Report: Critical Errors in Online Banking

Many financial institutions risk losing market share because they are concentrating too much on developing new online and wireless products, rather than improving the experience customers have on their existing Web sites, according to a report released Tuesday by Jupiter Media Metrix.

The report, “Integrated Finance: Composing a Symphony Out of the Discord,” found that while financial services executives believe that creating new mobile and online offerings is their No. 1 priority, consumers believe that improving trust and security in online banking is paramount.

The reason for this disconnect is fairly simple, Jupiter analyst James Van Dyke told the E-Commerce Times.

“No one wants to be late to the party,” Van Dyke said. “No one wants to be late to launch exciting new products.”

Van Dyke emphasized, however, that for financial institutions to succeed in a slowing economy, the key is “to simplify and integrate basic services, such as banking and lending, insurance, investment and payments.”

Adding Clutter

Jupiter found that 57 percent of banking executives said their top priority was expanding online capabilities, which, according to Jupiter, indicates an “industry-wide propensity to clutter sites, rather than to simplify them.”

Fifty-two percent of the executives said that broadening the scope of traditional services is a top priority.

However, only 25 percent indicated that increasing customer trust and security is a top priority, and only 18 percent were interested in improving the overall design and layout of the existing company Web site.

Trust Issues

In contrast, customer service and trust issues are of primary importance to online banking consumers. Of those surveyed, 59 percent named having a federally insured account as an important factor in choosing a financial institution, and 52 percent said that improving customer service is critical.

Jupiter said that many new features added by financial institutions produce only complexity, which is fundamentally at odds with the customer’s goal of increased convenience.

Getting Personal

Those financial services that succeed in cyberspace, according to Jupiter, will be those that invest heavily in personalization and customization capabilities in order to provide each customer with unique offerings. Those personalization features will be based on both requested services and previously gathered usage data.

Jupiter also recommended that financial institutions improve the customer experience by integrating basic financial services — such as banking and lending, insurance, investment and payments — into one simple interface.

“As leading financial companies remain obsessed with first mover advantage, their failure to integrate services, content and advice is preventing customers from realizing their time-tested goals of trust and convenience,” Van Dyke said.

“Those institutions that fail to effectively merchandise a widening array of multichannel offerings will be left with a shrinking base of customers,” he added.

Banking Shakeout

Jupiter is predicting a shakeout in the financial services industry.The research firm pointed out that in the United States, there is one federally insured bank for every 26,000 consumers. In contrast, in the UK there is one bank for every 140,000 consumers, and in Canada there is one bank for every 660,000 consumers.

To reach a customer-to-bank ratio somewhere between that of the United Kingdom and Canada, Jupiter said the approximately 11,000 banks in the United States would need to consolidate into approximately 700.

Companies most at risk of disappearing during the shakeout, according to Van Dyke, are those that are moving too slowly to adopt online channels.

1 Comment

  • Bank of America
    Recently I had an experience with your bank, which has left me feeling uneasy with your Online Banking System. On April 18, 2003, $22036.00 was paid to AT & T Wireless out of my Checking account. The bill was actually $22.36.
    This was a letter recently written by me to the BofA. As of 5/17/03 I’m still waiting to get my money back.
    I think that this error on whoever’s part could and should have been avoidable. I AM not aware of the inner workings of the online bill paying system and how it works. Is there someone on the banking end who reads and interprets the transaction before they send it through, or is it automatic?
    If it’s automatic and I was the one who typed in a zero instead of a decimal point, then there should have been software alarms essentially going off, warning, "There isn’t enough in your account to cover the AM mount of your payment". Or somthing to that effect.
    If someone in the bank interprets what I type in for the transaction AM mount, then the bank is responsible for any loss of interest, internal transfers charges due overdraft protection, other charges that the bank chooses to levy. The way I feel is the bank is responsible for protecting my money.
    Since this AM ount was so far removed from the historical record of my payment to this vender, I should have received a phone call from someone in authority asking me if this transaction was what I intended to do. Enough venting.

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