Consumer Internet Banking


Published on

To accommodate changing customer behavior and leverage growing Internet capabilities, consumer banks need to shift from a customer service model to a customer engagement model.

Published in: Technology
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Consumer Internet Banking

  1. 1. • Cognizant 20-20 InsightsConsumer Internet Banking Executive Summary Internet is now the preferred channel of commu- nication for customers. Internet banking has evolved over the last decade from product brochureware, to a complete To accommodate changing customer behavior financial marketplace for its online customers. and leverage growing Internet capabilities, banks Banks see Internet banking as the key channel began embracing a model of tighter customer for growth and customer retention. As such, the engagement. This translated into an expansion online banking model has moved from tactical and of their online offerings to “advisory services,” lower cost customer service, to a more strategic “engagement-based services” and “advanced form of customer engagement. financial services.” This shift from a customer service model to a customer engagement model Many banks have adopted the latest technologies brought about a radical change in consumer and added new Internet banking functionalities Internet banking. and features to stay ahead of the competition. However, when measured by key performance What follows is a brief description of how and why indicators such as customer growth, revenue these models were adopted and the features that growth, etc., the value delivered varies from banks provided within each of these models, over bank to bank. While some banks achieve better the years. customer response and retention from adding new technology/feature bells and whistles, others Customer Service Model have received moderate to poor acceptance, Initially, banks were viewed as the primary which has undermined their return on investment. provider of financial services; hence, they focused The challenge is to find the right approach and on providing the best service possible. The same leverage the right mix of technology and features model was adopted by banks for their consumer that keep customers happy and transacting over Internet channel, aimed at practices and an extended period of time. procedures for serving customers most effective- ly. With technological advancement, the quality of Industry Trends these services has improved dramatically. When online banking was launched in the late 1990’s, the online business model of banks was Information-based services: These services centered around customer service. Banks offered were introduced with the objective of dissemi- online “information-based” and “transaction- nating product and service collateral to online based” services, delivering product and services customers. From static pages, which displayed collateral, account activity, money transfer, etc., rates, terms and conditions, bank Web sites have thereby serving customers’ informational needs. become more interactive, offering features such However, with changing usage patterns and as interactive product and services demos. This the advancement of Web 2.0 technologies, the development served not only to promote trans- cognizant 20-20 insights | september 2011
  2. 2. Changing Internet Banking Business Models Customer Service Model Customer Engagement Model Information- Transaction- Advisory Engagement- Advanced based services based services services based services financial (e.g., information (e.g., fund (e.g., online (e.g., using Web services on bank’s products transfer, bill financial advisory 2.0 for customer (e.g., collateralized and services) payment, loan services) engagement) financial platform repayment, etc.) capability)Figure 1parency in bank offerings but also to educate cus- representing banking products and services,tomers on the best ways to utilize banking prod- and two-way interaction between the customeructs and services. and customer service representatives.Transaction-based services: The self-service • Advisory services: Banks are now movingtransactional capability was introduced to the up the value chain, from a focus on satisfyingonline channel to enable enhanced service consumer financial needs, to creating andefficiency, which included both value- and non-val- inspiring them. Advisory services wereue-added transactions. Starting with basic trans- introduced with the objective of providingaction features such as internal funds transfer, expert insights into customer wealthbanks have expanded to include advanced trans- management, identifying and selecting theaction offerings like external utility payments, best investment avenues (e.g., provider andsecurities trading, etc. Several banks now offer product comparison engines) and providingstraight-through processing (STP) capabilities to self-service capability, with complex product90% to 95% of banking and non-banking transac- simulations and projected financial returns.tions, which helps them achieve millions of dollars • Advanced financial services: With the rangeof cost savings per year, increased customer sat- of banking and investment avenues available,isfaction and greater transparency. banks needed to offer one-stop solutions for all financial needs. This required a singleCustomer Engagement Model platform for customers to track and manage allThe services and features offered in customer financial products, with collateralized tradingservice models are no longer the keys to success capability.for online banking. Almost all banks providefeatures on similar lines with no differentiation. With emerging technological innovations, cus-This has resulted in a shift in focus from a service tomers can now access advanced financial ser-to an engagement model to establish long-term vices on the go through mobile phones, usingcustomer relationships. These relationships not mobile apps or a WAP browser. Figure 2 (nextonly create new revenue opportunities, but they page) offers a snapshot of the features in eachalso turn customers into advocates who bring new of the segments.customers to the bank through favorable word ofmouth voiced through social media channels. The Internet Banking Strategy: Evaluation,objectives and features offered in this model are Analysis and Roadmapas follows: Banks have come to realize that merely adopting a stand-alone technology, providing best-in-class• Interactive services (leveraging Web 2.0): customer service or having innovative products in The overload of information in static pages created cluttered Web sites with prohibitively their portfolios is not a guarantee for the success long response times. Banks needed to enlist a of their Internet-banking model, nor can these new IT infrastructure to deliver a more dynamic approaches function as differentiators for long. customer experience. Interactive features were The guarantee for a successful online banking then introduced with the objective of faster model involves a blend of features that revolve resolution of customer queries, better ways of around various strategic themes. cognizant 20-20 insights 2
  3. 3. Feature Comparison: Customer Service vs. Engagement Model Feature Description Balance inquiry, statement, Customers can check out their previous transactions, transaction history with real-time balance. Information Service Customer Service Model Single view of bank accounts Linking various accounts so customers can view their bank, credit card and loan accounts (with the same bank) through a single-user ID. Mailbox Customers can send e-mails directly to the bank, and the bank can also maintain constant communication and promote its products and services. Transfer funds online Customers can transfer funds to any account (irrespective of the bank to which it belongs). The money sent is delivered to the receiver’s doorstep. Transaction Account-to-card fund transfer Customers can transfer money from their bank account to any other debit Features or credit card. Pay utilities bill Customers can pay bills to providers of utility services like phone and energy; recharge their pre-paid mobile cards; pay credit card bills of any card provider; etc. Online chat Live chat features that allow customers to interact with relationship man- agers for all their financial queries. Online TV services Some banks provide online TV services to share information about financial and business events, so as to continuously engage with their customers. Interactive Features Online appointment reservation With the help of this service, customers can book their appointments at the branch well in advance. Personalization Using personalization and localization, customers can customize their dashboard with graphics-rich features. Online banking widgets Essential widgets like calendar and calculator are provided, with the option of adding more interactive widgets based on customer preferences. Social computing Leveraging social communities like Facebook, Orkut, Digg, etc., along with micro-blogging sites like Twitter and social forums. Customer Engagement Model Financial calculators Interactive calculators to calculate monthly payments, debt consolidation, card selectors, mortgage selector tools, wish list, unit fund selector, etc. Simulation tools Budgeting tools for cash and money management, financial planning tools, credit management tools to manage debt, simulated trading tools, etc. Financial research tools Stock screening tools for basic screening information, advanced screening Advisory Services tools (sector, industry, volume analysis tools, etc.) and comparative tools. Research reports Research reports on exchange-traded stocks, S&P reports, educational articles on mutual funds, mutual funds investing, etc. Podcast and Webcast sessions Online broker sessions, sessions with experts for market and financial information, etc. Alerts and messaging services Daily, weekly, monthly alerts through e-mail and other messaging channels. Bill presentation and payment Bill payment services to over 400 billers. Investment services Online IPO application, structured products, Euro-dollar deposits, multi- currency deposits, etc. Advanced Financial Mutual fund selection One-click trading access to mutual fund center through secured online brokering. Services Trading services Online brokerage services with commission-free trading and reward points covering a range of asset classes like equities, derivatives, futures, options, bullion, commodities. Wealth management services Features like managing funds under various asset classes, tracking portfolio movement and mapping them with long-term and short-term goals. Custodian services Providing low-cost services for online custodian services.Figure 2 cognizant 20-20 insights 3
  4. 4. Figure 3 translates these needs into a features • Virtual Bankand capabilities mix that banks should offer toonline customers. One caveat: When the overall • Virtual Financial Marketonline migration strategy is measured across Banks started with basic vanilla offerings ofcertain key performance indicators, the results information and transaction services throughvary. Key performance indicators can have their online channel. Some banks still have basicfinancial attributes (e.g., cost savings, revenue features on their Web sites, and their onlinegenerated through online products and services, strategy is to leverage this channel to supplementetc.) or be non-financial (e.g., new accounts the branches and contact centers. In order toopened, percentage of online customers, achieve cost savings through the Internet —percentage of online transaction volume, etc.). transferring control to customers and providingThey can also include other indicators (e.g., complete self-service — banks are pushing morepercentage of satisfied customers, number of and more banking and non-banking transactionsinnovations delivered though online banking, online. They view the Internet as an alternate toperception of bank’s Internet features, etc.). the branch channel.Segmenting Consumer Banking Web Sites These banks have designed their Web sites withBanks design their Web sites with features and rich interactive features, providing capabilitiescapabilities to serve customer needs and provide to handle almost all banking and non-bankingthe best possible online experience. However, the transactions online with 100% STP. Their onlinebreadth of functionality and the depth of informa- banking channels can be categorized as a virtualtion/interactivity on their online banking channel bank.depends on the bank’s overall strategic theme(as enumerated in Figure 3). Based on service A virtual bank fits into the customer serviceofferings, Web sites of banks can be classified model. However, with the changing business focusinto the following categories (see Figure 4, next from customer service to customer engagement,page): virtual banks must offer interactive, advisory and advanced financial services through their Internet• Basic Internet Bank banking channel. Banking Web sites classified• Virtual Advisory BankKey Strategic Themes in Consumer Internet Banking Key Themes Key Initiatives Banks are on an innovation drive to launch products and services catering to evolving consumer lifestyles. Key initiatives include interactive Web sites for shopping, e-statements, targeted solution Innovative products campaigns, straight-through processing (STP), instant online card approval, any-bank credit card and services bill payment, innovative customer rewards, online financial health-check tools, alerting services, immediate online transfers within accounts in other countries, etc. Banks look to deliver enhanced customer experience to retain existing clientele by providing best-in- Enhanced customer class customer service. This includes enhancements to online portals, micro-site links, educating and experience engaging customers, online customer surveys, using social media, adopting analytics to understand consumer behavior, online demos, etc. Banks are offering a comprehensive, integrated online banking experience that looks to replicate the offline channel in most functionalities. The top global banks have undertaken key initiatives, Integrated online such as integrating with the core banking platform, integrated multi-product views ,integrated online banking Web site financial centers and integration with other channels, such as the ability to register for Internet banking through the ATM, debit or credit card or phone banking number, etc. Banks are providing multiple secured features, such as strong encryption technology, virtual keyboard, Secured and trusted two-/three- factor authentication with dynamic code generator and PKI-based smart cards, key loggers, online banking secured online signatures, anti-phishing, anti-Trojan, etc. For fraud prevention and resolution, some experience of the key features include multi-layered global fraud monitoring tools, real-time suspicious account activity, regular ethical hacking test, Web action team, well-defined dispute resolution team, etc. Banks have adopted the personalization route to attract customers. Key initiatives include per- Personalization sonalized log-on page, pre-filled application forms, personalized banners, personalized alerts and messaging, event reminders, online assistance, etc.Figure 3 cognizant 20-20 insights 4
  5. 5. Segmenting Consumer Internet Banking Virtual Bank Virtual Financial Market • Consolidated view of accounts • Global view of accounts • Access to wide range of banking • Collateralized trading programs for complete Advanced Services services through single sign-on financial products, such as equities, Transaction / Value-Added Services • Straight-through processing currencies, etc. • One-stop payment banking • 3-D interactive experience for banking, • Banking through innovative mediums financial, investment services, etc. such as mobile devices, etc. • Personalized banking experience • Innovative media for sharing financial • Comparative experience of third-party products information, such as iPTV • Social financial blogging • Online demos of bank’s products • Online financial forums and communities and services (e-Kiosks) Basic Internet Bank Virtual Advisory Bank • Sharing information on banking • Financial advisory through online TV Transaction Features products and services • Online advisory services for mortgages, • Online payment services portfolios, etc. • Online account opening • Online financial product selector for • Promotional and award points credit cards, mortgage products, etc. • Alerting and mailing services • Financial health-check • Anytime-anywhere banking • Investment profiler • Branch and ATM locator • Wish-list tracking • Interactive tools and calculators • Stock comparison tools • Advanced advisory tools, such as sector reports, analyst opinions, price performance tools, etc. Information Features Advisory Features Information / Interactive FeaturesFigure 4under the virtual advisory bank category provide Implementation Approachrich interactive features that leverage Web 2.0 After critically analyzing the key performancefeatures and advisory capabilities. However, they indicators of lower adoption rates, reduced onlinedo not provide online brokerage services. banking success in certain geographies and current online banking challenges, the questionTranscending from “bank in a box” to “financial that comes to mind is, “What is the right Internetmarket in a box,” online customers can now banking strategy?” or, “What is the right mix ofaccess all the banking and financial markets features and services for the online channel?”(investment management, trading, wealth The answer is, “There is no panacea to all ills.” Themanagement services, etc.) using a single correct response depends on customers. Bankssign-on (SSO) capability across the bank’s lines must contend with geography-specific issues andof business. When banks provide such capabilities account-focused needs; for instance, customersto customers, they become the virtual financial in some regions may have a high preference formarketplace to serve their online customers’ a particular feature, while in other regions, thiscomplete financial needs. feature may not be a high priority.Implementation Approach Define Current Evaluate Define & Future Features Roadmap PositioningFigure 5 cognizant 20-20 insights 5
  6. 6. The approach for defining the right strategy for of the evaluation can be used to identify maturitya better feature mix depends on careful analysis and feature mix gaps in the online offering. Finally,of a number of factors, including the current- and the resultant prioritization roadmap, with the listfuture-state vision of the bank’s Internet banking of features and implementation plan, should beoffering; the current customer base and their prepared for a phased implementation.preferences; customer inclination for adoptingnew technologies; and the competitive landscape. This is a continuous approach, wherein key per-Once the current and future positioning segment formance indicators should be evaluated on ais identified, a detailed evaluation of features periodic basis to re-prioritize the feature mix andshould be conducted to benchmark performance add midcourse corrections to stay ahead of thevis-à-vis competitors on the Internet banking impact and level of maturity. The resultAbout the AuthorsVipin Kumar and Sanjit Bose are Senior Consultants within Cognizant Business Consulting. They haveexecuted multiple projects for Top-10 players in the banking industry, spanning consulting, businessprocess optimization and IT project execution. They can be reached at Vipin.kumar2@cognizant.comand, respectively.About CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered inTeaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industryand business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50delivery centers worldwide and approximately 118,000 employees as of June 30, 2011, Cognizant is a member of theNASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing andfastest growing companies in the world. Visit us online at or follow us on Twitter: Cognizant. World Headquarters European Headquarters India Operations Headquarters 500 Frank W. Burr Blvd. 1 Kingdom Street #5/535, Old Mahabalipuram Road Teaneck, NJ 07666 USA Paddington Central Okkiyam Pettai, Thoraipakkam Phone: +1 201 801 0233 London W2 6BD Chennai, 600 096 India Fax: +1 201 801 0243 Phone: +44 (0) 20 7297 7600 Phone: +91 (0) 44 4209 6000 Toll Free: +1 888 937 3277 Fax: +44 (0) 20 7121 0102 Fax: +91 (0) 44 4209 6060 Email: Email: Email:© Copyright 2011, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein issubject to change without notice. All other trademarks mentioned herein are the property of their respective owners.