White Paper Online Banking Meets Online Buying: Five Best Practices from Online Retailers
Online Banking Meets Online Buying: Five Best Practices from Online Retailers When it comes to online banking and online buying, consumers have fundamentally different mindsets and expectations. When banking online, consumers typically focus on a specific task, and they place a priority on both utility and ease of use. High levels of security and privacy are expected. When shopping online, consumers typically browse before they buy. Marketing messages and product pitches are expected, even welcomed. Many consumers willingly provide input on their personal preferences in order to receive recommendations on products of interest and share purchase wish lists. Knowing the differences in how consumers approach online banking and online buying, no financial institution should set out to model itself after Amazon or itunes. However, there are a few tricks bankers can learn from online retailers in order to boost customer engagement and create cross-sell opportunities in the online channel. Following a series of consumer focus groups and a June 2011 survey of 3,000 U.S. consumers who both bank and buy online, Fiserv has identified five best practices financial institutions can adopt from online retailers in order to market products and services through online banking without alienating users. The key for financial institutions is to strike the right balance between banking and buying and to maintain consumers trust. Consumers Hold Financial Institutions to a Higher Standard While consumers have come to expect targeted marketing from online retailers, the Fiserv Consumer Insights survey 1 and focus groups indicated they hold their bank or credit union to a different standard when it comes to cross-selling. As one participant shared: I feel like I have a different relationship with my bank and my doctor than I have with my retailer. I expect them to act to a higher standard. I expect Amazon to sling stuff at me to see what I ll buy. That s what I m there for. But I want my bank to act differently. However, this expectation of a higher standard does not mean that consumers will not buy products or services from banks or credit unions. According to TowerGroup, consumers will purchase products and services that their financial institution offers, particularly via the online channel. More than half of the surveyed consumers who had been presented with an offer while banking online ultimately purchased the product or service (See Figure 1). 1 Fiserv online survey of U.S.-based consumers ages 21-64 who use online banking at least once per month and had made an online purchase at a retail site in the previous six months, June 2011. 1
Figure 1: Consumers are Most Likely to Purchase from their Financial Institution via the Online Channel Were you offered a product or service from your financial institution? If so, did you ultimately buy the product or service? Figure 2: Online Banking is Key to Financial Institution Satisfaction How important is online banking to your ongoing satisfaction with your financial institution? Source: Fiserv Consumer Insights Survey, June 2011 Five Best Practices to Adopt from Online Retailers Source: TowerGroup CEB Financial Services Customer Experience Survey, 2010. (1) Counts indicate the number of survey respondants who indicated they received an offer from the listed bank channel. Despite expecting more from their bank in terms of what and how they cross-sell, consumers will respond to offers from their financial institution. The key is to understand consumer preferences for cross-selling and targeted messaging in an online banking service in order to find the balance between banking and buying that consumers will accept. It is important for financial institutions to strike this balance, particularly in the online channel, because online banking is a key driver of customer satisfaction. Over 75 percent of participants in the Fiserv Consumer Insights survey stated that online banking is very important not only when choosing a financial institution but also for sustaining satisfaction with their bank or credit union (See Figure 2). Fiserv has identified five best practices from online retailers that we believe will help banks and credit unions boost customer engagement and create crosssell opportunities in the online channel. The Five Best Practices for Online Cross-Selling: 1. Make it easy for users to find what they want 2. Offer a personalized online experience 3. Target the message to the right customer, the right way 4. Position recommendations in a helpful, friendly manner 5. Focus on what you know Make it Easy for Users to Find What They Want Online retailers position hot items front and center on their sites, and so should financial institutions, albeit for different reasons. 2
According to the Fiserv Consumer Insights survey, ease of use is the primary driver of customer satisfaction with online banking. Among consumers who were very satisfied with their online banking service, 31 percent attributed their satisfaction to the site being easy to use, and for many consumers ease of use equates to convenience. As such, it is important for banks and credit unions to make it easy to locate and accomplish specific tasks by prominently positioning frequently used online financial services. Online bankers are task-oriented and become annoyed if the flow of a task is interrupted with unrelated advertisements. Bankers should instead strive to make related offers as part of the task flow, such as displaying an offer for a home equity loan alongside a mortgage payment window, or displaying offers when a task is complete or when a user is leaving the site. No user wants to wade through splash pages or pop-up ads when logging in to make a quick bill payment. personalized greeting ( Hello Jack / Welcome Back Mary ) or the ability to edit their profile and account information. However, these are both areas where the online banking experience lags the online buying experience. For example, over 70 percent of survey participants indicated they were highly satisfied with the ability to edit their profile and account information at Amazon.com, while fewer than 50 percent said the same of their online banking service (See Figure 3). Figure 3: Consumers are More Satisfied with Their Ability to Edit Profiles at Online Retailers Of the companies you selected as providing the best online experience, please indicate your level of satisfaction with Editing your profile and account information. Offer a Personalized Online Experience When describing their ideal banking relationship, consumers use words like friendly, easy and trustworthy language that indicates a personal relationship. Leading online retailers excel at personalization greeting customers by name and making it easy to edit account information. At Amazon.com, customers can even improve their own product recommendations by ranking their interest in items on a scale of one to five. Much has been made of the use of complex analytics and algorithms that work behind the scenes to generate recommendations, but the idea of asking customers to actually let you know about the products and services that interest them is ingeniously simple. In truth, personalization does not have to be complex. It can be as simple as providing online bankers with a Source: Fiserv Consumer Insights Survey, June 2011 A personalized experience can help users feel more comfortable and connected. It can also help build the credibility necessary to more effectively cross-sell. Target the Message to the Right Customer, the Right Way The use of personalized recommendations and targeted messages is prevalent in online retail, but where or how does it fit in online banking? The fact is that every offer a financial institution makes to a customer can 3
be targeted using the most basic information. Offer pre-qualification starts with the question: does the customer already have this product? Despite the fact that this is seemingly a given, financial institutions often blanket their entire customer base with an offer, with no consideration taken to eliminate customers who already have the product. Consumers who participated in the Fiserv focus groups indicated that receiving offers for products or services they already have is not only an annoyance, but a sign that their financial institution does not really know them. A better approach is to develop a list of next-best products and services to present to users based on their needs, instead of relying solely on financial institution sales goals to define offers. Offers should be presented to customers based on simple rules: 1. They do not currently have the product or service. 2. The product offered goes well with a product they do have, for example, offering overdraft to a checking account customer. 3. They are pre-qualified for the product, for instance, having the credit capacity and re-payment history to support a new credit card or preferred loan rate. 4. The service will provide added convenience or protection, as is the case with paperless statements or alerts to help customers prevent fraudulent transactions. 5. Offers are prioritized and limited within certain time frames so that customers are not overwhelmed or irritated. The first step to successful targeting is for financial institutions to use information they already have about their customers in combination with information that is readily attainable in order to hone in on the most promising candidates for an offer. This approach can deliver significant returns on effectiveness without requiring outsize investments of time or money. Position Recommendations in a Helpful, Friendly Manner Online retailers are adept at positioning products for cross-sell without appearing to actually advertise the products. Instead of displaying banners or boxes touting product benefits they present recommendations in a more subtle and social manner. Recommendations based on prior purchases, browsing activities and what other customers have purchased or viewed are presented using low-key language. Letting consumers know that video game buyers who purchased Madden NFL 12 for Xbox also bought NCAA Football adds a social element to the online shopping experience. This social element is further heightened when combined with the ability to read reviews from other customers, making offers seem more like a personal recommendations from a friend than an attempt to cross-sell. This seemingly casual approach to cross-selling can be extremely effective because it positions products in a more objective manner. Consumers may also feel a deeper connection to the product or service being offered and to the company making the recommendation. As a result, consumers may be more likely to consider and potentially purchase the product or service. Taking a Social Approach In addition to taking a softer approach to cross-sell with language that positions offers as suggestions or recommendations, financial institutions should consider adding more social elements to their sites as a way 4
to promote products and services via conversation among consumers. This can be done through a social media presence on sites such as Facebook and Twitter, but can be taken a step further by enabling customer comments on the financial institution website. A handful of financial institutions enable such comments today, but with the rise of mobile banking it may make sense for more financial institutions to consider this feature. If your mobile banking apps are available in third party app stores such as the iphone App Store and the Android Market consumers already have an opportunity to comment, so why not enable them to do the same on your own site? Figure 4: Third Party Offers Impact Online Banking Satisfaction Please indicate the impact each would have on your level of satisfaction with your current online banking solution. Source: Fiserv Consumer Insights Survey, June 2011 Focus on What You Know When consumers are engaged in online banking, they are most receptive to offers about products and services that will enhance the banking experience or that are related to financial management. That does not mean that third party offers are strictly off limits for all consumers, but there are a number of factors financial institutions should consider before venturing into this territory. Research indicates that the permissions consumers allow online retailers do not always extend to online banking. For example, while consumers respond positively to third party offers at online retail sites, third party marketing at an online banking site has a negative impact on trust and satisfaction (See Figure 4). That is not to say third party offers are off limits to financial institutions, but it is important to be aware of the potential impact and to act accordingly. For many consumers, what differentiates one third party offer from another is whether or not they perceive the offer to provide a clear benefit to them. As one focus group participant stated: If it s tailored and a benefit to me instead of just the bank, then I would pay more attention to a tailored message. If you are helping them save money, providing valuable financial management tools or finding ways for them to increase their assets, customers are more likely to respond and have a positive reaction. Again, finding the right balance is critical and third party offers require careful consideration and planning. Offering a course on financial management from a third party might make sense, while offering a deal on new tires is probably too much of a stretch, even if the customer does have a car loan with your institution. Consumers in the Fiserv focus groups found it difficult to reconcile these types of offers with their financial institution, and many indicated that they perceived third party offers outside of financial services as a violation of the relationship. 5
Consumers are not entirely opposed to cross-selling within online banking provided it is conducted in a noninvasive manner and the recommendations being made reflect a commitment to helping consumers meet their financial needs. The Fiserv Consumer Insights survey showed that 53 percent of consumers are open to financial institution product recommendations, as long as they are tailored specifically to them. An additional 21 percent are open to financial institution product recommendations as well as third party product recommendations, while only 12 percent said they would not be open to either type (See Figure 5). Figure 5: Consumers are Most Receptive of Financial Institution Product Recommendations Assuming the recommendations and offers contained in each message were tailored specifically to you based on your banking needs and activities, which ONE of the following types of messages would be most compelling to you? selling should be done in a friendly, helpful way and the recommendations should be based on an interest in helping consumers protect, grow or manage their finances. Finding the right balance to meet your customer s preferences and expectations will help you enhance your cross-selling success. Next Steps: Engaging Consumers in the Online Channel As the evidence shows, consumer expectations are very different when it comes to online banking and online buying. The differentiation lies in the nature of the relationship consumers have with their bank or credit union and the mindset one has when going online to bank. When consumers use your online banking service, they are typically there to complete a transaction or accomplish a specific task. While no financial institution can be, or should be, just like Amazon or itunes, there are strategies and tactics financial institutions can learn from online retailers that will help enable successful cross-sell within online banking. The key is to find the right balance between allowing users to conduct their business quickly and efficiently and using targeted marketing and messaging to deliver a more personal and valuable online experience. Source: Fiserv Consumer Insights Survey, June 2011 Bottom line, consumers want their online banking service to allow them to conduct their banking activities quickly and easily, but that does not mean there is no room for marketing or cross-selling. However, banking should come first and selling should come second. It is important to keep in mind that any cross- 6
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