Marktanalyse - Logging On: Making the Most of the Online Channel

Introduction
Online banking, despite being a relatively new channel in historic terms, has achieved mainstream acceptance by consumers around the world. The channel is quickly changing, and new functionality is constantly being added. At the same time, mobile banking has emerged as a new channel for transactional activity, adding another access point for consumers. This report is the second in the global customer experience series, and focuses on the online channel. It assesses the current state of online and mobile banking provision across the world, and discusses likely future developments.

Scope of this research
• Examine the latest developments in online and mobile banking.
• Presents results from Datamonitor’s Financial Services Consumer Insight Survey to highlight consumer preferences regarding online banking.
• Learn how the provision of new online services and functions can enhance the customer experience.
• Discuss the future shape of online and mobile banking provision.

Research and analysis highlights
Online banking has achieved mass acceptance. For many consumers, it has supplanted the branch as the primary channel for conducting basic transactions. The online channel has also become a significant sales and acquisition medium for many financial products.

New developments in the online sphere are emerging all the time. Increasing engagement with social media can help to strengthen customer relationships. The growth of mobile banking and added website functionality are also helping to transform the online experience and facilitate consumers’ lifestyles.

Mobile banking will experience rapidly change in the coming years. From the basic provision of text-based alerts, this channel will eventually allow comprehensive payment and money transfer services. Mobile phones will become the main means by which consumers interact with their banks.

Key reasons to purchase this research
• Find out about the latest trends in online and mobile service provision.
• Read case studies of providers who have brought in particularly noteworthy innovations in online and mobile banking.
• Assess the possibilities for the future evolution of online and mobile banking.

TABLE OF CONTENTS

Overview 1

Catalyst 1

Summary 1

Methodology 1

Executive Summary 2

Managing finances online has become a mainstream activity 2

Personal finance managers are in the vanguard of providing added-value services online 2

Mobile banking will become the main channel of interaction for many consumers 5

Consumers in developing markets view mobile banking provision as highly important 5

Mobile banking has the potential to greatly enhance the customer experience 6

Social media will become a valuable tool for a minority of institutions 7

Banks with already strong customer relationships have the most to gain from using social media 7

Evaluating the Customer Experience 18

What does customer experience mean? 18

The evolution of customer experience 18

The importance of generating a satisfying customer experience 20

Providers are starting to focus on customer experience management 20

Most banks now have in place extensive programs to monitor customer satisfaction 21

Customer loyalty is the key to profitability 21

Financial providers need to improve the quality of the customer experience they provide 24

There is much room for improvement in the standards of service that banks provide 24

Banks should focus on differentiating their customer experience 25

Creating an attractive customer experience can enable banks to charge a premium for their offering 26

Online Banking has Come of Age 27

Consumers in all regions are increasingly moving online 27

Improvements in technology have boosted uptake of online services 27

The migration of routine banking to remote channels has freed up branches for other uses 28

Managing finances online has become a mainstream activity 28

Routine banking transactions are now mainly carried out online 29

Online application is becoming very significant for some financial products 30

Online management of finances will rise over time 31

The Current State of Online Banking 33

Bank websites remain largely conventional in design and appearance 33

Consumer caution has driven conservative approaches to website design 33

Innovation has so far largely been restricted to smaller banks 34

ASB Bank New Zealand is one of a few that is using its website for customer acquisition 35

More striking designs remain largely the preserve of non-bank websites 36

Online money management functionality is increasing all the time 37

Personal finance managers are in the vanguard of providing added-value services online 38

Only a handful of providers have so far attempted to emulate the PFM websites 40

Financial services providers have been increasing their presence on social media 45

Hundreds of millions of consumers worldwide engage in social networking 45

A significant minority of consumers use social media and other online outlets for financial advice 45

Consumers agree that banks should make the most of new channels 47

Banks have many opportunities to reach out to consumers in the online social sphere 48

To date, efforts to connect with consumers via social media have had limited success 50

Mobile banking is fast becoming a significant channel 51

Take-up of mobile banking is more rapid than for online banking at the same stage of evolution 51

The Far East is embracing mobile banking more enthusiastically than Europe 53

Strategies for mobile implementation differ across banks 54

Developing regions are ahead of the developed world in terms of mobile technology 56

Balancing security of online banking with ease of use remains a challenge for banks 56

Consumers demand both high levels of security and ease of use 56

Criminal activity remains a potent threat to online banking 57

Some banks have been criticized for having relatively poor levels of online security 58

Some security solutions run the risk of reducing ease of access to banking services 59

New technologies provide new opportunities for criminals 61

More user-friendly security solutions are available 62

The Future of Online Banking 63

The Internet is not a suitable channel for all customers all of the time 63

The branch remains the primary channel for sales of many financial products 63

Consumers want to deal with their bank through many channels, not one 66

Banks will need to resolve the growing tension between demands and capabilities 66

Old architecture may limit the ability of banks to improve the functionality of their online services 66

HSBC has made a huge effort to address this issue 67

Santander has also undertaken a similar upgrade 68

Mobile banking will become the main channel of interaction for many consumers 68

Consumers in developing markets view mobile banking provision as highly important 68

Age is also a key driver of mobile banking usage 69

Adoption of mobile banking in more advanced regions is high among customers aware of these services 70

Mobile banking varies in terms of functionality across the world 70

Mobile banking has the potential to greatly enhance the customer experience 74

Mobile is very likely to become the most frequent usage channel for consumers 81

New technologies will improve other aspects of online banking 81

Consumers will soon be able to engage in live video chats with their banks 81

Some banks are adding money management tools to help their customers 82

The introduction of straight-through processing will make consumers' lives easier 85

Technology now allows banks to present a personalized face to their customers 86

Social media will become a valuable tool for a minority of institutions 86

Banks with already strong customer relationships have the most to gain from using social media 87

Many larger banks do not seem to understand how social media works 88

Banks need to focus on facilitating the day-to-day online experience 89

Get the basics right and customer satisfaction will increase 89

Appendix 91

Supplementary data 91

Definitions 102

One-time password (OTP) 102

Two-factor authentication (2FA) 102

Smartphone 103

Methodology 103

Further reading 103

Ask the analyst 103

Datamonitor consulting 103

Disclaimer 103



TABLE OF FIGURES

Figure 1: Globally, three quarters of online consumers regard online banking as important to them 2

Figure 2: PFM sites such as lovemoney.com allow visual representation of spending and transactions 4

Figure 3: Developing markets place a much higher premium on mobile banking than developed economies 6

Figure 4: The ANZ goMoney mobile platform allows payments using just the payee's phone number 7

Figure 5: First Direct is trying to engage with its customers through building an online community 9

Figure 6: Value-added increases as providers move towards an experience-based economy 19

Figure 7: Consumer behavior varies from antagonism to advocacy according to consumer attitudes 22

Figure 8: Many providers now regard NPS as a key metric 23

Figure 9: A growing proportion of the world's population now uses the Internet 27

Figure 10: Globally, three quarters of online consumers regard online banking as important to them 29

Figure 11: Most consumers now carry out day-to-day banking activities online 30

Figure 12: In five markets, more than a quarter of loan holders are applying for their loans online 31

Figure 13: Older consumers are less willing to apply for products online than those who are younger 32

Figure 14: Caution and conformity characterize the current appearance of most bank websites 34

Figure 15: ASB Bank has opted for an informal and unconventional website in order to attract customers 36

Figure 16: moneyStrands is trying to engage with a young demographic 37

Figure 17: PFM sites such as lovemoney.com allow visual representation of spending and transactions 39

Figure 18: Barclaycard is following the lead set by PFM sites in terms of presenting account data 41

Figure 19: BBVA's PFM tool is also available on a customized mobile platform 42

Figure 20: NatWest has recently added a basic savings goal facility to its online banking platform 43

Figure 21: Three in four online consumers prefer to carefully research their financial decisions 44

Figure 22: Globally, around one in six online consumers use online resources for financial advice 46

Figure 23: Online resources are far less popular than friends and family as a source of advice 47

Figure 24: Nearly half of consumers worldwide think that financial providers should embrace new technologies 48

Figure 25: Banks can engage with consumers through a variety of social media outlets 49

Figure 26: Visits to Compare the Market's website shot up in early 2009 on the back of its new campaign 50

Figure 27: Smartphone usage will grow strongly during the next few years 52

Figure 28: All smartphone operating systems will gain in popularity in coming years 53

Figure 29: Banks in the Asia Pacific region commonly allow customers to move money and pay bills on the move 54

Figure 30: Security concerns are a significant worry for non-online bankers in China and Brazil 57

Figure 31: Nationwide is introducing card readers in 2011, despite their unpopularity with users 60

Figure 32: Key fobs are easier to use than card readers 61

Figure 33: Globally, nearly nine in 10 bank account holders opened their account in-branch 64

Figure 34: Only 6% of mortgage holders worldwide applied for their home loan via the Internet 65

Figure 35: HSBC has carried out a major initiative to streamline and modernize its IT systems 67

Figure 36: Developing markets place a much higher premium on mobile banking than developed economies 69

Figure 37: Younger consumers increasingly see mobile banking as a necessity 70

Figure 38: Mobile banking will evolve in terms of interactivity and variety of functions 71

Figure 39: Bank of America offers mainstream, second-generation mobile banking to its customers 72

Figure 40: More advanced mobile services allow banks to significantly improve the customer experience 74

Figure 41: ING Bank offers a geolocation-enabled ATM finder 75

Figure 42: DBS is using mobile applications to broaden its appeal beyond financial services 76

Figure 43: ANZ's goMoney mobile platform allows payments using just the payee's phone number 77

Figure 44: Banks are starting to offer access via the latest tablet-style mobile devices 79

Figure 45: Commonwealth Bank sees mobile technology as a lifestyle enhancer 80

Figure 46: Video adds an extra layer of interaction to online chats with advisors 82

Figure 47: PNC's Virtual Wallet is a holistic money management tool 83

Figure 48: Wells Fargo has revamped its PFM portfolio 85

Figure 49: First Direct is trying to engage with its customers through building an online community 88

Figure 50: Lloyds TSB's approach to online engagement with its customers seems lacking in purpose 89



TABLE OF TABLES

Table 1: Common design cues for bank websites 33

Table 2: 2009 Which? survey of online banking security in the UK 58

Table 3: Proportion of online consumers stating that online banking is important 91

Table 4: Proportion of online consumers stating that mobile banking is important 92

Table 5: Number of Internet users per 100 inhabitants 92

Table 6: Proportion of global online consumers who conducted each activity online, in the six months to June 2010 93

Table 7: Proportion of online consumers using each channel for loan application 94

Table 8: Proportion of product holders who applied via online channel 94

Table 9: Proportion of online consumers who agree they gather as much information as possible when making financial decisions 95

Table 10: Proportion of online consumers who agree they take financial advice from blogs and other online resources 96

Table 11: Sources of advice used by online consumers for financial advice 97

Table 12: Proportion of online consumers who agree that financial services should embrace new technologies 98

Table 13: Smartphone total annual shipments by region (000s), 2008—15f 99

Table 14: Proportion of online consumers who agree that quick and easy access to online services is important 100

Table 15: Proportion of online consumers using each channel for bank account application 101

Table 16: Proportion of online consumers using each channel for mortgage application 102

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