Rate Of Return | Hefty tech investments fail to lure online customers
Although banks are spending billions of dollars — $9.3 million in 2007 — on new, secure online technology, traditional face-to-face banking is still preferred by the majority of customers because many remain leery and confused about online banking services.
The luke-warm response to online banking has forced banks to shell out even more money to market their online banking services.
Banks are being driven to spend more to market their online services, according to a January survey by Nielsen Online. The survey found that financial institutions spent more than $230 million to market their online services, outpacing second-place Web media by nearly $100 million.
The marketing strategies have come a long way from when your grandmother’s bank gifted her a covered casserole dish as a reward for opening up a new bank account or joining its Christmas Club. Now some banks, such as Enfield Federal Savings, hold monthly drawings for lucrative prizes, including cash prizes up to $1,000 if customers use the bank’s online bill payment service.
This month, the bank is running a new promotion, entering all customers who pay a bill online in a sweepstakes drawing to win a free vacation.
The situation is a frustrating conundrum for banks — customers want more online banking options yet are increasingly wary of fraud and identify theft. Financial institutions are expected to increase their investment in technology by 9.2 percent through 2009, according to Celent, a Boston-based research firm.
Despite banks’ tech and marketing investments, customers continue to be slow to adopt online bill pay and banking services.
Identify Theft Fears
To bank officials, the problem is one of customer perception.
A survey conducted by Opinion Research Corp. found that the majority — 54 percent — of bank customers cited fraud or identity theft as their top concern with online banking.
“Everybody’s concerned about identity theft,” said Lindsey Pinkham, senior vice president and secretary of the Connecticut Bankers Association. “Banks have strict rules when it comes to online banking, but it’s a big concern because of the perception.”
Jack Vonder Heide, chief financial officer of the Illinois-based Technology Briefing Centers, blames the media for creating consumer anxiety about identity theft.
“This abundance of information has resulted in a growing fear that demand deposits and investments are more vulnerable than they were a few years ago,” Vonder Heide said. “Because of this anxiety and lack of reliable information, customers are hesitant to fully embrace Internet banking.”
Barry Abramowitz, Liberty Bank senior vice president and chief information officer, has noticed those customer concerns.
“We’re concerned about identity theft just as [the customers] are,” Abramowitz said. “We do our best through communication and the education process to let them know what the situation is and what they can do.”
From a bank’s perspective, making online banking easier and calming customer concerns can provide dividends down the line. The goal, as Abramowitz stated, is to convince customers to use the bank for all of their financial needs, from checking accounts to loan applications to mortgages.
Customers also play a valuable role in protecting their personal information from predators, Abramowitz said. “We can really only control the technology side of things; we can’t control people.”
Too Complex
“From our perspective, we’ve experienced a tremendous increased interest in participation in online banking,” he added. “There’s also been, not quite resistance, but questions about it. They view it as too complex.”
What Abramowitz is referencing is multi-faceted identification, now standard practice in online banking. Simply put, customers have to answer “challenge” questions and have a password that must include numbers and capital letters to access their accounts.
“We get questions like, why do we have to do this?” he said. “It’s interesting because we tell people it is for their protection, and it’s just good practice.”
While it might seem minor that a customer would complain that their bank password is different from their others, it could be a stumbling block between the banks getting more business from the customer.
“We’re driven to be responsive to what the customer wants,” Abramowitz said. “What we’re finding is that people want to do banking at any time, and we’re constantly working to meet their functionality needs.”
WBJ Web Partners
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