Financial Institutions' Online Goals: Retention, Growth . and Billpay

CAMBRIDGE, Mass. – Credit union executives might want to take note that the competition is focusing on retaining existing customers and increasing the use of online bill pay as top e-commerce priorities. And CU managers frustrated with the struggle to synchronize information across channels as well as measure their return-on-investment in these kinds of deployments also are not alone, according to a new report from Forrester Research. Nearly every respondent in a survey of 250 bank executives said retaining customers and increasing cross-sell success were high priorities, according to the report, “Banks’ Online Priorities for 2003.” However, “executing on those priorities won’t be easy,” says its author, Forrester analyst Ron Shevlin. “Synchronizing information across channels and ROI/channel profitability measurement stand out as two significant challenges among the banks surveyed. “In fact, many banks won’t even know if they have succeeded. Nearly two-thirds don’t measure channel migration, and almost half don’t measure improvement in their cross-sell ratio.” Another top priority for financial institutions will be increasing the use of billpay at their sites. A Gartner Inc. research report released last month says that online bill payment in the United States is expected to increase nearly 38% to 40 million users this year, forcing financial institutions to make it a top priority in order to remain competitive. “In 2003, online bill payment will be the fastest-growing online financial application, and banks will compete fiercely to lure consumers over to their sites to view and pay bills,” says Avivah Litan, vice president and research director for the Gartner think firm in Stamford, Conn. “Most of the growth in online bill payment will occur at the same site where consumers view their bills,” says Litan. A Gartner Web-based survey of more than 1,000 online adults showed that 79% viewed their bills at a biller’s site, compared with 10% who said they used an aggregation site at their financial institution. Litan also found strong retention among those users. “Consumers who sign up and begin to pay bills online at their banks’ Web sites are more than twice as likely to stay with their banks,” the Gartner analyst says. “Once consumers set up and automate their bill payment preferences and payees, they are reluctant to go through the process at another bank.” Litan also found price sensitivity among consumers, noting that nearly one-third of online consumers who currently don’t view bills online said they would if it were free. Moving consumers into online billpay will segue nicely with another oft-cited goal in the Forrester study: migrating transactions online from higher-cost channels. Other high-priority items on the list were enhancing customer service functionality, as well as improving site content and online product applications and statements. -