sarah Hartman, vp of electronic banking, which was revised with the help of customer feedback. Now functions that once took four or five screens to complete take only one or two. It has added contextual help boxes and interactive demos. Last year, it moved on-line check images to the top of its to-do list, which resulted in the highest customer praise Hartman says she's seen at the bank. Customer satisfaction is a measurable metric at National City, so a year-over-year jump of 26 percent in 2003 was a big coup for Hartman.
It costs a lot to acquire a customer, but when you've got him, what if you could keep him?" asks Steve Ellis, co-founder and partner of Irvington, N.Y.-based Change Science Group Inc., which ranked National City No. 1 in its recent on-line banking study. "And what if you could sell him mutual funds? Making on-line banking easy is a great way to make good on that promise," he adds. "I would wager that poor on-line banking experiences are reasons for defections to other banks."
