Looking for Loyalty Through Online Banking Tools

Banks looking to increase opportunities to cross-sell products to their online customers will turn in the coming years to Web-based personal finance management tools to do so, according to a research report released Tuesday.

"With the online banking market maturing, banks are seeking ways to engage their customers on their Web site[s] beyond just checking account balances," explained the report from JupiterResearch.

"During the next few years, banks, vendors and emerging consumer-facing Web sites will continue to introduce online tools to help consumers with their financial activities," the report noted. "Facing increasing competition, banks will seek to develop tools that assist in their acquisition, retention and cross-selling efforts."

No Consumer Clamor

While consumers aren't clamoring for online personal financial management (PFM) tools from their banks, deploying such tools will allow the financial institutions to meet a crying need of their customers, the author of the report, analyst Asaf Buchner, told the E-Commerce Times.

"Consumers are feeling financial pain, and that represents an opportunity for banks to come and assist them with their problems," Buchner observed.

Personal financial management tools are a way for banks to tap into an opportunity to meet an unmet need of their customers, he asserted.

"By doing that," he continued, "they have an opportunity to retain their customers and also sell them additional products."

Big Bank Appeal

Although many banks may be studying the benefits personal financial management tools can bring to their Web sites, only a small number are doing so seriously, according to Steve Ellis, a partner with the Change Sciences Group, a Web site consulting company in New York.

"Only the biggest national banks and online-only banks are looking at it seriously," he told the E-Commerce Times.

"Most banks have a long way to go just trying to execute well on the basics like online bill pay or single sign-on," he added. "For these guys PFM tools are way off."

The Cross-Selling Imperative

When deploying personal financial management tools, the JupiterResearch report noted, banks should have a clear idea of how the tools will benefit the bank's business strategy .

It recommended that banks should "focus their PFM efforts on deploying tools that support the cross-selling imperative.

"While all tools enhance customer engagement on the site, thereby providing banks more opportunities to advertise products and services, some tools directly promote the sale of specific financial products," the report noted.

Some of those tools mentioned in the report include:

• Cash-flow planners. Consumers using that tool will want to see an accurate picture of their finances by having more banking activity with the same institution. "The tools therefore can promote the sale and use of the bank's credit/debit card as well as bill view and pay services," the report reasoned.
• Saving assistants. "This tool promotes the use of the institution's savings products and could help convince customers to leave their liquid funds with the bank," the report said.
• Tax filing assistants. "By offering customers tools to calculate and file their taxes, banks can promote the sale of savings and investments products as well as loans," the report noted.

Bank Bias

Will all this cross-selling, however, dampen a bank customer's enthusiasm for the institution's personal finance management offerings?

"It has to be done in a tactful manner," JupiterResearch's Buchner cautioned. "It's about creating a win-win situation, a situation where both the consumer and the bank are winning."

Nevertheless, consumers should be skeptical of using bank tools to manage their personal finances, according to Marc Hedlund, cofounder and chief product officer of Wesabe.com.

Wesabe offers Web-based tools for aggregating and analyzing a consumer's financial transaction data from bank and credit card accounts and delivering financial tips from users based on the individual's transactions.

"The banking industry really isn't unbiased when it comes to providing you with financial information," Hedlund told the E-Commerce Times.

"The banks make anywhere from a third to a quarter of their revenue from fees," he explained. "A lot of our tips are about how to avoid fees. The banks aren't going to tell you how to do that because that's where their profits are coming from."