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 / Autumn 2013 / Issue 72(originally published by Booz & Company)


To an Analog Banker in a Digital World

Few banks are brave enough to measure market share these days, much less the contribution of various channels to revenues. In the U.S., online-only banks grew from $3 billion in deposits in 2002 to more than $380 billion in 2011, yet they are often excluded from competitive analyses conducted by bricks-and-mortar banks. And during the last decade, many banks have opted to assign all accounts driven by other channels (such as phones and Internet) back to the “branch of domicile,” obscuring the relative impact of online and offline banking. I have a personal example: In 1997 I walked into a Citibank branch in Manhattan to open a checking account. Since then, I’ve physically entered that branch at most five times, and not once to add an account. Yet the nine Citibank products I have added to the account continue to accrue back to this branch, as if it were somehow responsible for my cross-purchase. As long as this practice continues, it will be impossible for any bank manager to assess the importance of physical distribution to the bank’s performance.

One good way to determine the market share your institution may be losing to Internet competitors is to ask your chief digital officer to provide metrics for how many people have visited a product page on your website and then applied for that product elsewhere—the digital equivalent of the foot traffic you’re losing to your competitor next door. When I was at Citibank in 2005, we determined that more than 500,000 customers opened an account at ING Direct, an online-only bank (which, after being acquired by Capital One, was renamed Capital One 360 in 2013), just after reviewing our savings account pages. That data provided the impetus for our launch of a low-fee, online-only savings account, called e-Savings, in 2006.

• Focus on the customer experience. For a significant number of prospects and current customers, the online portal is the primary door to your customer experience. But when they “walk in” that “door” to open an account, they are often required to mail in their application or use other non-electronic channels. We live in a world of instant gratification, e-signatures, ID verification, and electronic money movement, so if you do not yet have truly instant account opening online, drop what you are doing, and enable it now. At Citibank, when we implemented instant account opening, we increased new accounts by 472 percent, with only a 38 percent increase in full-time employees. If you need another reason to move rapidly, remember that every online account will cost your bank only about $9 to open, and it will typically drive repeat sales and customer loyalty.

Upselling online should emulate Amazon’s one-click feature. Use the data you already have on file to pre-fill applications or reduce product applications to a minimal number of questions. At Citibank, we allowed current customers to open new savings accounts with only two clicks, and we reduced the number of questions required for a home equity instant pre-qualification from 40 to nine.

• Drive efficiency by offloading routine transactions to lower-cost digital servicing. At Citibank, we knew that online transactions cost 4 cents each, those conducted via ATMs cost 14 cents, those conducted via interactive voice response $2.53, and those conducted via people at a call center upward of $18. Driving everyday servicing transactions to lower-cost channels can not only reduce your cost to serve, but also enhance customer satisfaction. You can find service offload opportunities by meeting with your call center management every quarter to identify their top 10 call categories. We used this strategy at Citibank to identify low-value transactions—such as address changes, requests for statements and copies of checks, and check reorders—that we could easily move to online and mobile channels. We knew this created greater efficiency but were surprised at the increase it delivered in customer satisfaction. One of the things that most wowed customers was enabling check viewing and printing online—hardly innovative, but our customers thought that was practically the best thing we had ever delivered to them.

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