Internet Banking: How can Banks Enhance Channel Maturity? (Part 2)

Segment Description and Strategy


This is a customer segment that relies more on the traditional offline channels primarily for a strong need for human assistance in performing banking tasks and hence is more comfortable with human interactions. Customers in this segment are infrequent user of online channels and are unaware of the variety of tasks they can perform on internet banking channel. For reasons such as security, trust in technology etc., this segment is uncomfortable moving beyond the basic level 1 channel functions like view account balances, view recent transactions, generate online account statements etc.


- Educate about array of services offered and convenience of Internet banking over traditional banking channels.

- Educate about security of online transactions, privacy policies, limited liability in fraudulent transactions, additional user authentication measures, data encryption techniques etc.

- Training and handholding is the right first step to move them to the next level of channel usage.


Customers in this segment are frequent users of selective services offered on self-service channels. The primary drivers for these customers are speed and convenience. In addition to informatory services, customers in this segment are most likely to engage in the transaction-centric functions such as funds transfer within and between banks, bill payments, setting automated periodic money transfers etc.

Although active users of selective services and potentially aware of more advanced services, they do not perceive any compelling benefits in moving beyond the tasks they often engage with.


- Offer incentives – monitory (e.g. discounted processing fees) as well as non-monitory (e.g. quicker loan approvals).

- Offer multiple touch points to facilitate completion of transaction and create capability for effective handling of online – offline crossover interactions.

- Create a seamless experience between offline and online channels.


Customers in this segment are mostly forward looking and affluent who is time and service quality conscious. This is an effervescent customer segment where loyalty towards any particular bank is low and any lapses in service quality and unavailability of timely / accurate information can be a huge disappointment.

In addition to adoption of level 1 and level 2 services, customer in this segment often engage in utilizing the potential of internet banking to deliver automation driven straight through processes.


- Focus on artificial intelligence driven automation to deliver straight through processes.

- Provide an error free online experience.

- Introduce and educate about advanced investment planning and wealth management services.


Experts, the forward-looking segment, are early adopters of technology introduced. The customers in this segment are those who have achieved considerable expertise while demonstrating their ability to perform complex tasks using self-service channels. They are extremely comfortable and enjoy banking online and are proactive users of most of the online services. In addition to other service offerings, they tend to utilize the power of internet banking to consolidate multiple bank and investment accounts, investment planning and avail wealth management services.


- Engage to Retain: Create clear channel differentiation and offer distinguished value preposition to improve stickiness and retain online.

- Offer more advanced financial planning services like those offered by exclusive personal finance management portals such as

- Introduce technological advancements and migrate to more cost effective channels like mobile banking.

Channel Maturity Continuum to Make the Right Offer to the Right Customer

Banks that understands their customers‟ needs and act proactively and effectively to deliver tailored treatments stand the best chance to engage and retain customers. Banks that wish to improve the effectiveness of their channel maturity campaigns must develop capabilities to segregate areas that demand generic mass communication from the ones that demand personalized and targeted content appropriate for each customer segment.

When a customer logs on to internet banking channel, beforehand knowledge of segment the customer belongs to presents an opportunity to engage and drive the customer to relevant subsequent levels of functionality. Each successful login thus provides an opportunity to enhance channel awareness and induce channel usage, thereby enhancing the channel maturity.

The channel awareness – channel usage based segmentation offers a deep insight into customers‟ behavior and technology adoption cycle. This knowledge when translated into actions can help banks achieve precision in formulating an appropriate and targeted channel maturity strategy – thus improving the RoI.

The author, Anand Kulkarni, is a business analyst / consultant by profession and can be reached at or on LinkedIn. All the views expressed in this paper are those of the author and not Intuit Financial Services.

What We’re Reading This Week

Below are interesting stories the staff has been reading over the past week. What have you been reading? Let us know in the comments section below.

  • MasterCard and Visa Report Increases in Payments

American Banker

MasterCard Inc. and Visa Inc. on Wednesday reported higher spending on their U.S. debit and credit cards. Visa said total payments made with its U.S. debit and credit cards rose 13%, between Nov. 1 and 28, from a year earlier. Spending on the San Francisco payments network’s credit cards grew 9%, while spending on its debit cards increased 17%. Cross-border payments volume also grew 17%, from a year earlier. MasterCard reported that for the fourth quarter through Nov. 28, its processed payments volume for U.S. debit transactions rose about 25%, excluding portfolio deconversions.

Read more

  • Social Media Focus of Fiserv Survey

Credit Union Times

Fiserv Inc. has released the results of a survey the technology company said shows a high interest in social media among members of credit unions and customers of banks. The company said a nationwide survey of 3,000 representative online consumers conducted with The Marketing Workshop in August showed that 11% already are connected with their credit union or bank through a social media site and more than 36% of those who are not said they would be interested in doing so. Interest in making that connection is highest, at 45%, among Gen Y consumers, the survey found. All participants in the survey had to have a checking account and some responsibility for paying bills online, Fiserv said.

Read more

  • 11% of Consumers Have a Social Media Connection with Their Bank? No Way…

The Financial Brand

A social media white paper released by Fiserv, the leading global provider of financial services technology solutions, says that “11% of online consumers are currently connected with their bank or credit union through a social site.” Fiserv’s white paper was based on an August 2010 survey of 3,000 U.S. consumers who had checking accounts. This finding — that 11% of people online who have checking accounts are connected to their financial institution on a social networking platform — is shocking. Out of 307 million people in the U.S., 231 million of them are online, or 75.2% of the country. That means a financial institution with one million customers — we’ll use the fictitious “Acme Bank” as an example — could feasibly reach 750,000 people via social media. If Fiserv is right and 11% of Acme’s customers are indeed already connected to Acme Bank through social networking platforms, then Acme would have a following/community that totaled 82,500 people. Everyone wants the social media hype to be true so badly that they swallow favorable studies without much analytical scrutiny or intellectual skepticism.

Read more

  • What Do YOUR Internet Banking Customers Want?

Gonzo Banker

First, Internet banking (to include mobile banking) is popular and growing more so every day. Second, a dichotomy has developed between the Internet banking systems provided as an extension of core processing and the Internet banking systems provided by “free-standing” vendors such as Q2, S1 and the like. The free-standing systems are generally going strong and in some cases are taking market share away from the “imbedded” core-provider Internet packages. Security issues still exist and customer service is still sometimes spotty (just within the last 60 days a major bill pay provider experienced significant customer disruption), but the security issues are being managed and quality is on the rise. And the major core providers and their “imbedded” systems? Without getting personal or ugly, some of them have gone through more OLB systems than Henry VIII went through wives. Some are still trying to get it right. To a large extent, although they have some advantages, the core-provided Internet banking systems generally do not match the functionality of the free-standing systems. Why have the free-standing OLB systems not disappeared into obscurity? What are the differences, and why should bankers care?

Read more

  • Black Friday, Cyber Monday, And The Rise of E-Commerce

Javelin Strategy & Research Blog

Black Friday 2010 currently holds the place of being the second-largest online shopping day in history, following the Internet-focused Cyber Monday. This year’s Cyber Monday boasted record e-commerce sales, with purchase volume increasing by 16% from $887 million in 2009 to $1,028 billion in 2010. In fact, the entire holiday shopping season to date has seen a considerable increase in e-commerce sales, which follows Javelin’s findings that the entire U.S. e-commerce market has grown significantly during the post-recession market of 2010. While these statistics are specific to Black Friday and Cyber Monday, Javelin data shows that the number one driver preventing consumers from shopping online is that they prefer to see merchandise in-person and to avoid returns (36%) – suggesting that in-store shopping is still driven by a desire to hold to a traditional method of selecting purchases. With more and more large retailers offering online shopping with free shipping (with many including free return shipping) for the holidays and during other promotional deals, It’ll be interesting to see how long traditional retail avenues remain the preferred method of shopping for consumers.

Read more

  • Banks Pin Revenue Hopes on Prepaid Cards

Wall Street Journal

Big banks may soon start pushing a different type of plastic to their customers. Financial institutions such as U.S. Bancorp, Wells Fargo & Co. and Bank of America Corp. are exploring prepaid cards as a way to make up revenue that will likely be lost from federal restrictions on debit cards. That is because prepaid cards, which are preloaded with funds and used like debit cards, are exempt from restrictions in the Dodd-Frank financial-overhaul bill. The law, enacted earlier this year, is expected to reduce significantly the transaction fees that banks collect from merchants with each swipe of a debit card, known as interchange fees. The Federal Reserve hasn’t yet provided details on the new debit-card restrictions, but a survey released by last month estimated banks could lose as much as $9 billion of the $22.8 billion collected each year in interchange fees.

Read more

  • Firms, Funds Feel Squeeze Of Low Rates

Wall Street Journal

Historically low interest rates are starting to take a toll throughout the financial industry, presenting a potential downside to the Federal Reserve’s aggressive efforts to reignite growth in the sluggish economy. Rock-bottom rates are squeezing profit margins at banks that rely on the gap between what they charge borrowers and pay depositors. They also are hurting returns at pension funds already under mounting pressure to meet obligations to retirees, while making certain kinds of insurance more expensive as firms try to recoup earnings that are likely to shrink if the ultralow rates linger. Two years of generally falling interest rates, along with the Fed’s plan to buy as much as $900 billion of U.S. Treasurys through mid-2011 to keep bond rates low, have delivered a much-needed lift to borrowers such as companies, consumers, cities and states.

Read more

Internet Banking: How can Banks Enhance Channel Maturity? (Part 1)

Internet banking enables banks to perform many functions that are much more expensive to perform using the traditional banking channels. Most of the tier 1 and tier 2 banks have made significant investments in making the Internet Banking channel available to its customers. To make the investments in alternate channels good, banks worldwide have realized the importance of migrating customers on the self-service channels and are making considerable investments in channel migration campaigns.

Most of the banks view and measure channel migration in terms of traffic, number of new registrations and number of active accounts. Although these parameters offer a quantitative view of channel penetration, they fail to provide an insight on ‘channel maturity’ – the degree of adoption of services offered.

For banks to realize full set of potential benefits offered by Internet Banking, the scope of channel migration campaigns must be broadened – from acquiring customers on channels to include ‘channel maturity’- maturing customers on channels.

Enhancing ‘channel maturity’ is an ongoing process that works to improve two key aspects – awareness and adoption of services. It aims at improving customer awareness about tasks that can be performed on self service channels and maturing customers from performing basic informative functions to more advanced transacting functions.

An effective ‘channel maturity’ strategy can be devised by monitoring and measuring level of channel awareness and channel usage. This knowledge of user behavior, when viewed in light of a behavioral segmentation approach will help banks apply an appropriate strategy for each customer segment to achieve precision in channel maturity efforts rather than adopting a “One Size Fits All” approach.

Understanding Customer Behavior is the Key

Currently, the potential of internet banking is underutilized by most banks. The efforts to improve adoption rate fall short to achieve the desired results; primarily because of untargeted generic campaigns. Let alone the channel maturity, even the channel migration efforts by most of the banks lack a well defined approach. This leaves banks with high migration costs and unpredictable and low conversion rates.

The process of building a successful channel maturity strategy must begin with a focus on:

1. Thorough analysis of customer behavior by monitoring the usage of services offered and understanding the channel awareness levels.

2. Customer segmentation based on customer activity on internet banking channel.

3. Identification of offerings that can improve stickiness and motivate customers to mature to performing more advance functions

4. Designing targeted campaigns customized for each customer segment

Given the evolving state of internet banking, the degree of channel awareness varies and includes awareness about speed, technology, convenience, ease of use, services offered, security of online transactions etc.

The ‘services used’ parameter measures transaction-centric functionality used by customers. The classification of channel offered services that each of the four segment use assumes inclusion and adoption of lower level services and is a measure of growing awareness as well as channel maturity.

The author, Anand Kulkarni, is a business analyst / consultant by profession and can be reached at or on LinkedIn. All the views expressed in this paper are those of the author and not Intuit Financial Services.

Branch or Online? How Do Small Businesses Prefer to Bank?

Recent trends have shown that even though online banking usage has increased over the years, it is not entirely replacing branch banking when it comes to managing finances. According to Barlow Research, small businesses are still required to visit their banking branch for activities they cannot manage online.

In a recent survey, Barlow Research looked at how the number of monthly logins to online banking relate to attitudes about whether or not Internet banking usage has significantly reduced the number of monthly branch visits. To read more about the survey, visit Barlow Research and Associates, Inc.

Driving internet branch and solution usage among small business users can significantly impact an institution’s cost to serve and a customer’s happiness. What services do you offer small businesses? Are you seeing increases in small businesses using online tools versus in-person visits? Let us know in the comments section below.

Innovation Spotlight: Beneficial Bank Debuts “Swipe and Save” Program

Beneficial Bank is helping customers save money this holiday season. Each time someone shops with their Beneficial check card, and uses credit instead of debit, special deals from their favorite retailers will be sent directly to their online banking homepage.

It is free to sign up, and the deals are automatically available. Deals can range from money off on a specific item, to 20 percent off an entire purchase. Denise Kassekert of Beneficial Bank offers additional details on the offering to NBC-TV in Philadelphia.

What services are you offering to help customers and members save this holiday season?

Social Media Statistics: By-the-Numbers, December 2010

Below are interesting statistics on social media usage. Feel free to share your favorite social media statistics in the comments section.

  • 120 billion chat messages are sent on Facebook per month (Source: Facebook)
  • 15 billion person-to-person messages are sent on Facebook per month (Source: Facebook)
  • 94% of people will use social networking for mobile communication in 2015 (Source: Read Write Mobile)
  • 50% of SMBs block Facebook at work (Source: Webroot)
  • 35 hours of video are uploaded per minute on YouTube, a 10 hour increase over March 2010 (Source: YouTube)
  • $41 billion in value for Facebook, the third highest among Web companies (Source: All Facebook)
  • $4 billion valuation for Twitter as several venture capital firms reportedly enter into a ‘bidding war’ (Source: TechCrunch)
  • $192 million is expected to be spent on social gaming advertising in the U.S. in 2011 (Source: eMarketer)
  • 175 million U.S. Internet users watched online video content in October 2010, an average of 15.1 hours per viewer (Source: comScore)
  • 143.3 million unique monthly visitors for Google sites’ online video content, driven primarily by YouTube (Source: comScore)
  • 85 million LinkedIn members, with an additional member joining each second (Source: TechCrunch)

What We’re Reading This Week

Below are interesting stories the staff has been reading over the past week. What have you been reading? Let us know in the comments section below.

  • YouTube as A Model for E-Banking

(American Banker)
“The best online experiences employ a kind of magic — and one of the Web’s leading conjurors says banks can learn the tricks. Understanding and managing a bank account can overwhelm many consumers. But a well-crafted user experience can create the illusion of simplicity, says Margaret Gould Stewart, the head of user experience at Google Inc.’s YouTube. The popular video-sharing site is a prime example: it hides the intricacies of uploading and accessing a vast collection of clips. Before joining Google four years ago, Stewart spent two years with Wachovia as its Web usability manager. Her experiences across different industries have helped her develop a sense of what consumers want from their online interactions, and how to meet those expectations.”

Read more

  • ING Extends Its Online Offerings to Youth Market

(American Banker)

“ING Direct has quietly introduced a savings vehicle for the under-18 market. The U.S. online banking unit of the Dutch company ING Group NV released in October its Kids Savings Account, which children must open with their parents. It lets them save and view balances online. They can make deposits and withdrawals with parental guidance, but the account’s transactional capabilities are turned off… ING has 400,000 people younger than 18 saving through joint accounts, out of 8 million savings account customers in the United States.”

Read more

  • WikiLeaks Plans to Release Documents from Major U.S. Bank in 2011

(American Banker)

“WikiLeaks, the controversial website that released thousands of classified State Department cables this week, says it plans to reveal potentially damaging documents from a major U.S. bank early next year. The site’s founder, Julian Assange, told Forbes of his plans in an interview earlier this month, the magazine said on its website Monday. Assange wouldn’t say exactly when the documents will be unloaded or which bank they are from, but “it will give a true and representative insight into how banks behave at the executive level in a way that will stimulate investigations and reforms, I presume,” he told Forbes. “For this, there’s only one similar example. It’s like the Enron emails.”

Read more

  • Study: PNC, Ally, BofA Set Online Banking Bar

(Media Post)

“Rethinking online banking to be about empowering customers should be the cornerstone of any bank’s reinvention strategy, according to a study from Change Sciences…Personal financial management tools are no longer a “nice-to-have” add-on to online banking. Instead, smart and spare PFM functionality is becoming a must-have core component of online banking. The report details how banks can transform online banking from being statement and register-driven to being driven by a new understanding of customer goals.”

Read more

  • Customers Opt in for Overdraft Protection

(Wall Street Journal)

“As the holiday-shopping season kicks off, there is one thing most consumers won’t be leaving home without: an overdraft cushion. Rather than face the embarrassment of being declined a purchase, 75% of consumers are opting to pay a fee—sometimes as much as $34—each time they overdraw on their debit-card account, according to Moebs Services Inc. The choice is a recent one, thanks to new rules that came in as part of an overhaul of consumer-protection regulations. Since Aug. 15, banks have been required to ask consumers to “opt in” for overdraft protection on their debit cards and the added fees.”

Read more

Americans as Financial Sleepwalkers

The “Great Recession” has caused millions of Americans to tighten their belts financially.  However, nearly one out of five consumers are financial sleepwalkers who do not monitor or manage their personal finances, which is more than double the rate in 2009. James Van Dyke of Javelin Strategy & Research writes that despite financial sleepwalkers, there is opportunity for banks and credit unions:

“Half of consumers have a relationship with more than one bank (10 percent have four or more relationships!), consumers always predominately trust banks more than tech companies, and people need ways to simplify the complexity of managing so many interaction channels, financial products and mixed economic trends in order to achieve financial health in challenging times. For example, as Mark Schwanhausser points out in his new report ‘Personal Finance Management PFM and mobile can work together quite well and pragmatic features, benefits and messages must be given the highest priority.”

To read more, visit Javelin Strategy & Research.

How do you plan to help your customers/members better manage finances today and better plan for their future?  How would increased customer acquisition and retention, deeper relationships and more cross-sell opportunities impact your future revenue stream? Let us know in the comments section below.

Will 2011 Mark the Return of Online Services Fees?

A recent publication of Online Banking Report underlines the need for online banking to become a profit center rather than a cost center. There are a number of ways to improve the profitability of this channel in order to accomplish this feat. Premium online services top the list, supporting segmented offerings that can improve fee income, retention and customer acquisition. OBR editors believe that as more users go online, a market will grow for premium consumer services along the lines of American Express and Federal Express. Creating a lending center and providing mobile, credit monitoring and OFM also rank high on the list. For more information see OBR’s NetBanker blog.
How do you plan to improve your profitability in order to meet your strategic goals in the year ahead? What would it mean to your institution if your online channel became a profit center? Let us know in the comments section below.