Loading ...2008 Predictions: Online Trends in Financial Services
I spend most of my time working in the financial services space. Part of my role is to keep a tab on developments in online financial services as well as have an opinion on whether these developments are important to our work or not. As 2008 begins to unfold, here are four trends I’m thinking about and expect to see develop over the course of the year:
- Banks get serious about customer experience
- Mobile banking still isn’t ready for prime time
- Metrics drive experience design decisions
- Banks look to innovative personal financial management start-ups for inspiration
1. Banks Get Serious About Customer Experience
Shopping for financial services and products can be a lengthy and complex process. People don’t always know where to begin with complicated products like mortgages and annuities. For products like those, banks will need to provide users with decision support tools like needs-based product selectors that help narrow down the product set and make sense of the options.
The most innovative banks will look to simplify their offering. Take mortgages for example, most banks offer dozens of mortgage options - fixed, adjustable, jumbo, 100% financing, etc. This is all very complicated information to wade through, especially for first-time home buyers. In 2008, we’ll start to see banks simplify products like mortgages so that it is the mortgage that the bank offers and is customized to the customer based on their specific needs.
Other developments that will support this trend include relationship pricing, dynamic pricing, integrated customer information and streamlined account opening. All of these imply that major investments in information technology are required. Systems will need to be put in place to automate decisioning where relationship and dynamic pricing are concerned. Improved data warehousing will be required to support integrated customer information and improved account opening processes.
2. Mobile Banking Still Isn’t Ready for Prime Time
There was a ton of talk about mobile banking in 2007. Most of the big banks got in on the action. Both Citi and Bank of America rolled out their mobile banking tools in late 2007 using third party platforms like Firethorn and ClairMail. We can expect to see more banks roll out mobile banking tools in 2008. That being said, I’m not convinced that mobile banking is ready for prime time just yet. The value proposition for customers isn’t clear. Customers don’t know what they want. Banks aren’t sure what their customers need.
This doesn’t mean that 2008 will be a year wasted where mobile banking is concerned. In fact, it’s the total opposite. Banks should take advantage of this “grace” period and learn all they can about mobile banking and what customers need and want. The smartest banks will start simple. They will partner with a third party company as their turn-key solutions are easy-to-implement and relatively inexpensive. Banks will beta test their mobile banking tools with employees first and then roll it out to employee’s family members before testing with a select group of customers, likely based on a geographical region. The big banks will roll-out iPhone mobile banking apps. The mantra will be implement, test, rinse and repeat - learn, learn, learn.
3. Metrics Drive Experience Design Decisions
This is the most important trend we’ll see emerge in 2008. All of the top financial institutions will begin implementing metrics driven approaches for experience design. When everything is said and done, bank executives will ask about which analytics drove design decisions as opposed to whose opinions. Wells Fargo is already there and they’re talking about it. There’s a great Forrester report by Brad Strothkamp that gives an in-depth look at Wells Fargo’s analytical approach to site design. There are four areas, outlined in the report, that banks will start looking at in order get more analytical:
- Deep dive into site search data - look are your site search data, isolate the top 100 searches - users are searching for them because they can’t find them on the site, which indicates a failure in site design
- Customer pathing analysis - understand which pages users are going to and from and back and forth in order to decide if the path needs to be optimized
- Voice of the customer mining - Wells Fargo used pre- and post-implementation surveys to gauge the effectiveness of new designs
- A/B testing - split testing lets banks decide which offers work best, for example, on specific parts of the page
4. Banks Look To Innovative Personal Financial Management Start-ups For Inspiration
2007 was an exciting year for new online banking and money management tools from a handful of start-ups like Wesabe, Mint and Billeo. For the most part, banks have reached parity in terms of the online money management tool set. Over the past two years, I haven’t seen any really interesting online services introduced by banks with the possible exception of remote check deposits from companies like USAA (USAA is a Critical Mass client). The most innovative services are coming from start-ups.
Banks will need to do one of three things in order to get ahead of the innovation curve:
- Start a home-brewed solution by looking closely at what companies like Wesabe, Mint, Billeo and others are doing
- Partner with these start-ups to incorporate their tool set
- Outright buy these companies in order to establish an early competitive advantage
Check out Finovate for more examples of innovative financial services.
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Here’s to 2008! Check back throughout the year for updates on how these trends are developing. If you have a moment, go to Netbanker and weigh in on the 2007 nominees for top innovations in online banking and finance.
I hate to be a nay-sayer, but how much faith do you have in banks (as a whole) — institutional organisations — at acting in the Web 2.0/Agile practise of small, frequent iterative releases? My view/experience is that these guys will take months to sort out details, merging them into massive point releases that put out huge amounts of content.
So the question: Do you predict banks (as a whole) changing this behaviour?
Hey Geoff. Banks as an entity won’t change their behaviour anytime soon. But, I believe that progressive e-commerce or marketing departments responsible for parts of the site are desperate to adapt a more agile (not the method, necessarily) approach to launching new services online. Fidelity is the best example of this. They’ve created a beta site with a bunch of great tools called Fidelity Labs.
Update on the mobile banking front already - Bank of America launched an iPhone app. More info at Netbanker. One of the comments on the Netbanker post indicate that it needs some work still.
Well put Scott.
I think many banks and credit unions are already trying to do #1 but no one is truly doing it differently and standing out from the pack. Everyone’s saying the same things and trying to be the same.
#2, not sure I agree. I think the implementations have been too complex to date. Most folks just want balance, last 5 transactions. Bill pay and much of the other functionality is overkill and adds complexity given the wide variety of handsets/devices.
#3, odd that others aren’t already doing this. For the past 3+ years we’ve been leveraging our analytics on our site https://www.nscu.com to drive user experience design. Frankly the opportunity here is beyond A/B and multivarient and is with behavioral targeting.
#4, this will happen or they will figure out ways to build their own as CIBC has done with its PFM.
An interesting list here. Do you have a reason why 2008 in particular will be when banks get serious about customer experience? Most of what you say on that point (like the fact that financial products are complicated) has been true well before the net came along. Having worked on a couple of consumer banking projects myself, it’s easy to be cynical about this. For example, the banks like to present “choice” in mortgages but in fact each product is designed to cost the same (and make the bank the same) amount of money. Choice is therefore simply a matter of fashion. 2008 might therefore be a year in which “choice” is temporarily replaced with “simplicity” in mortgages (possibly because of a property slump). Dynamic and relationship pricing is interesting though, and there is some evidence they are doing this already. The trouble is that without very careful planning, they will find themselves in extremely hot legal water with the regulators and consumer groups (”Our systems say you have a lot of debt - here, have some some with this “special” rate credit card - bwah ha ha.”)
Oh and one more thing. Your last point is somewhat doubtful I think, simply because banks are (historically) doing extremely well for themselves. In the UK, the financial services sector has gone from being a 5th of the UK’s economy to almost a 3rd in 10 years. They don’t need inspiration - they’re doing just fine as they are (and a very large proportion of that is done off line).