Think Outside The Lockbox

As banks continue to woo customers with online services, they face a challenging courtship. The good news: Customers' comfort with such transactions is growing as they become increasingly confident in banks' ability to protect sensitive data.

A recent poll by Barry Leeds & Associates, a market research firm in New York, reveals that 68% of respondents completely or strongly agree that Internet banking is secure. That's a significant increase over the 48% who held that opinion a year ago.

Customers who are no longer leery of online transactions are good for business. Online services increase customer satisfaction by letting them access information at their convenience. They also save banks time and money over transactions that use bank tellers or call-center employees. And many transactions can be transferred to the Web. Case in point: The treasury group of PNC Bank, a subsidiary of PNC Financial Services Group Inc., says that 80% of the client calls it handles could be converted to Web-based self-help. "We want customers to have a choice, not force them to adapt," says Tim Shack, CIO of the Pittsburgh bank.

But while customers cozy up to cyberspace, there's a catch. As people embrace the Internet, their expectations grow. That's reflected in the results of a recent Gallup survey, which shows a decrease in customer satisfaction with online banking. Only 62% are very satisfied this year, compared with 69% last year. Nine percent aren't satisfied, up from 5% last year.

The bottom line for banks is that standard services won't cut it anymore. "If you give somebody an inch, they'll want a mile," says Ray Graber, a senior analyst at the Tower Group. "First, people start to accept making online transactions, then they want to be able to view the balance sheet of their net worth." Customers are looking for more services, more features, and improved functionality. It's time to think outside the lockbox.

That's what Wells Fargo & Co. did. In February, the San Francisco company launched an aggregation service called Wells OneLook that lets customers view all their accounts--even accounts from competing banks--with a single sign-on and password. With technology from account aggregator Yodlee Inc., more than 2 million Wells Fargo customers can use the Web to access current balances and last transactions for checking, savings, investments, and credit cards, as well as personal accounts like online travel rewards.

Here's how it works: When customers sign up for the aggregation service, they give Wells Fargo passwords for all accounts they wish to access. This is a deal-breaker for certain customers, Graber says, because some people have no desire to divulge passwords for the sake of convenience. Other customers value the ability to access accounts at one site.

Aggregation is relatively new to banking. Citibank, a subsidiary of Citigroup Inc., was the first to implement it in July 2000. But as customers demand more innovative online services, aggregation services are gaining momentum. About 10 of the 25 largest U.S. banks will offer account aggregation by year's end, Graber says. He expects the remaining 15 to implement it by the end of next year.

Northern Trust Corp. plans to launch an aggregation service this fall, also powered by Yodlee. "We're not only taking our content, but data from other financial providers as well," says Tim Theriault, chief technology officer and executive VP. "That will allow us to offer more advice consultation to clients, because we'll have a more complete view of all their assets."

Some companies are reluctant to make competitors' information readily available to customers, but many banks view aggregation as a powerful cross-selling opportunity that lets them create targeted marketing, Graber says. When Bank X, which offers aggregation services, can see that certain customers are using Bank Y's brokerage services, that gives Bank X a better shot at soft-selling those customers with promotions to bring them over to its own brokerage services. The key is to use customer information carefully, Graber says. Otherwise, they'll say, "'I didn't sign up for this service so I could get marketing calls at dinner time.'"

Aggregation services aren't the only ways banks are thinking outside the lockbox. FleetBoston Financial Corp. is doing so, literally. In May, the company introduced a Web-based deposit box to let customers store documents online. For a flat fee of $7.95 per month, customers get 20 Mbytes of storage space. The service is geared toward small businesses and home offices that want to ensure the safety of their files. FleetBoston's customers sign up for the service at http://www.filetrust.com and don't need to install any software to access the service. After receiving a personal ID and password, they can upload, download, and view files in a variety of formats.

PNC went outside its typical mode of operation this year, offering customers the supply-chain automation solution it's been using in-house. Last year, the bank partnered with Ariba Inc. and FreeMarkets Inc. to conduct online requests for proposals and reverse auctions. PNC employees use Ariba's Buyer E-procurement platform to make purchases from select vendors, and E-learning company SmartForce LLC trains PNC employees on the Ariba system. BillingZone, a joint venture with Perot Systems Corp., provides PNC with the system to support the delivery and payment of electronic bills.

PNC expects to save $16 million a year with the supply-chain automation effort. It's now planning to share the secrets of the system with its customers. "This expands our role beyond traditional banking products and provides an unprecedented level of support for both buyers and suppliers throughout the procurement and payment process," CIO Shack says.

While new technology can build customer loyalty, it can also help identify new customers more effectively. Just ask BB&T Corp. The Winston-Salem, N.C., bank has improved its cross-selling ratio with Customer Miner, a campaign-management application from NuEdge Inc. that uses thin clients to connect to a relational database and performs ad-hoc queries on customer data. A segmentation feature lets managers quickly identify the highest-revenue customers and the ones who generate the most profit.

BB&T can translate as many as 5 million records into reports within several minutes, a process that used to take days. That's critical because banks have a big incentive for cross-selling. Customers are less likely to switch to another bank when they have many products and services coming from one place, says Jim Strieber, senior VP of IT services and strategic planning at BB&T.

While banks appear to be meeting clients' demands for Internet services, there's still room for growth. PNC has been very aggressive with its Web efforts, adding new cash-management services for business clients, including online stop payment, image inquiry, and wire payment. Nearly one-quarter of its deposit customers view their account information online. Still, the bank knows it's only achieving half its potential, since just half of the bank's customers have Internet access.

Banks such as PNC find it's tougher to differentiate themselves with online services. Customers are increasingly Web-savvy, and they expect more--but that doesn't mean they expect everything online. Wells Fargo's Commercial Electronic Office lets customers track wire transfers online to see if they've gone through, but some customers are still dialing the call center a half-dozen times to check on transfers. Even though that creates additional expenses for Wells Fargo, the bank doesn't plan to eliminate the call center until 2003.

The way Northern Trust's Theriault sees it, online services are great for tactical decisions, but there's still a place for face time when it comes to strategic decisions. "There's great value in us empowering clients to perform a lot of transactions, to be educated," he says. "The key thing we're trying to do is align online services with our personal service, not replace it."

When Northern Trust's clients are planning their wills, they can learn about it through the bank's Web site, but ultimately, they'll want to sit down with an agent, Theriault says. "There are moments when personal contact is relevant and necessary. The end game, we believe, is finding the optimal way to tie online to brick and mortar."