Last week, Christophe Langlois @Visible-Banking tweeted a question about the value of in-statement rewards programs: 

And my answer:

My response was partly 140-character hyperbole. It's Twitter after all. But after sleeping on it, I think what I said might actually be true. 

What's the biggest problem facing online/mobile banking?

The cost to the bank. Always has been and always will be. And it's not going to get less expensive anytime soon (note 1). Every time we write about the next must-have online bell or mobile whistle, it just gives bank CFOs another gray hair.

Up until recently there were only three ways to pay for these extra expenses:

• Charge direct fees for the channel, which customers hate
• Cross sell, which is hard to attribute solely to the online channel
• Cover the costs with other revenue streams

The vast majority of banks, and every one in the United States, took the last approach. Unfortunately, this can lead to unwise pricing decisions such as the one that gave rise to the "$35  cup of coffee."

But thanks to Cardlytics, who recently took home Best of Show honors at Finovate Europe, and others, we are entering into a new era of advertising-supported banking. And that could finally make direct banking a revenue generator on its own. Not enough to pay all its costs, but enough to alter the game.

Let's assume banking customers redeem 2 offers per month and the average commission to the bank is $1 each (note 2). That's $2/mo in new revenues, almost entirely attributable to the online/mobile channel (note 3).

A bank with 25,000 online banking customers would earn about $600,000 annually. That will buy a several bells and a decent whistle.

----------------------

Notes:
1. It can be argued that in the long-term support costs per banking customer will fall dramatically as branches and human customer support are downsized.
2. Using Aite's forecasted $1.7 billion in-statement commissions in 2015 and dividing by 70 million online banking household (link).
3. You have to have the debit or credit card too, so the revenue might need to be shared with the card P&L.
4. We published a report on in-statement rewards in 2011 in our Online Banking Report.

I was doing some research into banks' Facebook sites and found a couple pretty terrible results when using each bank's own search feature. Here are three samples. 

1. Citibank site-search results for "Facebook" (17 Feb 2012; 3 PM Pacific)  
The search results try to convince you to search for "fake book" instead (why?). Ironically, the second search result does lead to the bank's Facebook page, but you'd never know it from the title, "Citibank Online - IMPORTANT INFORMATION."

2. Chase Bank site-search results for "Facebook" 
Chase has more Facebook fans (3.4 million) than any bank on the planet, in fact almost 4x the nearest competitor. But you wouldn't know if from their site search, which returns exactly zero useful results. 

3. US Bank site-search results for anything
It looks like US Bank's site search is broken today. Every search comes up with the same error message. Too bad there isn't a better error message. "We could not process your request" sounds a bit like they are shifting the blame to the user.

---------

Note: We've covered banking site-search in our Online Banking Report industry newsletter (subscription).

While I don't use eBay for entertainment much any more, I still pick up the occasional used item now and then. And I love the rewards program which began about two years ago. It works like it should, with no qualification hoops to jump through or byzantine rules to discourage redemption (note 1).

Users accrue a 2% cash-back bonus, called eBay Bucks, for three months. Then they have 30 days to spend it on the site. When paying for a subsequent purchase, the eBay Bucks are automatically used first, with any remainder shunted off to PayPal for authorization.

It's all well integrated and transparent. eBay even emails you multiple times as the spending deadline approaches.

They company also provides ways to earn extra eBay bucks. Today, for example, they offered an extra fiver if you bought something worth $100 or more.

In addition, outside brands can make offers on the rewards-summary page as well. The current featured offers (for me anyway) are from Intuit's Mint.com and TurboTax units. Users receive one eBay Buck for signing up for Mint and two for using TurboTax. There are 36 offers altogether, paying up to 15 eBay dollars (People Magazine). All offers are powered by TrialPay. Two others are financial:

• FreeCreditReport.com (Experian): 10 bucks
• Credit Karma: 1 buck

Side note: The eBay rewards implementation is a good example to simulate when designing your own in-statement rewards program.

--------------------------------------

Mint.com offer displayed in eBay rewards program area (16 Feb 2012)

Close-up of Intuit offers

Landing page powered by TrialPay (link)

-----------------------

Notes:
1. I did fail to redeem my cash-back horde the first time, because I didn't realize there was a 30-day redemption deadline. But not before eBay sent multiple messages reminding me of the pending deadline. 
2. For more on in-statement rewards programs for banks, check out our Online Banking Report on the subject (published Feb. 2011).

Last night, my son was having trouble convincing his college landlord that the Feb rent payment had been sent via online billpay. I was not happy, envisioning an extended conversation with bank customer service, something that is very, very low on my list of Monday night activities.

So I logged in to the Chase account to see if the check had cleared. At best, I expected to see that the payment had been sent via billpay, but no way to prove that the check had actually arrived. 

Bit I was pleasantly surprised. Not only could I see that the payment had cleared, the bank had posted an image of the check so I could see the landlord's endorsement (see screenshot 1 and 2).

That was great on its own. But wait, there was more.

The bank offers a self-service "Note to Payee" function that automatically creates a letter to document payment details, including a copy of the check image (see screenshot 3). All you have to do is download the PDF and attach it to an email to the payee.

The only hitch in the system is finding these functions. They are located under the Payments & Transfers tab (see screenshot 1). That's not bad, but it would be more intuitive to place a direct link from the the online statement (My Accounts) to the bill payment details. Also, the "Print to PDF" button is easily missed (screenshot 2).

Still, the entire process took less than two minutes. And I didn't have to call customer service, a saving of 15 minutes of my time and $15-20 in customer service expense by the bank. 

The letter worked perfectly. Within an hour, the landlord had backed down, apologized for her error, and went back to her day job. This pretty much makes up for the unreadable bit of correspondence I got from the bank last week. 

-------------------

1. Chase bill payment activity screen (14 Feb 2012)

2. Chase proof-of-payment screen
Note: Print to PDF option

3. Chase automatically generated "Note to Payee" letter in PDF format

-------------------------------

Note: See our Online Banking Report for more info on bill payment, messaging, customer service and much more.

If you read much tech news, you've probably heard about Kickstarter, or at least their most famous project that helped a budding entrepreneur make watches from iPod Nanos (above).

Kickstarter is the best known (note 1) of the so-called crowdfunding sites where the Internet is invited to help fund new projects in return for recognition and/or a tangible good related to the project. Kickstarter focuses on the arts world, helping connect artists, designers, publishers, and performers with patrons around the world, who kick in as little as a $1 to help get a project off the ground. There are dozens of others focusing on other areas as well. 

I used Kickstarter this weekend to fund publication of a new comic book called Steamfunk (screenshot below). I came across it when searching for local Seattle-area projects.

My niece is a steampunk fan, so I thought it would be a nice surprise for her. I dropped $15 into its pledge drive, and assuming the artist Zilla Doty receives at least the $3,000 he was seeking (note 2), in April I'll have a signed copy of his inaugural edition to send to my niece (note 3).

Not only do I get a cool one-of-a-kind gift, I gain the satisfaction of helping a local artist get a project off the ground. Very gratifying.
_______________________________________________________________________

Bank Opportunity
_______________________________________________________________________

I bring this up, not because it's a slow news day, but because I think leveraging crowdfunding could be a good way for community banks or credit unions to distinguish themselves in the local market. It would not be an easy project, getting people to part with their money never is, but it has the potential to attract new small business clients while supporting your community.   

Here's how it would work (note 4):

1. Bank sends customers to a third-party crowdfunding site, which could be operated independently, or private-branded for the bank

2. Bank publicizes new community projects via its website, blog, Facebook page, and so on

3. OPTIONAL: Bank offers to match the crowd's funding with a credit line/loan (if needed and assuming reasonable credit risks) or other banking services

For extra credit: Integrate crowdfunding with peer-to-peer lending. 

------------------------

Kickstarter project page
Note: This is how it looks after you've made a pledge

----------------------------------

Notes:
1. According to Compete, Kickstarter had 750,000 unique U.S. visitors in Dec. 2011.
2. With 20 hours to go, the project has easily surpassed the $3,000 goal. 175 backers have pledged almost $5,000.
3. The pledge process is very smooth. Payment is made when you make the pledge and fulfilled through Amazon Payments. If the project fails to reach 100% funding by the end date, you get your money refunded. According to the company, 90% of the projects who make it past the 25%-funded mark end up with 100% funding. That's an amazing stat.
4. No, I don't have a clue what objections you might get from compliance, but I'll bet it will be an interesting conversation.
5. We haven't written specifically about crowdfunding at Online Banking Report, but we've covered P2P lending and small biz banking services.