Consumer Internet banking has evolved from helping customers meet their basic banking needs to meeting more sophisticated requirements like personal financial management. Today, Internet banking is an important revenue builder and competitive differentiator for banks. However, despite its all-too-obvious advantages, many banks are unable to realize the full potential of the Internet banking channel.

1. White Paper
Consumer Internet Banking – Arise!
- Anjani Kumar, Somil Mittal
Consumer internet banking has evolved from helping customers meet their basic banking needs to meeting their more
sophisticated requirements like personal financial management. In recent years, the number of internet banking users
has been increasing exponentially. Today, internet banking has become an important revenue builder and competitive
differentiator for banks. However, in spite of the obvious advantages of having a robust internet banking channel, many
banks are unable to realize the full potential of this channel. This is due to the sub-optimal approaches followed by such
banks. Banks must follow structured approaches and best practices to transform and realize the full potential of their internet
banking channel. This ranges from the right mix of technology, integration, sourcing, support strategies and tactics.
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2. Introduction
Over the years, the internet banking channel has evolved from being a cost-reducing
convenience to a self-reliant channel and a must-have differentiator for the banks. Today,
consumer’s usage of internet banking is growing at a rapid pace across geographies. In
North America,for example 60% of the times basic transactions were conducted through
online channel in 2011. In 2011, Internet banking usage in India increased to 7% from 1%
five years ago. Nearly 40% of the total internet users visited online banking sites in Europe
in December 2011. This growth is led by five key drivers listed in Exhibit 1.
Exhibit 1: Internet banking drivers
Preference of Gen Y customers
of internet banking growth
Rapid expansion of and reduction
in cost of broadband
Growing comfort with internet
banking security
Retail boom
rs
Drive
Technological advances leading to advanced
solutions and offerings
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3. Internet banking benefits both consumers and banks. It is estimated that internet banking offers more than 60% cost saving to banks over
conventional offline channels. Exhibit 2 illustrates a few examples of how banks and customers benefit from the internet banking channel.
Exhibit 2: Benefits of internet banking channel
Benefits of internet banking channel
To Bank To Customer
Support to branch channel Ease of use
Integral to multi-channel strategies
Expeditious payments and other transactions
Reduced cost
Personalization
Higher and proactive cross-selling opportunities
Competitive differentiator Transparency
Enables true relationship banking Online research capabilities
Helps gain customers’ prompt feedback
on products and services Self-service channel
Banks’ Challenges
Unfortunately, today, many banks are unable to reap the optimal benefits from their internet banking channel. This is due to the lack of
robust internet banking channel model in such banks. Consequently, such banks are faced with myriad challenges. Also, in many cases,
where banks have endeavored to transform their internet banking channel, they have met with another set of challenges and barriers. The
challenges faced by banks; a) in the absence of robust internet banking channel, and b) in effective transformation of their internet banking
channel can be broadly categorized into Strategic, Organizational, Customer and Techno-functional.
Many banks have huge gap between their internet banking channel expectations and its actual capabilities. Many banks
don’t buy advanced internet banking functionalities that are available, mistakenly assuming that their customers aren’t
asking for such advanced functionalities. Consequently, such banks’ customers have silently started leveraging other
Strategic
financial service providers’ sites. Innovative non-banks like Mint and Geezeo, supermarkets, pre-paid debit card providers,
1 remittance providers and such are all threatening banks’ traditional models. Many banks want to offer a next-generation
internet banking channel, rich in Web 2.0 elements. However, they are unable to take on the required heavy investments
to make it happen. Many banks face difficulty in benchmarking and estimating ROI metrics for individual internet banking
features or capabilities. Also, most banks lack integrated channel capabilities. As a result, their inflexible, siloed applications
and processes get easily exposed to customer.
Organizational
Change does not come easily to banks that have operated in siloed business units, have heavy compliance requirements
and are gripped with internal politics. Such banks have their innovation and creativity stymied and lack agility and focus.
This has led to implementation of sluggish, incoherent and ineffective internet banking solutions in such banks. In many
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banks, one delivery channel reports to many different divisions of the bank, thereby hampering decision making. In addition,
many banks continue to rely on a branch centric revenue model, which leads to dissatisfaction amongst branch employees
and customer frustration. Simplifying such banks’ reporting structures is difficult to achieve.
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4. Customers, especially Gen Y, have started demanding seamless, multi-channel service and sales experience. However,
Customer
most banks are slow in responding to changing customer’s needs. As a result, many customers have started leveraging
3 alternative models (e.g. social lending sites like Prosper Marketplace and Lending Club). Also, many customers are content
with traditional channels like branches; thereby using internet banking sub-optimally. Banks face challenges in getting
these customers to use internet banking channel optimally.
Many banks’ internet banking channel is not stable, scalable or flexible. Years ago, when such banks entered the internet
banking channel, their primary intention was to get the solution up and running in quick time. This hurried approach resulted
Techno-functional
in unruly data stores, inflexible and sub-optimal user experience; and fragmented and weak architecture. As a result, such
banks suffer from weak IT support of the channel and product alignment, high maintenance costs and long delivery time.
Such banks have been slow in adopting sound internet banking technologies like SOA, Web 2.0 and RIA features. Ensuring
fool-proof internet banking security is another key challenge for banks. Fraudsters continue perpetuating new methods
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of internet banking frauds. Additionally, factors like collaborative Web 2.0 applications that require opening up of bank’s
websites to third-party sites and outside technology, has increased banks’ internet banking security vulnerability. Many
banks lack the analytics capabilities to enable real-time product promotion and pricing to specific customer segment. Many
bank’s existing internet banking sites are gripped with shortcomings that range from inefficient task flow, requiring users
to jump between multiple site locations, wasted space, hard to read text, un-sized content in windows requiring lots of
horizontal scrolling, hidden security/privacy policy and unhelpful error messages.
Approach for Internet Banking
Channel Transformation
Today, many banks across geographies
are looking to transform and increase the
effectiveness of their internet banking
channel on stand-alone basis and within
their overall channel strategy. However, to
effectively achieve this goal, banks need to
follow a robust approach and where customer
is at the core. Customer activation and not
just customer enrollment on internet banking
channel should be the focus for banks. Banks
must work towards providing an aggregated,
customized, social and relevant experience
to customers.
They must focus on providing immediate responses to customers and have more two-way dialogue with customers. Banks must also
aggressively focus on driving higher routine customer transactions through internet banking channel. For this, they could look at making
it harder for customers to conduct routine transactions in branch. Banks must endeavor to leverage internet banking channel for more
sophisticated and contextual cross-selling/up-selling.
The optimal benefits from an internet banking channel is realized when it forms part of a bank’s multi-channel integration model. Hence,
banks must focus on integrating its information, functionality and services across all channels. For this, it is imperative that a single unified
view of a customer’s many relationships with the bank is available on all channels. Wells Fargo is a good example of a bank that has been
focusing on multi-channel integration. It has been working for years to integrate its consumer banking delivery channels and is focusing on
providing a consistent experience across all of its channels. It is imperative that a single bank executive is made in-charge of a bank’s multi-
channel integration efforts. Such an executive should have the mandate to integrate banks siloed and antiquated channels and be responsible
for interactive marketing efforts, standardization of metrics across channels and creating true measure of overall channel profitability.
Banks should adhere to the following structured approach for their internet banking channel transformation (Refer Exhibit 3):
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5. Exhibit 3: Structured approach
Structured approach to internet banking channel improvement
1
2
Identify 3
4
customer Prioritize
needs needs Identify
gaps Define
roadmap &
implement
In the first stage, banks must determine the internet banking features that are important to customers. For example, for a large number of
customers, secure email communication, single sign-on, ability to set-up alerts and ability to analyze spending and cash flow are very important
features. In the next stage, banks must prioritize customers key stated and unstated needs. While prioritizing, banks should consider both
the current and future needs of customers. In the next stage, banks should do gap-analysis of the prioritized needs vis-à-vis banks’ current
internet banking channel capabilities. Further, banks must define a roadmap to bridge the gap. They must then diligently implement the
road map. Banks could start small with internet banking channel improvements and then scale up. Refer Exhibit 4 for key considerations
for internet banking transformation.
Exhibit 4: Key considerations
Internet banking transformation - key considerations
Security
Features
solution
Leverage expertise
gy s’
Technolo provider
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6. 1. Features: Banks must focus on improving navigation and usability of their web sites, streamline access and linkages to account data (within
and across financial institutions); and provider richer content. They must break the Chinese wall that exists between their private and public
web sites. A bank’s internet banking channel should have high level of flexibility for customization and content. For example, it should enable
creation of customized and personalized online offerings and pricing models as per customer segment, profile and relationship with bank.
Banks’ internet banking channel should provide co-browsing feature to support dynamic consultations to customers. Banks should also work
towards simplifying their online account opening process. Infosys’ Unified Account Opening Solution is one good example of online account
opening platform. Banks must also work towards leveraging the full potential of social media. A good recent example isCanadian bank TD (@
TD_Canada) using social media for customer service . To differentiate their internet banking channel, it is important that banks prioritize and
gradually start providing advanced features that customers are asking for. Good PFM tools, transaction categorization, multi-firm account
aggregation, enabling online research capabilities, remote deposit capture are examples of advanced features that customers prefer. Refer
Exhibit 5 for good examples of advanced features that are already provided by many banks.
Exhibit 5: Advanced features
Examples of advanced features
Account aggregation, expense
categorization, consolidated bill Alert examples: balance,
payment, budgeting tools, setting of deposit/withdrawal, bill payments
savings goals, spending comparison reminders and confirmations;
and community forums secure message alerts
Personal Financial
Online check deposit Secure chat and messaging,
Management (PFM)
(e.g. Services from Bank of email alerts, single sign-on,
(e.g. My Money Map from Wells multi-lingual support
America, Citibank and PNC)
Fargo)
Online advice tools Peer-to-Peer(P2P) fund
E-vault services (e.g. Barclaycard’s “My Money transfer
(e.g. Wells Fargo’s vSafe service) Steps”, National Australia Bank’s (e.g. services from Bank of
“Online Assistant” ) America, Wells Fargo)
Online tools eTransfers and electronic bill
Personalization
(e.g. Bank of America Home payment
(e.g. BBVA)
Loan’s “online home loan guide”) (e.g. Wells Fargo)
Example: budget planners, savings Example: personalized spending
calculators, credit calculators, analysis, homepage layout, search
product selectors and compare non-bank products
2. Security: Banks should endeavor to comply with updated FFIEC e-banking authentication guidelines. They should implement advanced security
features like multi-factor authentication and multiple-layer defensive architecture. Implementing secure lock-down standards procedures,
having bill pay security key, enabling separate password to authorize transactions, subscription based two ways multi-channel alerts are few
examples of security best practices that banks could implement. Banks should consider leveraging best-in-class vendors’ security solutions.
Infosys’ Finacle banking platform’s security aspects and Gemalto security solutions (Ezio Way and Ezio Suite) are good examples. Banks must
also have robust mechanisms to ensure that the third party sites linked from their internet channel are secure, appropriately certified and
that these pose no security threat. Banks must conduct regular and comprehensive security audit of their internet banking applications.
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7. 3. Technology: Banks must look towards implementing new-generation internet banking solutions that are built on open architecture and
industry standard platform; and that can provide true relationship banking functionality. Good internet banking solutions follow international
technology standards, take a component based approach and follow model driven architecture. Such solutions’ application architecture are
enabled for high performance and leverage Web 2.0 potential and RIA capabilities. Infosys Finacle and FIS TouchPoint/Xpress Solution Suite
are examples of best-of-class internet/multichannel banking platforms. A bank’s internet banking channel should be integrated with its core
banking solutions (directly or through industry standard middleware) and also with the bank’s analytics applications. Banks must enhance
their analytics, customer tracking and on-line chat capabilities to achieve higher cross-selling/up-selling.
4. Leverage Solution Provider Expertise: Where appropriate, banks must leverage the expertise of leading internet banking solution providers
(e.g. Infosys’ Finacle) for the transformation. They must do the due diligence in selecting the vendor. Banks must study the solution’s technology,
scalability, flexibility, environment, architecture and security aspects. Solution’s installation base and reference clients, and whether it can
support cross-channel interactions and transactions must also be looked into. Banks must also review the vendors’ product positioning,
business strategy and support model, performance history; sourcing, integration and delivery capabilities. Banks should also consider
choosing between deploying a licensed in-house solution, using a hosted application or going for a hybrid model.
Conclusion
Internet banking channel has already become one of the main
channels and key differentiator for many banks. In today’s hyper-
competitive environment, consumer banks across geographies
can no longer ignore or defer the transformation of their internet
banking channel. This is imperative for a bank’s very survival and
growth. Importantly, the effective transformation of a bank’s
internet banking channel requires a holistic and structured
approach. Those banks that follow such an approach are destined
to reap immense business benefits through enhanced share of
customer’s wallet, increased customer loyalty an advocacy; and
much more.
About the Authors
Anjani Kumar is a Principal Consultant with the FSI Domain and Process Consulting, Infosys Limited. Anjani has over 15 years of IT, domain and
process consulting experience. He has deep knowledge and expertise on the Consumer Banking techno-functional aspects; with special interest in
the Banking Channels and Analytics space. At present, Anjani is leading many domain competency development initiatives in FSI unit of Infosys. He
can be reached at anjani_kumar@infosys.com
Somil Mittal is a Senior Consultant with the FSI Domain and Process Consulting, Infosys Limited. Somil has an overall 5 years of experience in
process and domain consulting. His areas of expertise are strategic consulting, business research and business development. He has been involved
in developing research based consultative insight and analysis for client engagements and business pursuits. At present, he is a Senior Consultant
with FSI Research Center within Financial Services and Insurance vertical in Infosys. He can be reached at Somil_Mittal@infosys.com
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