Are Online Bankers More Profitable?

In this three part series, Digital Insight staff discusses how financial institutions, can increase their profitability through offerings and customer usage.

Correlation is defined as a mutual relationship or connection between two or more things. Causation is defined as the idea that something can cause another thing to happen or exist.  Recently, I and my team at Digital Insight have conducted thorough analysis on correlation and causality amongst different digital banking products and services. To measure causality, customer behavior was analyzed through a before, during, and after time period over the course of two years.

Digital Insight data showed that highly engaged customers that used multiple digital banking services are 51% more profitable than customers who do not actively utilize online or mobile banking. [1] In addition, customers who actively use digital banking services are correlated to having higher account ownership, balances, retention, and debit card purchases when compared to offline bankers. [2]  It is evident that those customers using multiple digital banking services become more “profitable” and engaged, when compared to the offline banking segment.  The question that remains is, “does online banking cause a more profitable customer?”

After analyzing several hundred thousand banking customers across dozens of financial institutions, We have quantitatively concluded that digital banking does indeed cause a customer to become more profitable to his/her financial institution.

Simply stated, when measured against customers who remained offline (non-digital banking) over two years, those customers who became engaged in digital banking increased their account ownership, total deposit/loan balances, and propensity to open additional accounts more heavily than offline bankers.

Internal study of 86 Digital Insight FI customers, July 2009 through March 2014; claim based on comparison to Digital Insight online versus offline customers. Internal study of 16 Digital Insight FI customers, July 2009 through March 2014; claim based on causal analysis of Digital Insight online and offline customers.

While all of the customers in the analysis maintained an open checking account with their financial institution during that two year period, the customers who eventually adopted online/mobile banking became more engaged with their bank or credit union. Some examples include migrated accounts over from other financial institutions, renewed lines of credit, or reached a point in their financial lifecycle that warranted opening of a retirement account.

So keeping this in mind, it’s interesting to further examine how specific digital banking applications increase engagement and profitability. In the next article in this series, we’ll look at remote deposit capture and loyalty rewards.

The data used for this article was analyzed by the following Digital Insight team members: Heather Youngo, business analyst, Jason Weinick, manager of analytics, Brenda Shimmons, manager of analytics and Russ Tarver, marketing manager.


[1] Internal study of 67 Digital Insight financial institution customers, July 2009 through March 2014; claim based on comparison to Digital Insight online versus offline customers.

[2] Internal study of 67 Digital Insight financial institution customers, July 2009 through March 2014; claim based on comparison to Digital Insight online versus offline customers.

 

This Weeks Reads: Data, Innovation, Mobile Banking Success

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

Security and Compliance in the Interconnected Age – Webinar

*Disclosure: Banking.com is powered by Digital Insight

 

The Internet of Everything (IoE) is here, and with it your users will be connecting within a new online ecosystem of devices, networks and services. But with the new interconnected age of IoE comes new risks for cyber attacks and other fraudulent activity. How are you protecting your customers?

On  Tuesday, June 24th, Digital Insight will host a free webinar,  “Security and Compliance in the Interconnected Age,” as part of their 2014 Momentum Webinar Series.

The webinar will include insights on optimizing the benefit of your mobile channel and help you:

  • Learn about best practices for maintaining security and privacy across the interconnected ecosystem.
  • Rethink about maintaining compliance with FFIEC layered-security requirements.
  • Understand the types of tools you need to avoid a cyber attack and mitigate fraudulent activity.

Do you know what you need to keep your end users protected? Join Digital Insight for the second segment in our 2014 Momentum Webinar Series as we take a dive into security and compliance in this new era of banking. We’ll be attending, following along and sharing insights via Twitter with the hashtag #DICompliance.

You can register for the webinar by clicking the image below. See you there!

DI Webinar Banner_June

 

 

Monetizing the Mobile Channel – Webinar

*Disclosure: Banking.com is powered by Digital Insight

The mobile channel is no longer optional for banks and credit unions. But for those financial institutions already deploying mobile solutions, how do they optimize profit and benefit to the customer?

On  Wednesday, April 23rd, Digital Insight will host a free webinar,  “Monetizing the Mobile Channel,” as part of their 2014 Momentum Webinar Series.

Digital Insight Mobile Webinar

The webinar will include insights on optimizing the benefit of your mobile channel and help you:

  • Learn about key trends driving mobile innovation and their potential to solve real problems for your users while driving revenue.
  • Rethink potential disruptors to your business with a new collaborative approach.
  • Understand how traditional channel profitability analysis may limit your perspective and therefore your outcomes.

Does your mobile spending embrace change with a laser focus on ROI? Join Digital Insight as we kickoff our  and take a dive into the future of the mobile channel as a profit engine.

We’ll be attending, following along and sharing insights via Twitter with the hashtag #DIMobile.

You can register for the webinar by clicking the image above. See you there!

The Top 10 Trends in the Digital Banking Industry

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. What do you think about the trends below? Which one do you think rings most true for 2013 and 2014?

*click on each image to enlarge it

 

1. U.S. Consumers continue to favor large financial institutions. There are over 13,000 chartered financial institutions in the United States, yet close to three-quarters of all deposit dollars are held by just 100 financial institutions. Although deposits are flowing into large national banks, an opportunity exists to gain market share for regional & community financial institutions by offering consumers the most relevant services available in the market today.

Top Trends Image 1

2. The U.S. population is aging and changing banking behaviors. 39% of the U.S. population over the age of 44, compared to 34% 10 years ago. New consumers opening their first account at a financial institution represent a demographic that is different than five to 10 years ago, meaning an “older” consumer is opening up their first account with the bank and/or credit union.

Top Trends Image 2
3. Younger generations are becoming more active bill pay users. Although the population is aging, the age of active bill pay consumers is declining, with Gen Y consumers becoming more active bill payment users. In addition, mobile banking consumers are 14 years younger than offline bankers.

Top Trends Image 3
4. Boomers and Seniors are engaging in digital banking. Although Boomers and Seniors have tended to be late to technological adoption, these groups are showing an increasing willingness to engage in digital banking! The traditional product curve for online banking reveals early adopters are younger demographics who embrace technology, have grown up with a computer and internet access, and value anytime/anywhere convenience. Technology services such as email, Skype and eBay have become increasingly popular with Boomers & Seniors, and as their technology comfort level grows, so does their adoption of online banking.

Top Trends Image 4

5. Consumers are moving to mobile-only banking. More and more consumers are starting to “ditch” their PC and rely solely on their phone and/or tablet to conduct their banking needs. Mobile-only banking is increasing, while PC-only banking has declined over the past year. One challenge that financial institutions face from mobile banking is the inability to grow cross-selling opportunities through the online and branch channels.

Top Trends Image 5

6. Mobile bankers are early adopters. The majority of mobile users become engaged in mobile banking early in their digital banking lifecycle. Of new consumers who adopt mobile, 62 percent adopt within 90 days of registering for Internet Banking. Mobile banking leads to higher engagement for financial institutions’ customers. Over a month-long span, the average offline banker visits the branch two times and the ATM three times; a total of five touch points. When compared to an engaged online banker, the financial institution has three times the opportunity to cross sell to this customer.

Top Trends Image 6 (1)Top Trends Image 6 (2)

7. Digital bankers user multiple devices to connect with financial institutions. Now more than ever digital banking consumers are using multiple ways to interact with their primary financial institution, and the trend of consumers using multiple “touch points” continues to rise. Approximately 40 percent of digital bankers are using multiple devices to access their financial information.

Top Trends Image 7

8. More devices means more time online. As consumers use more devices to interact with their financial institution, they spend more time on their financial institutions’ website. This provides financial institutions additional opportunities to cross-sell their most profitable products to their customers. Online bankers spend approximately 38 minutes per month on financial institutions’ websites.

Top Trends Image 8
9. Mobile remote deposit capture is changing consumer behavior. Mobile features, such as mobile remote deposit, are changing how consumers interact with their financial institutions. For banking and credit unions, cross-sell opportunities will become increasingly relevant as more consumers rely on the digital banking channel to conduct transactions and become less dependent on brick and mortar visits. Consumers who adopt mobile remote deposit capture display similar deposit activity to consumers who never use remote deposit, but once mobile remote deposit consumers start actively using the service, they quickly become less dependent on the branch.

Top Trends Image 9

10. Personal financial management users are more engaged with their financial institution. The percent of consumers aggregating outside accounts into their online banking experience has doubled in three years. Consumers are able to see their entire financial picture in personal financial management (PFM) solutions, which means intelligent cross-sell opportunities are growing dramatically. Consumers who enrolled in FinanceWorks (Digital Insight’s PFM offering) in 2012 were two-times more likely to aggregate outside accounts than consumers who enrolled in 2009. FinanceWorks consumers log-in 54 percent more frequently than online bankers without FinanceWorks.

Top Trends Image 10

 

About Heather Youngo:  Heather is a business analyst with Digital Insight and leads the initiative on generating and maintaining the accuracy of financial institution profitability data.  Heather holds a Bachelor of Business Administration degree in marketing from the University of Georgia.

The data used for this article was analyzed by the following Digital Insight team members: Jason Weinick, manager of analytics, Ann Gladstone, business analyst, Fatai Bamidele, senior business analyst, Brenda Shimmons, manager of analytics and Denis Kimondo, senior marketing analyst.

Barlow Small Office and Home Office Study: Mobile and Payments

There is a significant business market that is being ignored by almost every major bank. Many know this market as the small office/home office (SOHO), non-employer or personal business segment — generally thought to be businesses with less than $100,000 in annual sales revenue.

Today, November 14th, at 1:00 pm ET/10:00 am PT, we will host a #SOHOStudy Twitter Town Hall with colleagues from  Barlow Research and Digital Insight. In advance of this event we wanted to share some insights from Barlow’s research on mobile and payments.

Let us know what you think about the data and we look forward to seeing you on 11/14 at 1:00 pm ET. If you have not yet registered yet, you can here.

Please view the infographics below and download a PDF with additional data here.

Barlow SOHO Study Mobile Infographic

Barlow SOHO Study Payments Infographic

Unlock the Power of Mobile: Digital Insight Webinar

The mobile channel is no longer optional for banks and credit unions. However, it’s far easier to make educated decisions about using mobile services when you have insights on the potential benefits.

On  Wednesday, November 20th, Digital Insight will host a free webinar sharing compelling consumer trends and statistics within the mobile channel. In this session, Deepti Sahi, group product manager, Digital Insight, will show you how solutions like mobile payments, remote deposits and cross-platform compatibility are continuing to revolutionize the way consumers manage their money.

DI Power of Mobile Webinar

The webinar will help you understand the multitude of benefits that can be gained from deployed mobile services, including:

  • Acquire new users through simple, personal mobile registration or in-branch mobile account opening
  • Serve your users with best-in-class, multi-platform support
  • Retain more users with differentiated and delightful solutions that meet their mobile needs

We’ll be attending, following along and sharing insights via Twitter with the hashtag #DIMobile.

You can register for the webinar by clicking the image above. See you there!

 

Banking.com, Barlow Research and Digital Insight to Host Twitter Town Hall on November 14th

Banking.com and Barlow Research SOHO Twitter Town Hall

In conjunction with Barlow Research and Digital Insight, we will host a Twitter Town Hall on Thursday, November 14th to discuss Barlow Research’s recent study of the Small Office/Home Office (SOHO) market. The Twitter Town Hall will discuss the survey results and how they tie into current banking trends, including  financial management, payment and credit card behaviors, mobile and digital banking habits.

Barlow Research recently completed a comprehensive, multi-sponsored study that gathered the information needed to segment the SOHO market, examine their financial management, payment and credit card behaviors, measure the value of the SOHO customer, analyze product usage and explore business Internet banking and mobile device habits. Banking.com will be hosting a Twitter Town Hall to discuss the study results, how banks are currently serving consumers and answer any questions about the study.

The Twitter Town Hall is open for all our readers to join and participate in the conversation. To join us and/or learn more about the event, see below

Steps to Join:

  • Twitter Town Hall: Go to www.tweetchat.com. Log in using your Twitter ID.
  • Enter the hashtag to join the conversation: #SOHOStudy
  • You can also follow the hashtag (#SOHOStudy) using Twitter applications such as Hootsuite or Tweetdeck 

Details:

  • Date: Thursday, November 14th
  • Time: 10:00 am PST/1:00 pm EST
  • Hosted by: Banking.com Staff (@bankingdotcom), Joel Mueller, Research Analyst, Barlow Research (@BankingResearch), John Barlow, President, Barlow Research (@JohnRBarlow) and Digital Insight (@Digital_Insight)
  • RSVP/Add to your Calendar: You can register for the event via Eventbrite and add a reminder to your calendar. See Eventbrite link here

Additionally, if you are interested in submitting a question prior to the Twitter Town Hall, please DM us on Twitter.

We hope to “Tweet” with you on November 14th!

For more on the study, visit our earlier posts on the topic.

 

The Haves and the Should-Haves

Small business and younger, tech-savvy consumers—these are two market segments that couldn’t be more different. Yet for our purposes, at least, they could be seen as representing two sides of the same coin. For both, there are big obstacles and even bigger opportunities. The key to success on both fronts is to get smarter about what we’re doing.

First, consider the sheer size of the small business market. In a word, it’s big. In fact, with $6 trillion in revenue each year, it’s the second largest economy in the world. That is one huge pie, with profitability enough to go around for everybody. That said, it’s only a ‘market’ in the loosest sense of the term—with some 28 million companies around, it’s too diffuse to identify specific patterns. Besides, it’s a target that’s constantly moving. Thanks to the constant emergence of new online and mobile capabilities, routine best practices and fundamental human behaviors alike keep shifting.

But here are some numbers that should stick with us. Only 14% of small business owners currently use their financial institution’s cash management/business banking solutions. Sad as that sounds, our customers spend 5.4 billion hours each year doing taxes (it takes less time to produce every car, truck and van in the country). And finally, let it be noted that a stunning 66% of small business owners still use personal bank accounts for business.

So that’s what they’re not doing. To get a snapshot of what they could be doing, consider the generational shift. A Digital Insight study of 27 financial institutions found that 84% of mobile bankers fall into what we call the ‘Gen Y’ and ‘Gen X’ categories (to make some of us feel a little older, remember that Gen Y alone will account for close to half of the nation’s personal income within the next 10 years.) This is one ripe demographic.

And how does this translate into tech-savvy behavior that benefits them and us? Online banking customers have 13% more accounts than their offline counterparts. In fact, online banking customers conduct 59% more debit card purchases and have a 7% higher annual retention than offline customers. Going one level deeper, consider the difference in log-ins: for online banking users, the number is 9.73; for online and mobile users, it’s 18.87; and for online, mobile and tablet users, it’s 29.05.

We may be sick of hearing it, but mobile is a particularly big deal. These consumers conduct 40% more monthly debit card purchases than online non-mobile consumers. Even more significantly, mobile consumers access their financial information 65% more frequently than online non-mobile users.

Underlying all these changes is an even more fundamental shift, and it’s from consuming credit to managing cash. Basically, business customers of every kind want simplified workflows with greater access to financial information and tools, ranging from payments capabilities to asset management. Do traditional cash management solutions do the job? Or are they too complex to meet emerging business needs?

Now for the good news. Nearly 80% of consumers name their bank or credit union as their most trusted online destination to manage finances. According to the Tower Group, business owners’ use of online financial services has risen 17% in just the past year. Online services are among the top three reasons businesses choose their financial institution in the first place (but we warned: Barlow Research tells us that nearly half of business online banking customers would switch banks for better online banking functionality).

So here’s the future of financial management. To get smarter about profitability, credit unions must get to manage every facet of customers’ financial lives. There’s a ton of research telling us this—of the 88% of consumers who now pay bills and transfer funds online, 62% would like a single place to manage their complete financial picture, regardless of where the information originates, and an unbelievable 94% of TurboTax for Online Banking users who used direct deposit for their refund sent it directly to their host financial institution.

It’s easy to get overwhelmed by all the changes taking place in our customer base. If the move to online banking was a big change, then the adoption of mobile tools and services is a seismic shift. Yet the wealth of data we have at our fingertips also offers a clear view into the multitude of opportunities that comes with that transformation. Consumers who actively use technology-enabled services, particularly those offered through mobile channels, undeniably represent higher account ownership, balances, retention, and debit card purchases. They will find, join and be loyal to financial services providers that offer customizable tools and services to meet a wide range of evolving needs. The onus is on us to get smarter about how to meet those needs.

Online Banking Engagement: Data from Digital Insight

Digital Insight has been conducting a comprehensive and ongoing study of financial institution customers. From these studies, the company has been able to provide a deeper view of banking customer behavior across several categories, such as mobile and online banking. Earlier this year, we examined mobile banking behavior and now we are taking a look at how online banking is an integral engagement tool for financial institutions. Below are key findings from Digital Insight’s online banking study, and you can view a more in-depth analysis here.

As we continue this series of data, we will be publishing blog posts on additional topics on Banking.com. *For information on the on the methodology used for the study you can download the PDF