Core to Forrester's value proposition are the insights we derive from in-depth surveys to understand consumer preferences, attitudes, activities and desires. On the flip side, is understanding how businesses are responding to consumer needs and opportunities. Over the last few years, Forrester has been focusing on building up this business side intelligence, and I am happy to report we have further extended that in the retail banking industry.
Forrester in partnership with the Consumer Bankers Association did an in depth survey of digital banking executives in North America to understand the state of the digital channel. Our survey which included responses from 19 digital banking executives contains data from 13 of the top 50 retail banks in the US. The survey covered many aspects of the business including organizational structure, hiring, channel priorities, and business metrics across online servicing, mobile servicing, payments, social, and sales. The output of this survey work is two reports outlining "The State Of North American Digital Banking." The first of which is availabe on Forrester.com.
Here are some of the highlights of the report:
Digital channels are growing. "The State of North American Digital Banking 2012"s survey shows that investment in the digital channels continues to grow with budgets being split 70/30 online to mobile and budgets that range from from $250K to over $25M.
With all the focus and hype around mobile and payments, one major trend surfaced that has as much impact on financial service companies as anything mobile. In 2011 for the first time, consumers who opened financial products opened more of those products through digital channels (online and mobile) then they opened in a branch.
Every year, Forrester surveys North American consumers and asks them about the products they purchased/opened in the previous 12 months and the channels they used to research and apply for the those products. In 2011 across products including checking, credit cards, mortgages, insurance and investments, 37% of US online adults that opened a product opened that product online with another 2% that opened via mobile. This compares with 36% who applied in a branch. These percentages are up significantly from 2010 where 32% applied online and 40% in a branch. The percentages for Canada are less for digital, but we expect those numbers to continue in the digital direction with the focus Canadian banks are putting on digital sales.
So why the big move? In general more products were opened in 2011. In the US in 2011, 38% of online adults opened a product versus 32% in 2010. Other reasons for the move in digital sales include:
More digital bankers. Survey data has consistently shown that online bankers, mobile bakers and bill payers are more likely to apply through digital channels then those who are not digitally savvy. Those groups continue to grow. In fact, Bank of America announced today that they reached 10 million mobile bankers.
Greater familiarity. Applying for financial products online is no longer a new activity. Most consumers have opened at least one financial product online at this point.
Monitiseannounced today that it acquired Clairmail, in the United States in a deal that values Clairmail at $173 million. Mobile banking is a large growth market in both the US and Canada with recent Forrester data showing that 17% of US online adults are now mobile bankers. So why does this move make sense? Forrester believes that acquisitions like this are inevitable because:
The future of mobile banking is payments.The first wave of mobile banking was getting the basics down including basic functionality like balances, transactions, and location services as well as mobile endpoints like mobile web, apps and SMS. The second wave which has already begun is focused almost exclusively on payments and money movement. Person-to-person and interbank transfers are just the beginning.
A trio of factors — mobile devices, regulations, and payments — have changed the retail banking landscape. These factors have driven retail banking firms to adjust business plans to explore new channels, uncover new sources of revenue, and understand potential threats. eBusiness and channel strategy professionals must understand not only these trends but also their impact on how they run and orchestrate channels. I have recently released my report on current industry trends and specifically how those trends are impacting on eBusiness and channel strategy professionals, channel priorities, and 2012 growth opportunities. Here is my high level take on today's trends:
Regulations, mobile devices, and payments are changing retail banking. Three macroeconomic and technology trends are changing retail banking. The results for channel professionals are a focus on revenue generation, changing channel models, and payment innovation.
Branches are changing, driven by consumer trends and technology. The branches are undergoing big changes, driven by changes in consumers' channel preferences and technology. The result will be specialized sales and revenue-generating branches as well as branches that use digital technologies in multiple aspects of the business.
On Wednesday of last week, I had a chance to sit down with Seth Besmertnik, CEO of Conductor. Conductor is a search engine optimization (SEO) analytics vendor that provides a software solution that analyzes, reports, and recommends changes to a website based on third-party search engine data (e.g., Google).
The conversation was enlightening to me from many different perspectives. Previously, I had assumed that SEO was the realm of interactive marketers as evidenced by reports from my colleagues in the space. As Seth and I spoke, I soon realized I was dead wrong. SEO may be driven by interactive marketers but success in the area is highly reliant upon folks in eBusiness that build websites. Additionally, better websites can be built using insights drawn from SEO analysis. Here’s why:
Search is first step in the acquisition process for many financial service purchases. 52% of US online consumers who research a financial product online started at a search engine, and that was nearly five years ago. Today, that percentage has surely increased with the increasing number of online researchers. For products like credit card, the percentage of online researchers is more than a third of researchers overall.
The drive for revenue and the desire to improve the customer experience are converging within financial services, with one of the results being a renewed interest in new customer onboarding. On the revenue side, the importance of onboarding is clearer. A new customer who leaves after opening a new account is an expensive proposition. For something like deposit accounts, that attrition rate is somewhere between 25% to 30% of new customers, and when you add up the cost to acquire the account, the cost to open the account, and the potential loss of ongoing revenue, the impact can be huge to a financial services firm.
On the customer experience side, a new revelation has surfaced. Onboarding is to financial services what out-of-box is to companies like Apple computer. Apple sweats the details around the experience of getting, opening, and engaging with their devices. Financial service companies do little in that way, but that is changing with a renewed desire to improve the customer experience. That is where onboarding comes in. Onboarding is the out-of-box experience for financial service product. It is the processes and experience new customers have as they activate and utilize a new product.
An article in today’s New York Times entitled “The Exaggerated Impact of Bank Transfer Day” states that 214,000 customer opened accounts with credit unions as a result of the much ballyhooed Bank Transfer Day event. With as much media blitz around the event as there was as well as the rash of articles around Bank of America’s debit card fee situation, you’d think millions would have moved their accounts. We’ll that did not happen and here is why:
Consumers choose banks based on location as well as fees. Fees are just one factor in a consumer’s decision to “bank” with a given provider. As much or more a factor is bank access – more specifically convenience of branches and ATMs. In general, credit unions have fewer branches and ATMs than banks and do a poor job marketing benefits like fee-free ATMs and co-op branches.
Banks (and especially big banks) have the products and services consumers want. Credit unions are getting better but in general their account services are inferior to banks. Case in point digital services. Banks like Chase go way beyond the basics of digital services to include services robust transfer capabilities, advanced mobile offerings, and multi-touch point self service. Credit Unions provide the basics but seldom advanced digital services consumers are interested in these days.
We are very excited to announce the hiring of our newest analyst in the eBusiness and Channel Strategy team – Tiffani Montez.
Tiffani joins Forrester from Wells Fargo where she spent 20 years managing various aspects of digital strategy, implementation, operations and cross-channel integration across lending, investments and customer service. Tiffani joins a quickly expanding team which includes Peter Wannemacher, Bill Doyle, Ellen Carney and myself in North America dedicated to eBusiness and channel strategy for retail banking, lending, investments and insurance.
Tiffani’s will focus on digital financial service technologies including areas like mobile banking, personal financial management, online banking, person-to-person payments, automated account opening, etc. Tiffani will explore the vendor landscapes for these and other areas to help clients understand about how to make strategic vendor choices, implement new technologies, and create a operational team to manage the solutions once installed.
Additionally, Tiffani will expand on Forrester expertise in the lending area as well as cross-channel integration to drive sales and service strategies.
A result of the recent and continuing rash of government regulations is a renewed desire on the part of banks and credit unions to drive new sources of revenue and profitability. One outcome of drive for revenue is a renewed interest in cross-selling to deepen customer relationships.
Cross-Sell Strategy Is Not New
Cross-selling as a strategy is nothing new. Wells Fargo has been a champion of the concept for decades. Cross sell efforts in general have been marginally successful, with the average bank owning just 2.1 financial products out of nearly seven owned per household. The struggles of cross-selling to customers are two-fold. On the consumer side, there is a natural inclination that one provider cannot have the best product in all situations. On the bank side, organizational silos and a general failure to appreciate the impact of effective cross-selling on metrics like customer retention hinder success.
The Elements Of Effective Cross-Selling
So what makes for successful cross-selling? A well-defined strategy is an important but relatively easy part of the question. An analysis of the problem shows that execution is what separates success from also-rans. Effective cross-sell execution requires four key elements:
No topic has straddled the chasm of hype versus ROI as social media. The last few years have been a never-ending array of stories around successes using social media as well as pundits questing the validity and value of the social area. The financial services industry is increasingly playing a role in the social space, and the last two years have also provided clarity to the value of the social channel.
Like other industries, the majority of the efforts in the social space in financial services space were initially focused on the marketing area. The last two years have resulted at least four areas that show promise for social outside of pure marketing including:
Product development and innovation. Who better to ask about new product development or product enhancements than existing customers who own and use the product? Firms such as Chase tap social communities to drive product innovation that starts with the customer are using social very effectively
Community support. While financial decisions may be a personal activity, the path to these decisions is often steeped in social with segments like investors or small business looking to one another for peer comparisons and best practice sharing. American Express, TradeKing, and most recently E*Trade are using closed communities to drive service utilization and segment engagement by getting customer to interact with each other in the social space.