Internet Banking: Why it should be in a Bank Marketing Strategy Plan

  

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Sixty percent of the Households in the US are doing business with one of the four largest banks – Bank of America, Wells Fargo, JP Morgan Chase, CitiCorp.

At the same time, however, 60% say they would prefer a community bank.

So why this disparity between preference and reality?

One, the study respondents perceive the big banks to be more convenient because of their iniquitousness.  To many, a branch on every corner equals convenience and to many others it translates in top of mind awareness. The convenience perception is true to an extent, but not so much anymore.

Second, and by far more importantly, the larger banks are perceived to be more sophisticated technologically.  Not true, you say, and to a large degree you are correct.  Community banks have access to all the same on line features the big banks do…online account opening, mobile banking, on line account access, bill pay, etc. etc.

The difference, according to the survey, is the face of the technology, the website.  The difference is that the presentation and functionality of the websites of most community banks appear to be behind the times.  The technology and the website are not integrated.

So why is a website and the internet so important?  Well, let’s take a look at some additional research.

Delivery channel preference has shifted dramatically, and will continue to do so.  Between 2007 and 2011 the preference for internet banking grew from 23% to 62% while a preference for banking in a branch dropped from 36% to 20%. 

 To illustrate this preference for the convenience of the internet consider the following:

• 70% of consumers go online to research banking products/services, up from 42% five years ago (83% for checking accounts)
• Going online to check balances online has increased from 40% to 68% in the last five years
• 35% of respondents say they turn to online or call centers for financial advice
• 60% use online channels for funds transfers, twice what it was just five years ago

Overall customer visits to bank branches has also declined dramatically.  Last year 61% of bank customers indicated they had visited a branch within the last month.  (See Figure 3)

“Well, that’s a lot,” you may say.  But consider in 2008, that figure was 98%.

In the last 15 years community bank branch traffic has declined an average of 4% per year or an accumulated 90%.

And deposits through branches have declined by 45% since 2008, and with the growth of Remote Deposit Capture, are projected to decline by 90% by 2014.

“Oh,it’s just the young people who are doing all this online stuff,” you might say, “the older folks with the money aren’t doing that.”

Well, let’s look at the primary adult market segments:

• Traditionalists:  Born before 1946
• Baby Boomers: Born 1946 to 1964
• Generation X: Born 1964 to 1981
• Generation Y (Millennials): Born early 1980’s

Traditionalists:  Most have not adopted technology in a way that makes them heavy users of the internet – especially for banking – although many of the younger traditionalists, those 70 and younger, are heavy technology users.

Baby Boomers:  The oldest Baby Boomers are just now reaching retirement age.  Therefore, they have experienced a technology explosion in the workplace.  They have lived and worked through an era during which one adapted to technology or became a functional illiterate in the business community.  They are also a generation that demands convenience and seeks expeditious solutions and services.  In general they are very technologically savvy and they tend to use it to save time.

Generation X:  There is some overlap in attitudes toward technology between the older Gen Xers and the younger Baby Boomers, but the younger end of Generation X grew up with technology and have witnessed dramatic and rapid advances in computers, telephones, televisions and personal devices.  They obviously are candidates for technology based delivery channels for financial services.  The youngest of this generation are now in their early 30’s so they are also a significant component of wage earners and growing families.

Generation Y:  This group - along with the younger Gen Xers born after 1975 – doesn’t even think of personal computers, smart phones, iPads and DVR television as technology.  To them these devices are appliances and are not viewed much differently than refrigerators and toasters.  Personal electronic devices are utilitarian and a routine part of everyday life.

Considering these market segment characteristics, it becomes obvious that the vast majority of bank customers and potential customers are not only comfortable with technology and the convenience it can bring to banking, but that they demand it.

The definition of convenience in banking has changed.  It does not exclude physical locations, but it has added quick, easy, intuitive electronic banking that includes virtually everything you can do in a branch including opening accounts and originating loans.

Here are two quick anecdotes that illustrate the point.  1) A young professional, 29 years old, earning a six figure income, purchased a high end imported sports car.  He completed the entire set of transactions on line.  Selected the car, the color, the accessories and placed the order.  Applied for and received a loan.  Was notified the car was ready for delivery.  He had literally no interaction with a human being until he picked up the car.  2) A 32 year old teacher has been working for nearly 10 years and had an account at her bank since college.  How many checks has she written?  She still has her starter kit.

So what’s a community bank to do in the environment?

1. The technology is available that allows community banks to offer the same levels of electronic and internet services as the largest banks.   If your strategy is to grow market share and you have competition from large banks it is imperative that you install, adopt and maintain state of the art technology.
2. Promote the fact that you have the latest technology and promote your electronic and on line services.  This not only illustrates your technology but also aids in combating locational disadvantages.
3. Create and maintain a modern, technologically functional, intuitive website.  You may want your marketing messaging to have a “home town” tonality, but your website must demonstrate that you may be “home town” but you are “with it” technologically.
4. Ensure that your marketing strategy includes – as a very high priority – an electronic marketing plan.
1. Marketing should drive your web site
2. Utilize search engine optimization
3. Customer segmentation
4. Email campaigns and email alerts
5. Event trigger marketing
6. Social Media
7. Employee Incentives
8. Electronic Banking
9. Social Media
10. Customer Incentives

For more detailed information about assistance with any or all of your electronic banking strategies and services contact Abound Resources. 

Our experienced bank consultants will:

• Help with the selection of the appropriate technology vendors
• Develop an online marketing strategy
• Develop parameters to guide your website functionality and navigation
• Develop and implement a Search Engine Optimization plan to increase traffic and response to your website