A new research report says UK & US banks are in danger of losing online customers unless they improve the levels of personalisation and communication offered. The report from Gartner says people in both countries are heavy users of online banking and over 40% use at least two banking sites, meaning they are in a position to compare features.

The trends observed are interesting:

• Younger respondents value features that enable customisation of their online banking experience and are looking for additional financial planning tools to help them manage their money more effectively
• Older customers seek tools that let them use current services more effectively or communicate better and want features that make the online banking channel itself easier to use

Banks can learn from the Grocers:

Retailers have spent ten years working out how to build successful e-commerce businesses and in the last three years have been moving that to a multi-channel mix that involves services like ‘ring & reserve’, range extensions and of course online order tracking.

Banks seem to have been asleep at the wheel, it’s taken them an age to react to the fact that customers are demanding more self-service and looking to manage many of their regular transactions online. But at last the Banks seem to be reacting now that the pressure is on:  There is much talk in the big banks of cost-cutting programmes – I’m told by those who should know that a key focus of this is about getting the optimum number and location of branches and getting those online services to deliver what customers want and need to take the pressure off branches and especially off call-centres.

 So we may be on the brink of ‘multi-channel banking’ – let’s see if the Banks can catch up with the Grocers, especially now that one of the Grocers is a Bank!

Tom Standage, Business Editor of The Economist magazine, says that mobile banking has been a major success story in the developing world and is in fact ahead of the developed world. He explained that in a typical developing country, for each extra 10% of people with mobile phones, an extra half a percentage point is put on GDP growth a year.

Its worth listening to the audio of Tom explaining this link between growth of mobiles and GDP growth in developing countries. The audio link is embedded within the story.

A leader in multi-channel retail to show the way in multi-channel banking?

Whilst many like to throw stones at Tesco because of their success and scale of operations, I can’t help but admire the performance they drive in each area of their business. Now it seems Retail Banks have to look to Tesco as they ditch RBS, buying them out of the JV for £950m and take the challenge to the High Street banks and the Insurance Companies.

In the eleven years since its launch, Tesco Personal Finance has been doing very nicely thank you, making a £206m profit last year and signing up five million customers. I understand that the business has very low bad debts on it’s loan books and has accumulated a 4.3% share of the UK motor insurance market. So bringing it back in-house makes great sense for Tesco, they soon won’t have to share the revenue as they grow their banking business through the launch of bank accounts and other new products. I guess they will also take it overseas into the countries where where the Tesco brand is well known and respected.

Tesco Personal Finance Key Facts:
5.5 million customers
1.3 million credit card accounts
390,000 savings accounts
6.9% share of credit card market
2,700 ATMs in Tesco stores
4.3% of car insurance market

It seems pretty obvious really but here’s some evidence if you need it…when asked what they want of their credit card accounts, this is what customers say;

-> 64% of people prefer to apply for credit cards online, only 20% would rather go to a branch
-> 68% also want to be able to manage their credit card account via the Web!

And it seems we take all this for granted assuming it will be there for us – rates and fees are still the most important criteria for customers when choosing a credit card provider;

-> 51% citing ‘no annual fee’ as the most important criteria
-> 46% citing interest rates
-> 40% said online account management was most important to them when choosing a card!

The web also seen as critical for finding information;

-> 78% of credit card customers use the web to research deals
-> only 11% visit a branch for credit card information and two per cent use the phone!

This is all from a survey by Global Reviews, they asked over 1000 people how they choose a credit card, the role the Internet plays in the process and what information and service they would like their provider to offer online.

The survey also ranks the credit card providers, with Lloyds TSB, Barclaycard and Egg performing well.

I had the pleasure of organising, hosting and facilitating a breakfast briefing session recently for senior online strategy people from the world of Retail Banking – most of the big banks were represented. What a fascinating online and multi-channel strategy session it turned out to be!

The theme was designing & delivering success online and the emphasis on learning from other sectors and new business models with case studies/opinions shared by two high achievers who’ve “been there done that” – James Alexander (Egg & Zopa) and Indira Thambiah (Argos).

My view of the opportunity for banks to design and deliver success has been fueled by the discussion on the day, the great thing is that there is loads of enthusiasm from within – that things can be improved and that the online channel must be viewed within the context of the multi-channel service offering – everyone attending said they found it thought provoking so hopefully new/improved services will follow.

I for one want to be a part of making that happen!

I’m saying it again after saying it with the conviction of a New Year revelation (no it wasn’t a revolution) recently. And this time it’s about the banking experience; I can’t help believing many customers express unhappiness with the experience but generally don’t vote with their feet. But I’m told that inertia is breaking down – its seems that banking customers are more agile in their financial affairs than ever before – and it seems they are moving around when they see good new products!

But are they getting a good experience?

I think I should aim to find out this year and I made a startthe other day – an interesting conversation with someone who has already done more than most to challenge the banking status quo…

I was lucky enough to spend some time this week with James Alexander, ex Zopa and Egg, now at Green Thing. James is not only a very bright star but also a very nice guy so it was a pleasure to hear his views on the relationship of consumers with their banks – and his conviction that success comes from starting with customer and experience – or in his words “the increasing demand from customers for transparency and the need to feel connected with their financial actions”.

Here is a man well qualified to offer his views for consideration after his achievements at the forefront of Social Lending and I was fascinated to hear him talk about consumers having an “acute demand for something different and something better”. It echoes the other conversations I’ve been having that inspired me to declare at the start of 2008 my view that this is the customer experience era.