Extra! Extra!

This week’s issue of The Economist has a nice article on the state of financial literacy here. We are proud to contribute this noble educational cause through our work with Charles Schwab. Happy Financial Literacy Month, everyone!

The game is changing for personal financial management tools. The tools are getting better, the prices are coming down, and they are beginning to offer the consumer real value.

Digital Insight’s solutions are looking better. What was once a stale user interface seems to have been positively impacted by the Intuit acquisition. The timing for this new launch is key. With so many free tools in development today, it was important for DI to remain competitive.

One of the most compelling free solutions is Mint.com. The design is great and it actually works. The experience is stellar and the business plan makes sense. The company is taking off, a recent article explained that Mint had the online banking penetration rate of a bank with about $17 billion in assets within two weeks of launch.

Mint is one of the few Web 2.0 PFMs that offers real value to the consumer. Their software will search through bank transactions and suggest more cost effective ways to accomplish your financial goals. The two examples the Mint CEO cited at Finovate 2007 were cable television and interest bearing checking accounts.

Ever wonder how much you can earn on an annual basis by being invested in the best savings account? Mint knows and ING appears to be the biggest beneficiary of this analysis. The same is true for bundling your phone, internet, and cable TV services through Time Warner.

The future for these tools is bright. It will be interesting to see this disintermediation between the consumer and their bank. In most ways the interface offered by these tools are superior to the typical online banking interfaces. Innovative institutions should seek to leverage these channels. The largest players will likely offer very similar experiences out of competitive necessity. Smaller firms should seek to private label PFMs to offer their customers a compelling reason to not use third party PFMs that will likely seek to disintermediate them.

Adoption habits vary greatly based on demographics and we continue to see dramatic change in the ways that these groups are approaching online banking. According to Forrester, 76% of households will be banking online by 2011. Online bankers are more lucrative customers for financial services firms as they bring nearly double the salaries and investable assets as their offline banking peers.

At the 5th Annual Financial Services Marketing Symposium the team from Javelin Research and Strategy presented an interesting finding. Javelin’s Jean Garascia identified that there is an inverse reaction to a security breach between high and low income groups.

The low income demographic will jettison new technologies like mobile or online banking when a security breach takes place. For this group a security breach represents a more significant life impact in that a theft will be an extremely large inconvenience. As a result, low income users will assume that the breach occurred as a result of this new technology and simply discontinue using the channel. It is important for financial institutions to understand this trend and be prepared to engage in a dialog with these consumers about the actual driver of the breach. Fear of security still remains one of the top reasons for non adopters to avoid online banking.

The opposite reaction is true for the higher income group. In the event of a breach this group tends to increase high tech adoption. They actively seek out additional technologies to keep them in closer communication with their money. This is especially important for the roll out of mobile banking and SMS text alerts.

From a mobile banking perspective, risk adverse users still prefer a downloadable application in lieu of a web based mobile banking interface. Mobile internet users (MIUs) still remain the most likely to adopt mobile banking. As of today, mobile is still not a significant enough value for customers to switch financial institutions. Consumer Adoption for mobile banking remains a function of the perceived risk and Javelin goes on to say that zero-liability is the key to mobile banking adoption.

Education will continue to be a critical component of any high tech roll out strategy – this is even more important for the low income groups.

Extractable, the leading West Coast interactive agency, today announced it has won eight awards at the annual Web Marketing Association WebAwards.

Awards Extractable took home include:

* Best Credit Union Web Site - SAFE Credit Union
* Financial Services Site Standard of Excellence - Schwab MoneyWise
* Investment Site Standard of Excellence - Contango Capital Advisors
* Medical Site Standard of Excellence - Merit Medical
* Medical Equipment Site Standard of Excellence - Merit Medical
* Pharmaceuticals Site Standard of Excellence - Victory Pharma
* Technology Site Standard of Excellence - Network General
* Technology Site Standard of Excellence - IDT

The Web Marketing Association was founded in 1997 to help set a high standard for Internet marketing and development of the best web sites on the World Wide Web. Staffed by volunteers, this organization is made up of Internet marketing, online advertising, PR, and top web site design professionals who share an interest in improving the quality of online advertising, internet marketing, and web site promotion. Now in its 11th year, the WebAwards is the premier annual web site award competition that names the best Web sites in 96 industries while setting the standard of excellence for all web site development. More than 2,400 sites from 40 countries were adjudicated during this year’s competition. Entries were judged on design, copy writing, innovation, content, interactivity, navigation, and use of technology.

“We are very pleased to receive this recognition from our peers,” commented Craig McLaughlin, Extractable’s President and CEO. “These awards further validate Extractable as the leading provider of interactive services to financial services, life sciences, and high technology firms looking to leverage the web as a core component of their overall customer experience strategy. Our primary focus is creating business results for our clients through the online channel. The sheer number of awards we won this year is a testament to the quality of our people and their commitment to consistently delivering the best to our clients. We are lucky to have such a killer team.”

I have always struggled with how social networking fits into the online financial services marketplace. My experience has been squarely focused on designing experiences for the customer that lead to account origination, cross-selling, and delivering a superior experience so I’m surprised to see that there are literally thousands of poor financial services Web sites that fail to optimize business opportunities and inevitably leave the customer disappointed.

Hoping to build deeper relationships with their customers, organizations – financial services and otherwise - are offering various forms of social networking; of these, the fastest growing is the blog. And within the financial services landscape the credit union should be in the best position to capitalize on the benefits of blogging. Because credit unions are owned by members who presumably are invested in the operation of the institution, the opportunity to generate a conversation and gather customer feedback would be well served by a blog. The challenge in this case might be in dedicating resources to monitor, update and ultimately address issues that are surfaced in the community discussion. The more successful the blog the greater the opportunity for improvement either of the Website or of the operation at large. And this means work for you because it’s critical that once you give your members an opportunity to speak out that you follow up somehow.

Among current financial services Web sites, Wells Fargo offers a killer design in their Student LoanDown(SM) site, but the content is uneven and the target audience appears unclear. If the objective is to show the lighter side of Wells Fargo – and that might be a fair goal in its own right – then maybe it’s fine, but if the intention is to drive a meaningful conversation that might generate actionable feedback then it appears to miss the mark. Remember: you have to have something to say that is relevant to your community. It does not necessarily have to be on topic, ie, about financial services in this case, but it should speak to your audience, and it should be a point of discussion – not just a journal entry.

Don’t get me wrong – I think that social networking and blogs in particular can have a dramatic impact. For example Oracle deployed a social networking site for their technical support customers and shaved 20% off their support costs. Microsoft rolled out Channel9, generates 4 million hits per month, monitors these in order to understand what is being said about Microsoft in the blogosphere and is now better positioned to address their shortcomings within the developer community. Both of these instances show a real business impact that clearly warranted the investment.

Clearly the ability to access accounts online is changing the way and frequency with which customers are accessing their banking accounts. Gone are the days of the monthly statement and waiting in line at the bank twice a month to do banking.

Today’s customers are online savvy and their expectations are changing– and it’s not just the Gen-Y crowd that is adopting this new way of way of doing their banking. Customers are coming in contact with their financial instutions at a higher rate than ever. A recent comScore survey found the following:

Growth in Online Customer Visits Total U.S. - Home/Work/University Locations Source: comScore Credit Card Solutions Benchmarker
Year	Total Customer Visits (Billions)	Percentage Change vs. Year Ago
2005	2.31	55%
2006	3.62	57%

Specific E-Servicing Activities that are Important to Consumers Total U.S. - Home/Work/University Locations Source: comScore Q2 2007 Credit Card Survey
E-Servicing Activity	Percent of Responders for Whom E-Servicing is Important
Viewing Online Statements	83%
Making a payment (pay your credit card bill online)	77%
Disputing a charge	62%

Number of Credit Card Bills Paid Online at Issuer Site Total U.S. - Home/Work/University Locations Source: comScore Credit Card Solutions Benchmarker
Year	Credit Card Bills Paid Online (Millions)	Percentagte Change vs. Prior Year
2005	414	37%
2006	524	27%

The online channel is quickly becoming the preferred channel for connecting and doing business with financial institutions. The online channel will touch more customers than all of the brick mortar touch points combined. It’s the best place for our clients to generate customer satisfaction and proactively market new products and services. This trend presents an entirely new set of challenges for the institutions that have historically competed as high-touch and relationship oriented.