by Jason Sherrill
February 4, 2010
For over 10 years we have worked with banks and credit union managers to design and implement online banking, internet & e-mail marketing, customer service and website solutions. In many instances, prior to our work with the organization, they had few metrics by which they measured their website's return on investment (ROI). To help our prospective clients establish a starting point for measuring ROI, we created an online Bank and Credit Union Website ROI Calculator.
We've identified five key areas where websites offer measurable ROI for financial institutions:
Customer Acquistion and Retention
Small banks and credit unions of all sizes face a significant challenge competing with large banks for new customers. As of December 2005, 55% of consumers who live in households with an annual income of at least $75,000 bank online1.The quality and quantity of a bank's online services is an important factor that these customers consider when choosing a financial institution. To determine how much to invest in design, programming, support and infrastructure for online services, banks need to consider the value of acquiring or retaining a single customer.
Loan Volume Increases
While it may be hard for most of us under the age of 35 to imagine that some banks still don't offer online loan applications, it's true. Frankly, I'm astonished at the number of bank and credit union managers who I talk to who tell me that online lending is not important to them, followed usually by a statement like, "our customers prefer to do business in person."
The rest of the managers, who do have a clue about what their customers want, are aware that online lending is an important part of their online service offerings. They tell us that they have a difficult time investing in technology and marketing to support online lending because they don't know their ROI value. This is because many of these institutions are not accurately measuring the revenues they earn from online lending.
On average, our clients who offer online loan applications realize at least a 10% increase in loan volume. If they execute a solid marketing strategy to drive customers to their online lending operation, they usually see a 20% to 30% increase in loan applications.
Customer support cost reductions
Like in many industries, customer support and service represents a significant expense for most banks and credit unions. This is the area where most small banks and credit unions are also the furthest behind their large bank counterparts. Less than 10% of the 200 banks and credit unions that I've interviewed over the past two years offer any online customer service channel. Most of the banks have a simple "Contact Us" form on their website, but rarely is there a true inquiry management system and team behind that form. Instead the form results are usually sent via a non-secure email to someone's inbox; then that person follows up with a phone call to address the customer's needs.
This is another area where small financial institutions are not measuring their costs, nor are they aware how they could more efficiently process a portion of these service requests online without ever picking up a phone or, in many cases, even responding to an email. On average, our clients who have implemented our MemberResponse inquiry management system have reduced their inbound telephone support calls by 25%.
Online document delivery, such as check images and e-statements
Fortunately, this is one area where most managers have seen the light and have already or are planning to implement a solution. The ROI is obvious and easily measurable here; number of customers X ($.39 postage + $.65 printing) = net savings.
There is one aspect of online statements where many financial institutions are disappointing customers though, and that is statement retention. With the cost of storage space and CPU cycles at all time lows, it's ridiculous that so many systems still only allow a customer to view a limited statement history, usually six to 12 months. While it's rare that someone may need to view a statement that's three years old, it's usually a situation where the customer needs the information to settle a dispute or provide documentation to a third party. The customer is probably already frustrated dealing with their situation, and that frustration only increases when he learns that he must order a paper copy of the statement rather than being able to access it online.
Reduction of teller assisted transactions
Items to factor into your per-transaction cost include teller office space, reception and waiting areas, teller wages, data processing costs (equipment and software), grounds maintenance, insurance and other applicable items specific to your financial institution. Our clients have calculated their in-branch transaction costs at between $4.50 to $22.00 per transactions. At an average of $10.00 per transaction, even a 10% reduction in teller-assisted transactions can save a significant amount of money for even moderately busy branches.
Bank and credit union website ROI calculator
You can use our ROI calculator to determine a ballpark estimate of your website's return on investment. It's important to note that your website's appearance, usability, perceived security and performance are going to directly affect your ROI. In other words, if you have a website that looks like it was designed by an amateur and works the same way, then don't expect to earn a high ROI. The web development industry is the same as many others; to get top results, you'll need top talent, and for top talent you should expect to pay top dollar.
Resources
1http://pewresearch.org/obdeck/?ObDeckID=31
by Jason Sherrill
February 4, 2010
One of the most popular questions we've fielded from our clients over the past twelve months has been, "How do we use Facebook and Twitter effectively?" While can provide many strategies that vary by client, a real-world example speaks volumes. Ally Bank provides just such an example.
Due to compliance regulations, fear and other factors unique to the financial industry, financial institutions are limited in the ways they can use non-secure channels to interact with customers. This doesn't mean though that the tools should be discarded entirely or just relegated to glorified P.R. and advertising channels.
One effective way to use social networking for banks is to engage customers in two way dialogue. For example, allowing customers to initiate service requests via Twitter provides a no-cost channel to at least get the ball rolling on resolution. While the intimate details can be communicated via telephone, the credit union rep can at least acknowledge the request via Twitter to let the customer know that someone is handling the request. This not only builds goodwill with the customer, but also all of the other people, such as the customer's followers, who are watching the interaction.
Simply opening and using the channel also exposes the company (or brand, if you prefer that term) to potential customers. The network effect increases exponentially the number of visitors who see the positive interactions occurring between the bank and its customers. Likewise, there may be some negative comments posted, but this provides an opportunity for the bank to (a) hear about these complaints, (b) correct the issue, if possible, and (c) build goodwill by acknowledging and publicly responding. The fact is that angry customers will vent to others and often this will take place online. By providing and participating in the channel (such as Twitter), the bank at least will have an opportunity to respond directly within the same channel, effectively getting the "last word."
Take a look at Ally Bank's Twitter page and you'll see examples of everything I've discussed above.
Good job, Ally Bank.
- A weblog by InetSolution about technology for banks, credit unions and e-commerce
