What Causes Profitability?

August 12, 2014
/   Spotlight

Digital Insight proves that digital bankers actually drive increase engagement and profitability with their financial institution.

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

Platform Shift in the Making

February 13, 2013
/   Insights

What does the banking industry as a whole have to do with Amazon, Microsoft and Apple? Just about nothing—and down the road, it may turn into a major problem (if it isn’t already). Consider...

The Top 10 Trends in the Digital Banking Industry

December 18, 2013
/   Spotlight

2014 is rapidly approaching and as the year wraps, the Digital Insight team has pulled together the top 10 trends in the digital banking industry based on data and trends from studying financial institutions....

Financial Literacy Month: How are you celebrating?

March 22, 2013
/   Insights

With April approaching, it’s almost time to kick off Financial Literacy Month! Strongly supported by the United States Congress and the Financial Literacy and Education Commission, Financial Literacy Month aims to promote the importance...

Online banking carries with it the same question that accompanies every aspect of human activity moving online: Is it simply a more convenient way to do what we’ve always done, or is something new, particularly in the sense that we can do more, and therefore will do more?

There’s obviously no simple answer to this—the very act implies a level of customization that rules out any all-purpose conclusion. But if we still don’t know everything, what we do know now that we didn’t know even a couple of years ago?

A recent report from Javelin Strategy & Research has some answers, and they’re not particularly pleasant. Here’s the gist: Too many financial institutions still view online banking as the completion of a circle—consumers and (and maybe businesses as well conducting transactions, only doing it faster and more easily than by going to the bank. Javelin emphasizes that this “approach to online banking and bill pay has reached saturation because it is outmoded and unappealing in an era of customer-controlled interactive finance.” And that’s not all. Instead of new, technology-driven offerings drawing more business, Javelin theorizes, it might be even be a handicap: “The banking industry’s stale approach to online banking and bill pay leaves FIs particularly vulnerable to losing the 11% of consumers who are likely to switch primary FIs this year.”

The fundamental problem is the role of the bank in the equation—is it now simply a facilitator, the same way a basic piece of technology might be, or does it have more to offer?

Looking back, it’s easy to see that this is a transformation that’s been a long time coming. The availability of personal finance software two decades ago signaled a major shift in consumer behavior; the ability to collate huge amounts of information with ease and speed enabled a level of unprecedented control over money matters. The rise of online trading was another milestone—the boom years of the dot-com era surely had a lot to do with the voluminous buying and selling of the late ’90s, but instant access to business data was also responsible for much of it. Even the simple act of online bill paying was, in its own way, revolutionary.

In this context, it’s easy to understand that in the grand scheme of things, online banking in general and mobile banking in particular are still in their infancy. But in a few years (there’s a reason this blog is called Banking2020), everything we do now will seem antiquated. That still leaves the question of the banking industry’s role in this evolution.

For example, think of how consumers prefer to pay their bills. While FIs in general have a share of this market, they could surely get more. However, research shows that many consumers still indicate a preference for bill-paying services rather than their primary financial institution. What can the FIs do to bring the back the business that many think is rightfully theirs?

This may be a small issue, but it offers a perspective on a larger one. Throughout its history, the banking industry has thrived on certain core advantages—trust and credibility built over years of operation, the convenience afforded by a real-world presence and easy access, the stability that comes from size and government-backed insurance. But as with so many industries, the past couple of decades have brought about more changes than the dozen decades that came before. In the era of mobile banking, these advantages are still there, but they don’t mean as much as they used to.

The Javelin report urges FIs to “raise their aspirations beyond being an efficient pipeline for paying bills to instead become a place where customers gain control, oversight and insight into their bills, spending, cash flow and overall finances.” That said, there’s no magic bullet here—every institution will have to figure for itself what this change entails.

To be sure, this will require a fundamental transformation in everything from business philosophy to operating practices. Those that resist the change have a problem. However, those that take on the challenge early, and manage the change well, will not only survive but thrive.

(365)

Insights

Banking.com’s perspective on industry news and trends

(204)

Spotlight

Must-read news and insights from financial industry leaders

(87)

Voices

Compelling voices and contributed content from around the web

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp

James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.