1. Forecast Usage Levels: If you haven’t already done so, you will need to forecast the number of new and closed online banking accounts for each year of your planning period. Plus you will need usage forecasts for any line items that you are tracking separately such as number of bill payments, number of funds transfers, number of e-mails, number of customer service requests, etc.

2. Calculate Variable Costs: Variable costs are those expenses that increase with each new online banking subscriber. Therefore, variable costs are totally volume related. The major variable costs were summarized on the previous page.

3. Calculate Fixed Costs: Fixed costs are the opposite of variable costs. They are not volume related. Fixed costs are relatively constant across a large range of volumes. Management salary and benefits, systems development, marketing, and software/hardware purchases are typical fixed costs.

4. Estimate risk factors (if necessary): If you are quantifying intangible benefits, you better do the same for the intangible costs, better known as risks. Some potential risk factors worth noting:

• increased staffing to evaluate and monitor new areas of potential online fraud (especially in the area of bill payment)
• potential procedural changes needed to beef-up internal fraud-prevention controls
• potential monetary losses from fraud in online banking customer accounts (although this risk may already be accounted for within the pricing of the individual products, credit cards, debit cards, checking accounts, etc.)
• potential public relations/consumer confidence cost from a publicly known computer fraud (even if there was no monetary loss)
• management time in evaluating and dealing with unforeseen customer service and performance problems (especially in the area of bill payment)
• costs to correct major errors in transaction processing (especially with bill payment and investment transaction processing)
• increased need for internal training and education in the area of online customer interactions

5. Allocate Overhead and Intercompany Chargebacks (if necessary): Business schools teach that overhead allocations and intercompany accounting treatments are generally irrelevant when evaluating individual projects (because corporate overhead won’t change whether the project is approved or not), but that may not be the way your company handles business cases. So follow company policy on this one. If you have any influence in the matter, simply the analysis by ignoring overhead allocations. You’ll have enough debate on the future of online banking to fill-up all available meeting time (and then some!).

Note on overhead: Allocations for corporate overhead (occupancy, executive management, investor services, etc.) can be either a fixed cost or variable cost depending on formulas used in various financial institutions. Our model spreadsheet does not contain a line item for overhead, but you can easily add one.