FREEDyourMind

Online Banking Outperforms Other Financial Services Industries

Our latest research with Forbes.com shows that online banking is vastly outperforming other online financial services industries. Banks scores an 82 on the ACSI's 100-point scale (up 12% or 9 points from the 2003 score of 73), while investing and credit card websites were both at 75. The online banks are clearly setting a high bar. A score of 82 makes online banking the bright spot in the industry overall (offline banking scored a 78 when measured by the ACSI in late 2007).

Most notably, we found that highly satisfied online banking customers are 31 percent more likely to buy additional services from the bank and 54 percent more likely to recommend the bank to others.

You can read more about the study in BusinessWeek or download the full report here.

ACSI E-Commerce Results

It’s that time of year again: time for the University of Michigan's American Customer Satisfaction Index (ACSI) report on e-commerce. The e-commerce report includes the e-retail, online travel, and online brokerage industries.

You can download the full report here, but a few things I found most interesting:

• Amazon has the second highest score in the entire ACSI (which includes 200+ companies), behind only Heinz. That is a stunning achievement for a retailer with such a broad mission.
• Online travel aggregators like Expedia, Travelocity, and Orbitz continue to slip and are having significant trouble differentiating themselves from each other.
• Online brokerage does better than expected, given the slowing economy (which usually results in lower satisfaction with any kind of investing). Customer satisfaction with Fidelity.com rises 5%, while Charles Schwab.com and TDAmeritrade.com also report increased satisfaction.
• Of all the sectors measured by the ACSI this quarter, e-commerce was the only one to increase. All other sectors saw customer satisfaction scores fall, and the overall ACSI score for the whole economy fell this quarter. I attribute this to the fact that competition is so fierce in the online world that companies HAVE to excel in order to survive. The best competitive differentiator is customer satisfaction. Still, it’s remarkable that the e-commerce sector now outperforms all other service sectors measured by the ACSI, online and offline.

You can read more in the Detroit Free Press and Network World.

 

The Killer App for Financial Services

We are always searching for that killer app, and usually come up short. The killer app is the catalyst that brings us to critical mass. For the PC it was word processing and spreadsheets. For the internet it was email.

Most industries look and look and don’t find anything close. Well in financial services there is as close to a killer app opportunity as I have seen in a while. Online Bill Payment. Yes, Online Bill Payment.

In a recent study that we did in partnership with Forbes.com, we saw some very interesting insights for online banking. You can get the full report at:
http://www.foreseeresults.com/Form_OnlineBanking_2007.html

Here are some of the highlights:

• Satisfaction with online banking maintained a slight edge over satisfaction with the overall banking experience.
• Providing an online experience that meets the needs of the customers (satisfaction) results in significantly higher likelihood for those customers to purchase more services from the bank and recommend the bank to others.
• Security is a concern for those not using online banking, but is of little concern to those that are using online banking.

So, why does online bill payment come close to being that killer app?

• Customers using online bill payment are significantly more satisfied than those online banking customers that do not pay their bills online with their bank. They are also significantly more likely to buy additional services (31%).
• And the more bills they pay online, the more satisfied they are and the more likely they will purchase additional services and recommend the bank to others.

So what are banks supposed to do?

Maybe it is time to dust off those online bill payment marketing programs. Also, focus on making the online bill payment an easy and efficient one. And make sure that both your online banking and online bill payment is meeting the needs of your customers. Online bill payment is a great tool to help your bottom line — if done right!

  Comments

1.    
         Ron Shevlin      
          
         April 30th, 2007      |       1:56 pm      
      

   I’m really not following your logic here. “Killer app”, as you described it at the beginning, referred to the app that drove major adoption of a platform. WP and spreadsheets drove major adoption of PCs, and email drove major adoption of the Internet.

   So what is online bill payment driving major adoption of? online banking? I know a million people who will disagree with you, if that’s your contention.

   It seems to me you’re not talking about “adoption” as much as highlighting the connection between satisfaction and use of online bill payment. And as any good statistician knows (hell, even us bad ones know it), correlation does not mean causality.

   It’s just as possible that the most satisfied customers decide to go ahead and go thru the pain of setting up online bill payment with their preferred bank as it is that paying bills online CAUSES a customer to be satisfied.

        
2.    
         Larry Freed      
          
         May 1st, 2007      |       4:29 am      
      

   The use of online bill payment will result in increased satisfaction by the online banking customers. The more bills the pay the more they are satisfied. Higher satisfaction results in better behavior, such as likelihood to buy additional products.

   The beauty of the American Customer Satisfaction Index is not only do we get a score upon which to measure, we also get what we call an impact. The impact tells us the causation between the drivers of satisfaction, satisfaction and future behavior of our users.

   The argument of causation vs. correlation is a good one, and one that most measurement methodologies don’t address. Fortunately for us, the American Customer Satisfaction Index technology answers that question for us.
   -Larry