According to a recent report from US digital marketing
intelligence specialist comScore, online banking is continuing to
grow in importance and popularity to the banking customer. But good
customer service is paramount in ensuring customer loyalty.
Victoria Conroy reports on the key findings.
Go deeper with GlobalData
Much has been said about the rise of internet banking
over the past decade, and it is estimated that approximately 55m US
households now routinely use the service. One of the major
benchmark surveys of the online banking landscape in the US is
published by comScore, in its annual State of Online
Banking report, which leverages behavioural data obtained via
the comScore panel of 1m US internet users as well as information
gathered through a survey of more than 2,500 US internet users to
provide an in-depth look at online banking. Its 2010 study,
published at the end of May, was compiled from data gathered
between March and April 2010.
Unsurprisingly, online banking continues to
grow in importance for the average US consumer. Since the inaugural
comScore online banking report in 2006, the number of banking
customers visiting the top 10 online banking sites has increased
from approximately 40m people to more than 58m people. In any given
quarter, nearly 60% of the total US internet population visits at
least one of the top 20 financial institution websites.
However, there are challenges to organic
growth. Quarterly growth rates in the 1% to 2% range, compared to
5% to 10% in the middle part of the decade, indicate that
penetration of online banking is reaching maturity.
Although online banking customer volume is not
growing quickly, its importance in the day-to-day lives of US
consumers continues to increase; hence banks continue to develop
new products and services to enhance the channel.
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By GlobalDataAs online banking customer acquisition growth
slows, firms are seeking to improve customer satisfaction and
reduce attrition. In 2010, 70% of respondents reported being
satisfied with their primary bank, a marginal decrease versus last
year. Certainly, this decline reflects the discomfort felt by
consumers having to confront their own less-than-pleasant financial
circumstances, as well as limited consumer credit availability and
low savings interest rates.
Satisfaction ratings at smaller regional and
community banks as well as credit unions are generally much higher
than at larger banks.
Overall institution satisfaction is highest for
regional banks at 79%, followed closely by credit unions at 75%.
However, these smaller firms generally had lower website
satisfaction scores, perhaps reflecting that overall institutional
satisfaction in this niche is not related to the online
interface.
It is interesting to note the apparent lack of
correlation between a website’s features functionality and customer
satisfaction, given the fact that credit unions and community banks
have similar online satisfaction scores when compared to the large
banks like Bank of America and Chase.
Loyalty challenged by consumers’
wariness
Driving customer satisfaction will
become increasingly challenging as consumers continue to display
less brand loyalty to a single institution.
The comScore survey shows that nearly half of
respondents use more than one financial institution for their
banking needs. This enables simple comparison of websites and
service features, but more importantly allows consumers to move
funds effortlessly between providers. Clearly, retaining customers
will continue to be one of the most important challenges facing the
banking industry in the coming year.
With slowing acquisition of new online
accounts, it is imperative that banks find ways to tap into the
market segment that does not bank online for security reasons. In
2010, 44% of survey respondents said that they feel more secure on
their financial institution’s website when compared to last year.
Though comfort with online security among consumers has increased
in recent years, the online banking industry cannot afford to be
reactive to the needs of their prospects.
There is still a significant segment of
consumers that do not feel secure enough to bank online and a
segment that does not feel comfortable with new tools like online
bill pay. When survey respondents were asked why they feel more
secure this year than last, the top ranking reasons were
independent of actions taken by banks to increase security. Nearly
40% of respondents said that they felt the new security software on
their computers increased their security when banking online. A
similar share (37%) cited that the internet as a whole had become
more secure.
Given the importance of consumer perceptions of
security at online banking sites, there is a significant
opportunity for banks to address this concern and reach an untapped
segment of the market.
Communication
strategies
As more people move to online banking
as their primary method of managing accounts, email has become a
low-cost way to reach current and prospective customers. Most
financial institutions have implemented a variety of e-mail
communication strategies to reach and engage their customers,
including new product offers, paperless statements, automatic bill
pay and balance alerts. Consequently, 52% of survey respondents
recalled receiving email communication from their primary financial
institution in the last six months.
Out of those that recalled receiving one or
more communications, 31% said they received offers to sign up for
balance alerts, followed by paperless statements (27%) and bill pay
alert (23%). More respondents recalled receiving communication
about signing up for online servicing features (22%) than signing
up for financial products (9%).
Email communications often include promotions
and financial information, but they mainly promote online servicing
activities, with nearly one-third of all emails urging customers to
go paperless or pay a bill online.
These emails are effective in promoting active
use of the online interface, but fail to get customers to open new
accounts. Of respondents who received email communication, 33%
logged in to their existing account and 21% reported paying a bill,
while just 3% opened a new account.
Bill pay surges in
popularity
A new milestone has been reached in the
online banking world with the widespread adoption of online bill
pay, now utilised by 64% of the online banking community, up 19
points from the previous year. Consumers are using both their
primary financial institution’s website as well as the billing
merchant to pay bills.
Automatic/recurring bill pay also witnessed
significant growth in the past year, with 52% of respondents now
utilising the service, up 10 points from the previous year.
Merchants have helped fuel growth in this area by offering
significant discounts to customers who utilise these options. For
instance, insurance and utilities companies have offered up to 10%
off for setting up a recurring bill pay through their online
interface.
Yet even with attractive promotions and a
user-friendly online interface, 36% of online bankers do not use
online bill pay at all. Nearly one-third of the respondents cited
worries about the security of these companies’ websites as the main
reason why they do not pay bills online. Around 22% still prefer to
have the monthly reminder of a paper statement to pay their
bills.
Reflecting the uncertainty people feel with
their personal finances, 14% of respondents did not enroll in
automatic/recurring bill payment due to a lack of confidence that
they would have adequate balances in their account to cover future
payments.
On a positive note, this uncertainty has
significantly dropped from the previous year when 38% of
respondents cited this as a reason for not enrolling. The top two
reasons underscore the notion that consumers are still not quite
comfortable with banking entirely online, preferring to closely
monitor their bills and to ensure that their money is secure before
payments are made.
Steady growth in the utilisation of online
statements and online/automatic bill pay is being driven by a
number of changes in the online banking industry. With increasing
environmental awareness and financial incentives, 58% of
respondents are now enrolled in paperless statements with their
financial institutions, up from 53% last year.
Of those with paperless accounts, 69% of
respondents are enrolled in paperless options for their
checking/saving, while paperless penetration rates are much lower
for other financial products such as credit cards (47%), insurance
(28%) and brokerage (16%).
For more volatile accounts that change from
month to month, such as credit card, brokerage and savings
accounts, consumers seem to prefer receiving a hard copy of their
statements. However, online banking customers are increasingly
comfortable using the online interface for recurring monthly bills
from utility and insurance companies.
As online banking becomes more and more
prevalent, the proximity of physical bank branches becomes less
important. That said, services such as ATMs are an absolute
necessity and therefore proximity of branches/ATMs continues to
feature as one of the major drivers in opening an account. Though
down from last year, when asked about reasons for opening new
checking and savings accounts, 67% of respondents indicated that
free checking was the most important attribute. Undoubtedly, this
poses a distinct challenge for firms with recent legislative
changes making the economics of free checking unsustainable, even
as it sets the baseline for consumer expectations.
Social marketing increases in
importance
In the last year, the quality of
customer service has grown in importance to consumers. In 2010, 22%
of respondents cited customer service as important in their
decision, over five times as many respondents as in past years.
Similarly, nearly twice as many respondents
expressed interest in free mobile banking, highlighting the growing
importance of remote banking to consumers. Lastly, with low savings
interest rates and virtually no high yield savings accounts
available, high interest rates lost their place as an important
motivation to open a new account.
