Logging On: Making the Most of the Online Channel
Datamonitor, January 2011, Pages: 104
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.
Overview
Catalyst
Summary
Methodology
Executive Summary
Managing finances online has become a mainstream activity
Personal finance managers are in the vanguard of providing added-value services online
Mobile banking will become the main channel of interaction for many consumers
Consumers in developing markets view mobile banking provision as highly important
Mobile banking has the potential to greatly enhance the customer experience
Social media will become a valuable tool for a minority of institutions
Banks with already strong customer relationships have the most to gain from using social media
Evaluating the Customer Experience
What does customer experience mean?
The evolution of customer experience
The importance of generating a satisfying customer experience
Providers are starting to focus on customer experience management
Most banks now have in place extensive programs to monitor customer satisfaction
Customer loyalty is the key to profitability
Financial providers need to improve the quality of the customer experience they provide
There is much room for improvement in the standards of service that banks provide
Banks should focus on differentiating their customer experience
Creating an attractive customer experience can enable banks to charge a premium for their offering
Online Banking has Come of Age
Consumers in all regions are increasingly moving online
Improvements in technology have boosted uptake of online services
The migration of routine banking to remote channels has freed up branches for other uses
Managing finances online has become a mainstream activity
Routine banking transactions are now mainly carried out online
Online application is becoming very significant for some financial products
Online management of finances will rise over time
The Current State of Online Banking
Bank websites remain largely conventional in design and appearance
Consumer caution has driven conservative approaches to website design
Innovation has so far largely been restricted to smaller banks
ASB Bank New Zealand is one of a few that is using its website for customer acquisition
More striking designs remain largely the preserve of non-bank websites
Online money management functionality is increasing all the time
Personal finance managers are in the vanguard of providing added-value services online
Only a handful of providers have so far attempted to emulate the PFM websites
Financial services providers have been increasing their presence on social media
Hundreds of millions of consumers worldwide engage in social networking
A significant minority of consumers use social media and other online outlets for financial advice
Consumers agree that banks should make the most of new channels
Banks have many opportunities to reach out to consumers in the online social sphere
To date, efforts to connect with consumers via social media have had limited success
Mobile banking is fast becoming a significant channel
Take-up of mobile banking is more rapid than for online banking at the same stage of evolution
The Far East is embracing mobile banking more enthusiastically than Europe
Strategies for mobile implementation differ across banks
Developing regions are ahead of the developed world in terms of mobile technology
Balancing security of online banking with ease of use remains a challenge for banks
Consumers demand both high levels of security and ease of use
Criminal activity remains a potent threat to online banking
Some banks have been criticized for having relatively poor levels of online security
Some security solutions run the risk of reducing ease of access to banking services
New technologies provide new opportunities for criminals
More user-friendly security solutions are available
The Future of Online Banking
The Internet is not a suitable channel for all customers all of the time
The branch remains the primary channel for sales of many financial products
Consumers want to deal with their bank through many channels, not one
Banks will need to resolve the growing tension between demands and capabilities
Old architecture may limit the ability of banks to improve the functionality of their online services
HSBC has made a huge effort to address this issue
Santander has also undertaken a similar upgrade
Mobile banking will become the main channel of interaction for many consumers
Consumers in developing markets view mobile banking provision as highly important
Age is also a key driver of mobile banking usage
Adoption of mobile banking in more advanced regions is high among customers aware of these services
Mobile banking varies in terms of functionality across the world
Mobile banking has the potential to greatly enhance the customer experience
Mobile is very likely to become the most frequent usage channel for consumers
New technologies will improve other aspects of online banking
Consumers will soon be able to engage in live video chats with their banks
Some banks are adding money management tools to help their customers
The introduction of straight-through processing will make consumers' lives easier
Technology now allows banks to present a personalized face to their customers
Social media will become a valuable tool for a minority of institutions
Banks with already strong customer relationships have the most to gain from using social media
Many larger banks do not seem to understand how social media works
Banks need to focus on facilitating the day-to-day online experience
Get the basics right and customer satisfaction will increase
Appendix
Supplementary data
Definitions
One-time password (OTP)
Two-factor authentication (2FA)
Smartphone
Methodology
Further reading
Ask the analyst
Datamonitor consulting
Disclaimer
TABLE OF FIGURES
Figure 1: Globally, three quarters of online consumers regard online banking as important to them
Figure 2: PFM sites such as lovemoney.com allow visual representation of spending and transactions
Figure 3: Developing markets place a much higher premium on mobile banking than developed economies
Figure 4: The ANZ goMoney mobile platform allows payments using just the payee's phone number
Figure 5: First Direct is trying to engage with its customers through building an online community
Figure 6: Value-added increases as providers move towards an experience-based economy
Figure 7: Consumer behavior varies from antagonism to advocacy according to consumer attitudes
Figure 8: Many providers now regard NPS as a key metric
Figure 9: A growing proportion of the world's population now uses the Internet
Figure 10: Globally, three quarters of online consumers regard online banking as important to them
Figure 11: Most consumers now carry out day-to-day banking activities online
Figure 12: In five markets, more than a quarter of loan holders are applying for their loans online
Figure 13: Older consumers are less willing to apply for products online than those who are younger
Figure 14: Caution and conformity characterize the current appearance of most bank websites
Figure 15: ASB Bank has opted for an informal and unconventional website in order to attract customers
Figure 16: moneyStrands is trying to engage with a young demographic
Figure 17: PFM sites such as lovemoney.com allow visual representation of spending and transactions
Figure 18: Barclaycard is following the lead set by PFM sites in terms of presenting account data
Figure 19: BBVA's PFM tool is also available on a customized mobile platform
Figure 20: NatWest has recently added a basic savings goal facility to its online banking platform
Figure 21: Three in four online consumers prefer to carefully research their financial decisions
Figure 22: Globally, around one in six online consumers use online resources for financial advice
Figure 23: Online resources are far less popular than friends and family as a source of advice
Figure 24: Nearly half of consumers worldwide think that financial providers should embrace new technologies
Figure 25: Banks can engage with consumers through a variety of social media outlets
Figure 26: Visits to Compare the Market's website shot up in early 2009 on the back of its new campaign
Figure 27: Smartphone usage will grow strongly during the next few years
Figure 28: All smartphone operating systems will gain in popularity in coming years
Figure 29: Banks in the Asia Pacific region commonly allow customers to move money and pay bills on the move
Figure 30: Security concerns are a significant worry for non-online bankers in China and Brazil
Figure 31: Nationwide is introducing card readers in 2011, despite their unpopularity with users
Figure 32: Key fobs are easier to use than card readers
Figure 33: Globally, nearly nine in 10 bank account holders opened their account in-branch
Figure 34: Only 6% of mortgage holders worldwide applied for their home loan via the Internet
Figure 35: HSBC has carried out a major initiative to streamline and modernize its IT systems
Figure 36: Developing markets place a much higher premium on mobile banking than developed economies
Figure 37: Younger consumers increasingly see mobile banking as a necessity
Figure 38: Mobile banking will evolve in terms of interactivity and variety of functions
Figure 39: Bank of America offers mainstream, second-generation mobile banking to its customers
Figure 40: More advanced mobile services allow banks to significantly improve the customer experience
Figure 41: ING Bank offers a geolocation-enabled ATM finder
Figure 42: DBS is using mobile applications to broaden its appeal beyond financial services
Figure 43: ANZ's goMoney mobile platform allows payments using just the payee's phone number
Figure 44: Banks are starting to offer access via the latest tablet-style mobile devices
Figure 45: Commonwealth Bank sees mobile technology as a lifestyle enhancer
Figure 46: Video adds an extra layer of interaction to online chats with advisors
Figure 47: PNC's Virtual Wallet is a holistic money management tool
Figure 48: Wells Fargo has revamped its PFM portfolio
Figure 49: First Direct is trying to engage with its customers through building an online community
Figure 50: Lloyds TSB's approach to online engagement with its customers seems lacking in purpose
TABLE OF TABLES
Table 1: Common design cues for bank websites
Table 2: 2009 Which? survey of online banking security in the UK
Table 3: Proportion of online consumers stating that online banking is important
Table 4: Proportion of online consumers stating that mobile banking is important
Table 5: Number of Internet users per 100 inhabitants
Table 6: Proportion of global online consumers who conducted each activity online, in the six months to June 2010
Table 7: Proportion of online consumers using each channel for loan application
Table 8: Proportion of product holders who applied via online channel
Table 9: Proportion of online consumers who agree they gather as much information as possible when making financial decisions
Table 10: Proportion of online consumers who agree they take financial advice from blogs and other online resources
Table 11: Sources of advice used by online consumers for financial advice
Table 12: Proportion of online consumers who agree that financial services should embrace new technologies
Table 13: Smartphone total annual shipments by region (000s), 2008–15f
Table 14: Proportion of online consumers who agree that quick and easy access to online services is important
Table 15: Proportion of online consumers using each channel for bank account application
Table 16: Proportion of online consumers using each channel for mortgage application
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