by Greg Crandell and Ron Daly

When the financial institutions’ e-statement industry was born three years ago, issues of Push vs. Pull, HTML vs. PDF and costs of electronic versus paper delivery drove the debate. Now these issues have given way to a new discussion of whether e-statements are a tactical option to save costs or a strategic opportunity to sell more products and provide richer customer service. One thing we have learned since 1999:  savings on statement printing and delivery are just the tip of the iceberg.

Financial institutions using e-statements as part of a Web strategy have found that they can be used as a strategic contact point to inform and interact with customers. By using e-statements with email notification, institutions have been able to increase business and generate additional revenue by pulling customers to their Website for information and targeted offers.

Many e-statements link to other Web-based services and information reducing transaction costs, enhancing interactivity, and enabling self-service. The most common links are to loan applications, online banking, newsletters, customer service, and even live chat.

Forecasting Adoption:  In estimating your institution’s adoption rate expect approximately 50% of online banking users to opt for e-statement;, and an equal number of non-online banking users to sign up, if
e-statements are offered without online banking registration required.

Using traditional snail mail, financial institutions spend $0.75 to $1.25 or more to generate and deliver a single statement. Included in this figure are the materials expenses (such as paper and postage) and the labor associated with generating and mailing statements. The ability to reduce, even eliminate, these recurring expenses results in significant savings, even at conservative adoption rate. 

We estimate that for every 10,000 retail customers, an institution can save at least $7,000 per year, assuming 12% adoption, or $12,000 per year with a 20% adoption rate. And these savings could be as much as three times higher depending on an institution’s current costs. These adoption rates are definitely realistic based on our experience. One of our longest tenured clients (two years) has reached nearly 20% adoption for account statements and 25% for mortgage statements (see below). And the savings grow as more users sign up and postage rates increase.

Table 1

Potential Savings from E-statements

annualized

Source: DigitalMailer, 1/03        Assumes monthly statements

For example, 10,000 x 12% x $0.50/mo x 12 months = $7,200

Beyond cost savings, e-statements can greatly aid financial institutions in improving customer relationships and thwarting competition. With an
e-statement service in place, the financial institution can leverage it to deliver more timely service. E-statement delivery eliminates monthly mailings of cumbersome paper statements that must be manually reviewed and stored by the customer. With e-statements, the customer can view their statements online, store them electronically, and print them if they wish; and they can expect their statement will be available to them days before the paper statement would have arrived.

But that’s just the beginning, the e-statement can become the entrée point for a host of self-service options such as: check images, balance/activity triggered alerts, deposit confirmations, check reordering, funds transfers, and all types of dispute resolution.

Along with cost savings and service enhancements, e-statement services are providing sales and promotional opportunities. Financial institutions are starting to use the e-statement and email vehicles to deliver newsletters and targeted promotional materials through links to Website content.

While most institutions are struggling with ways to generate new loans, one Mid-Atlantic credit union has found that targeted e-statements are proving to be one of their best loan-generation tools. The credit union began a strategic initiative to increase loan volume by targeting their members through e-statement and Website campaigns. Using database information and their e-statement engine, the credit union used the 44,000 monthly marketing opportunities to generate new loans. The credit union’s MCIF system identified members that most likely had car loans and credit cards elsewhere. Once identified, their e-statement program delivered tailored offers with the following results:

• The CU presented 2,945 targeted offers to non-credit cardholders for a new credit card via banners in their e-statements; 57 new credit card accounts were opened for a 2% response rate, with a total credit limit of $500,000 and $275,000 in outstanding balances within two months.
• During a three-month period, 8,713 members received targeted offers on their e-statements for new car loans; 117 accepted for a 1.5% response rate and $2.3 million in loans.

While all e-statement products should provide a financial institution with cost saving opportunities, only targeted marketing can put the right offer in front of the right member at the right time. The credit union’s marketing manager explained it this way: 

Each month our e-statement program saves the credit union $8,900 in statement costs and puts 44,130 marketing offers in front of my e-statement members. Last year the CU saved over $80,000; however, the cost-savings pale in comparison to the substantial opportunity for increasing revenue by cross-selling our products and services.

When considering e-statements, a financial institution needs to address a number of issues that mix technology, customer service, and marketing. The first of these is the decision whether to push
e-statements via email, or to notify customers via email and pull them back to the institution’s Website for statement viewing.

The push approach emails or pushes an image of a statement to the customer as an email attachment. Customers view their e-statements by opening the attached file. This approach is convenient for the member since the image is delivered to their email box and no additional steps need to be taken. A receipt notification back to the bank can provide confirmation that the email was received at the intended address. Most push providers use PDF-formatted attachments to closely emulate the printed statement and save costs.

The pull approach pulls the customer back to the institution’s Website each month to access their e-statements. This approach provides an added level of: security for the customer's financial data and provides more flexibility in crafting a personalized message.  Each month, an email notification is when the user’s statement is available for viewing. The notification contains a link to a secure login page that prompts the customer for their account number and a password. Once the security verification takes place, the customer can view their statement via a secure socket layer (SSL) connection.

But the problems with the push approach became clear once institutions started to deploy e-statements. First, while the PDF format closely resembles the paper format, it carries a number of liabilities: 1) customers may have to download and install the PDF reader;
2) PDF pages have somewhat different navigation than typical Websites; and 3) PDF files are sometimes restricted by workplace networks. The last point is the biggest problem; many people check their email, shop online, pay bills, and more while at work.                 

While the push approach proved less viable because of technical considerations, it also proved less attractive for another reason. Statistics show that customers drawn to an institution’s Website to pick-up
e-statements are spending significantly more time on the site and are increasing services. NSFCU’s Web traffic tripled during the first year after launching e-statements (see chart on previous page).

Gaining a customer’s permission to use their email address has always been a challenge facing retail institutions. E-statements have become a successful vehicle for gaining this permission and have become a formidable digital communications tool. They have helped customers establish an “e” comfort level and allowed the institution to become an invited guest in the customer’s email box, while building an online relationship with that customer.

Studies indicate that about 75% of e-statement customers are willing to give their financial institution permission to use their email address to communicate electronically with them on other topics – as long as this permission is not abused. An example of this can be found in the alert sign-ups experienced by a Northern Virginia credit union:

Table 2

N. Virginia CU Opt-in Statistics

• 82% request special offer or new product alerts
• 67% request loan rate change alerts
• 63% request share rate change alerts
• 63% request CD rate change alerts

Source: Digital Mailer, 1/03

With the level of permission granted by customers opting for e-statements and email alerts, financial institutions can target both product and service messages to their customers.

Case in point: Since implementing e-statements in September of 2000, the Mid-Atlantic credit union mentioned earlier has achieved an 18% adoption rate for checking accounts and a 25% rate for first mortgage statements. The credit union’s 2002 member survey revealed that 9% of its membership used e-statements (and the custom email notification) as a source of credit union information.

 The Next Generation

The Internet and Web-based technology have significantly reduced the cost of check image storage and retrieval. In 2002, vendors began rolling out the next generation, e-statements with integrated check image access. This new product allows an institution to use its Website to promote self-service technology and provide instant access to information. More importantly, it can free up personnel while taking the institution to the next level of customer service in the eyes of their customer.

Institutions across the country are seeing significant adoption rates when an e-statement/check image product is rolled out. One Midwest credit union’s program attracted hundreds of e-statement sign-ups each week. Why? Customers already accustomed to check truncation appear quite willing trade a paper statement for an electronic version with 24-hour access to check images.

E-statements with check images create customer value and another opportunity for institutions to save printing and postage costs, generate new business, and retain existing customers. Best of all, for many institutions, the technology is already in place at their check processor (e.g., Federal Reserve Bank or corporate credit union). It’s just a matter of hooking it all together.

Early adopting financial institutions are looking to take fuller advantage of the marketing and service opportunities afforded by next generation e-statement solutions. With this in mind, e-statement providers are developing more interactivity and improving digital communication with every product release.

E-statements are one of the best new technologies to come along in a long time. Not only are you able to enhance customer relationships and increase sales, you can build the business case on a quick payback with hard dollar cost savings. What a nice change!         

Ron Daly is President/CEO of DigitalMailer with prior experience as CFO at a large credit union.

Greg Crandell is VP Business Development at DigitalMailer with prior experience in financial services and high tech product management and marketing.

DigitalMailer  www.DigitalMailer.com   provides digital communication products such as, E-statements, alerts, and e-checks, (866) 994-4900, info@digitalmailer.com.