Assessing the state of Web site functionality in the financial services industry fifth update

Transcription

1 IBM Institute for Business Value Assessing the state of Web site functionality in the financial services industry fifth update It has been three years since the IBM Institute for Business Value began tracking Web site functionality of the key players in various financial services sectors. In the most recent assessment, performed in the spring of 22, without question, all sites have progressed tremendously, morphing from marketing tools to interactive, key channels. While a good Web site is dynamic both adjusting to and redefining expectations the questions now are: where can and should Web sites go from here? Where should financial services companies direct their investments to differentiate themselves and their sites? By Christy Maver

2 Contents 1 Methodology Findings 8 Conclusion 9 About the author Methodology The purpose of this assessment is to provide retail financial services executives with a means of comparing their Internet initiatives with those of their competitors. In this fifth assessment, completed in May 22, IBM Institute for Business Value consultants scanned 12 company Web sites in five financial sectors: brokerages, mutual fund companies, retail banks, life and health insurers, and property and casualty insurers. Looking at the sites of a broad range of brick-and-mortar and online companies in each sector, the Institute for Business Value rated functionality in 2 different areas on a scale of to, based on the breadth, depth and level of innovation displayed. These scores were then used to determine overall rankings for companies, categories of functionality and sector performance. In general, this analysis does not take into account Web functionality that is planned, in development or otherwise unavailable to site visitors. Though customer accounts would be required for a more-detailed report, we used online demonstrations to assess and compare certain functionality. When this study began in the fall of 1999, we attempted to capture the key elements of site functionality not only the critical requirements of the time, but also where future developments seemed to lie. These key elements were grouped into five categories (see Figure 1). Name Brochureware Posting print material directly to the Web without modifications Public tools and queries Account-specific access Product-centric commerce Customer-centric commerce Examples and characteristics Marketing and reference materials Quizzes, games, online quoting, interactive communication Content personalization, account opening and viewing, change of account information Sales, payments, transfers and claims Single login access to multiple products and accounts, multiple products beyond financial services institution (FSI) products Figure 1. Key elements of site functionality. Source: IBM Institute for Business Value. 1

3 As the selected company Web sites within each category improved over time, adjustments were made to the criteria of what should be measured. In this assessment, two significant changes were made. Effective technology deployment is when technology is Within customer-centric commerce, we stopped grading on whether used to enhance the user experience rather than disrupt the site sold multiple products beyond FSI products. Although or complicate it a balance between forward-looking this may have seemed like a component of an advanced site three technological features and ease of use. years ago an online supermarket where one could access their bank accounts and buy a pair of shoes in just a few clicks the trend has been more toward an online FSI supermarket. The repeal of the Glass-Steagall Act which once again allows banks, securities firms and insurance companies to affiliate with one another in a single holding company has blurred the lines within the industry. However, the distinction between finance and other industries remains clear, making non-fsi product sales irrelevant. The second change made was within business efficiency. A catch-all category, where are Web sites headed? was where the Institute for Business Value tracked the small business presence, technical performance, traffic promotion and the ability to migrate customers. This category was whittled down to what the research showed to be the two most important overall factors in a Web site: effective technology deployment and customer migration. Effective technology deployment is when technology is used to enhance the user experience rather than disrupt or complicate it. Many Web sites feature so much technology that simple functions become confusing, thus defeating the purpose. A well-scoring site in this category is one that strikes a balance between forward-looking technological features and an ease of use that isn t bogged down with excessive graphics or complex links. 2

4 Customer migration refers to an apparent effort made to deepen relationships through the online channel. Certainly less tangible and more subjective than other criteria, customer migration could also be described as site panache. Each Web site was assessed, based on these questions, Does this site make me feel welcome? Is it attentive to me and my needs? And does it have that certain something that makes me want to stay? After months of customer-centric promises, financial services Web sites are delivering on functionality that caters to customers comprehensive financial needs. Findings The report from the IBM Institute for Business Value concludes: After months of customer-centric promises, financial services Web sites are delivering on functionality that caters to customers comprehensive financial needs. The move toward convenience coincides with industry consolidation, as the sector lines are blurring. Banks are still the leaders in setting functionality table stakes. Insurance and brokerage pure plays continue to lead their traditional counterparts on a sector basis, while traditional banking and mutual fund sites are outperforming their online competitors. Though insurers are slightly behind, banks, brokerages and mutual funds have demonstrated that account-specific access and product-centric commerce are now table stakes. Key findings Financial services companies are not the only ones who have been tossing around the phrase customer-centric for a while. A customer-centric site is one that is designed with the customer s point of view in mind: what does the customer want to do on the site? What functionality is going to make the customer s life easier? In theory, all sites should take a somewhat customer-centric approach as the correlation between a successful site and satisfied customers is obvious.

5 However, this is easier said than done, and in financial services, two factors have made customer centricity difficult for companies and Web sites to achieve. First, customers are becoming more demanding. As technology progresses and customers learn what is available to them, they are constantly expecting better, faster and more personalized services. What used to satisfy or even impress customers three years ago may now be a baseline requirement. Second, many financial services companies are steeped in over 1 years of product centricity. Marketing, selling and servicing in financial services has traditionally been designed around specific product lines, creating a disconnect between the customer s needs and the institution s approach. Yet, in this assessment of Web site functionality, we see great progress being made. Many sites have taken customization to the next level by offering personalization and advice. From a site scanner s perspective, we measured this by the extent to which personalization and advice were promoted on the site and the various segments targeted on the public home page. Additionally, most sites now allow customers to check multiple accounts with a single login. This constant move toward making the customer s life as convenient as possible especially when it entails breaking down the product silos within which financial services companies are likely to reside demonstrates that these Web sites are now truly focusing on customer centricity. The move toward convenience coincides with industry consolidation, as the sector lines are blurring. Many sites are offering products beyond their traditional industry. Again, thinking in terms of customer centricity, this makes sense. This assessment, more than any other update, uncovered many sites that were attempting to be multi-fsi providers. Of course, this online functionality mirrors the consolidation occurring in the offline world. Yet, even for those companies that are selling only their own products, many are enabling customers to view accounts from other industries and products. Not only does this take personalization and advice to a new level, it also implies that the site is part of a bigger picture: a comprehensive financial solution. And it doesn t matter if that solution comes from a banking site, an online brokerage or even an insurance Web site. 4

6 Banks are still the leaders in setting functionality table stakes. Industry specifics For three years in a row, banking Web sites have had the highest score (or tied for the highest score) in every category of functionality (see Figure 2). Though mutual funds and brokerages are gaining some ground in account-specific access and product-centric commerce, banks clearly dominate. This should not come as a surprise, as banks are the most popular of the online financial services providers, just as they are the most popular offline. People are more likely to have a checking account than a brokerage account. This may have given banks more incentive to push their Web site functionality forward, as the customer expectations, interactions and feedback were greater than in other industries. Adding to their best-in-class score in product-centric commerce, as was established in the December 2 update, banks now have a best-in-class score in brochureware as well. This is mostly due to the significant improvement in the availability and usage of third-party content. Not surprisingly, banks also made a giant leap in customer-centric commerce, again due to the fact that many people view their banks as their primary financial services provider. Most banks allow a single login to multiple accounts across multiple financial industries. Additionally, many bank sites are increasingly offering aggregation to allow customers to see their entire financial picture. 5

7 Categories of functionality Brochureware Public tools and queries Account-specific access Brokerage Mutual funds Banks Life and health Property and casualty Product-centric commerce Customer-centric commerce Business efficiency Brokerage Mutual funds Banks Life and health Property and casualty All industries are ranked on a scale of to. = Nonexistent = Best-in-class May 22 Jun. 21 Dec. 2 Jun. 2 Sep Mar Figure 2. FSI site functionality by sector (top 1 incumbents). Source: IBM Institute for Business Value 6

8 The next steps for these companies will involve integrating the Web site fully with the back, middle and front office to allow for a total customer view. Though integration cannot truly be measured from a site scan, it will be measured in terms of customer acquisition and retention. Insurance and brokerage pure plays continue to lead their traditional counterparts on a sector basis, while traditional banking and mutual fund sites are outperforming their online competitors. When this study first began, we wondered if pure plays would threaten the incumbents. In general, that has not been the case. In fact, with each update of this study, the number of pure plays has diminished, leaving fewer companies that can compete on the same level of functionality. In the insurance industry, there are two that remain viable competitors. It makes sense then, that these surviving sites would be best-in-class, or at least better than the incumbents. In the brokerage industry, pioneers such as E*TRADE which started as a simple online brokerage and has turned into a sophisticated financial solutions provider have raised the performance level of the pure plays. For the first time since this study began, brokerages, mutual funds and banks all received the same score in account-specific access. Each industry excels in a different way. Brokerages provide password-protected, value-added content, which helps customers make decisions related to their accounts. Mutual fund sites excel at offering content personalization and account viewing, both of which are necessary to prevent being overwhelmed with too much information on too many funds. Banks are best-in-class at allowing users to open checking and savings accounts online, which should not be surprising because a checking account is possibly the least complicated financial product. Presumably, the customer requires little, if any, interaction in making decisions surrounding basic banking products. Insurance companies, on the other hand, are still lagging in this category. Some life and health sites have improved account servicing, but very few allow account opening. Even when flashy links tempt the user to purchase a policy, a click-through usually reveals information only on how to contact a local agent for more information. 7

9 Conclusion Financial services companies should be commended on the progress they ve made over the past three years. Though they are often criticized for resisting change, each assessment has demonstrated a move in the right direction a move toward customer centricity. Yet, while there is always room for improvement, the marginal benefits of site enhancements have decreased, at least in terms of what this study attempts to measure. If a site allows a user to perform the defined criteria in a clear way, what change in site functionality is going to enhance the experience for the customer? The answer does not lie in a site scan, but rather, behind the scenes. The next steps for these companies will involve integrating the Web site fully with the back, middle and front office to allow for a total customer view. Though integration cannot truly be measured from a site scan, it will be measured in terms of customer acquisition and retention. In this light then, this study may well indicate who will lead this next wave of integration enhancements, as only those with a solid site foundation can move into the next phase of creating the most compelling customer experience. We would welcome the opportunity to help you assess your current situation and develop a strategy based on your organization s unique needs. Contact us at ibv@us.ibm.com if you d like to explore how we might put our experience and creativity to work for you. To browse other resources for business executives, we invite you to visit our Web site: ibm.com/services/strategy 8

10 About the author Christy Maver is an Associate Consultant in the IBM Institute for Business Value. Christy can be reached at The Institute for Business Value develops fact-based strategic insights for senior business executives around critical industry-specific and cross-industry issues. Clients in the Institute s member programs the IBM Business Value Alliance and the IBM Institute for Knowledge- Based Organizations benefit from access to in-depth consulting studies, a community of peers and dialogue with IBM strategic advisors. These programs help executives realize business value in an environment of rapid, technology-enabled competitive change. You may contact the author or send an to bva@us.ibm.com for more information on these programs. 9

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