Achieving maximum account penetration for your online banking initiative begins with a four-step planning and evaluation process.

1. Perform a thorough unbiased evaluation of available technology-based access methods.

2. Evaluate your institution’s strategic goals relative to online delivery.

3. Evaluate the demographic and technology-adoption profile of your customers.

4. Run the numbers.

The field of online banking is not new, and it has been described with many terms and labels. Examples include: remote banking, interactive banking, electronic delivery, home banking, PC banking, self-service delivery, direct banking, and of course, online banking. Within this field there are many delivery options, also known as channels, device types, access methods, or even information appliances. The table on the right summarizes the major remote access methods.

Step two begins by taking a copy your company’s strategic goals and determining which ones could be enhanced with remote delivery. Because of the demographics of computer/online users, the following strategic goals have the most promise overall (though in your case, they may or may not be appropriate):

• increase loan outstandings
• increase loan originations
• decrease loan servicing costs
• increase POS debit usage
• increase credit card accounts/usage
• increase investment sales/brokerage trades
• increase electronic bill payment usage
• increase customer satisfaction
• decrease customer service cost
• decrease number of branches/branch staff
• improve account retention
• decrease call center costs
• improve brand awareness
• improve/change market positioning
• improve market share of newcomers

Source: Online Banking Report, 8/97

Before you make a final commitment to a new delivery channel/strategy, you better be sure the customers are there to support it. More than any other, this is the step that IT/IS managers often pay the least attention to. The marketing department or outside research firm must be enlisted to perform a thorough, statistically valid demographic survey of your customers. This is the only way to project which technology investments will have the highest payoff for you. But don’t fall into either of the following research traps that result in highly misleading results:

1. The marketing manager is tasked with conducting some basic demographic research such as customer access preferences and how many account-holders have PCs, PCs with modems, Internet access, and so on. To avoid annoying telephone calls (or to cut costs), a mail-in survey is chosen. Because lead times are so short (or to cut costs), there is no followup with non-responders and the percentage returned is very low. Therefore, the data represents the segment of the population that are technology-resistant and time-rich, and now you know everything you ever wanted to about those that will forever resist using any remote access products!

2. The IT manager, being the results-oriented person that he/she is, decides to conduct a mini-survey themselves. Conveniently, in the file cabinet there’s a list of about fifty people that have proactively expressed interest in online banking, so what better place to start? The survey is sent out to these individuals with a remarkably high response rate. And with project deadlines approaching, there isn’t enough time to contact other customers. These results are equally unreliable but in the opposite direction. You now know everything about the small early adopter segment that banks with you. But once again, this group bears little resemblance to your average customer, and you probably would have been better off using a photocopied set of survey results from Timbuktu Savings and Loan.

The right way to survey customers is to first make sure the survey respondents represent your total customer population. Second, don’t rely too heavily on questions that ask people if they want or would likely use online banking. History shows that survey participants are fairly unreliable in predicting their future adoption of new or emerging technology.

Once you’ve gathered the data called for in steps 1-3, you may see some clear delivery channel opportunities presenting themselves. Or it could look like a jumble of unrelated facts and figures. In either case, the final step in the evaluation process is to develop a decision matrix to rank the competing access methods.

A decision matrix is used to quantify the various attributes of each solution ending with a rank-order of all possibilities. Each attribute is assigned a weighting that corresponds to its relative importance compared to other attributes. In our example below, we’ve given the highest weight, 40%, to the attribute retain (the ability to retain current customers). The lowest weight, 10%, was given to revenue potential. You can have as many attributes (columns) in your decision matrix as needed. But the sum of all the weights will always be 100%.

While not a panacea, the resulting rank-ordered list of access methods should help you make more rational resource-allocation decisions during the 1998 planning process.

Note: The following example is provided for illustration purposes only. The values used are not intended to be guidelines or rules-of-thumb.

Guest columnist James Van Dyke was Product Manager for Ultradata’s remote banking products. He is now employed at Hewlett Packard in Sacramento.