Definition

E-statement: noun; a periodic account summary delivered via email, includes email notifications as long as they link directly to the account statement (graphic source: Citibank Singapore)

Although relatively few banks have implemented e-statements, they have become quite common at credit card issuers and credit unions. In a recent survey by Callahan & Associates, 45% of 159 credit unions responding currently offer e-statements, and 33% more planned to roll it out in 2003. Although these numbers cannot be projected to the entire credit union population, it’s still amazing growth given that just 19% of the respondents to a similar survey a year ago offered e-statements.

There are four primary methods for delivering statements electronically:

(1)     Notification with link: The simplest approach, and one devoid of tech support and security issues, is to email a link when a new statement is available for viewing online. This is the most common technique, used by DeepGreen Bank (see below), and hundreds of other financial institutions.

DeepGreen’s e-statement notification, not much to look at but it gets the job done. We wish they would change the subject line; “important notice from DeepGreen Bank” should be reserved for non-routine communications.

(2)     Statement imbedded within the email or in an unsecured attachment: This technique is not widely used due to perceived privacy and security issues. However, we believe it’s a viable option as long as account numbers are not transmitted with the statement. Several banks, including Charter One (below) and TIB Bank of the Keys, send unsecured statements or mini-statements.

Charter One’s emailed mini-statement in HTML format. Note: Only the last four digits of the account number are provided.

(3)     Email with password-protected attachment: The second-most popular approach is to email the entire statement as a password-protected attachment. Users have the comfort of knowing their account statement is safely stored on their hard drive: even if their machine is stolen or compromised, their data remains encrypted and safe from prying eyes. Password resets, tech support, and outsourcing costs are the downsides of this approach.

(4)     Email into a password-protected vault: This hybrid approach has considerable appeal if you can overcome cost issues and/or convince users to pay for it. Statements are placed into the user’s personal online vault stored on a co-branded server. Users control vault access, so they have the peace of mind knowing that the data will be available for years to come. The vaults can typically be used to store other valuable papers.

Zions Bank’s Z-Vault for instance can be used as a secure online storage facility for any document or file. Users have four ways to transfer items into their personal vault:

• via email to username@vaultinbox.com;
  note the vault’s address could be used to receive e-statements directly from any financial provider
• by logging into the vault, browsing their own hard drive and selecting files to upload
• using a personal scanner
• using a scanner at certain Zions branches 

 

Zions’ Z-Vault, from affiliate company Entervault cost users $3/mo for 10MB, $5/mo for 100MB, and $5/mo per 100MB thereafter.

Ref: www.zionsbank.com/zvault.jsp?leftNav=ob_zvault&topNav

 Strategic/Infrastructure Issues

• Market research: What kinds of information and alerts do users want? For e-statements, what will be the reaction to forced or voluntary paper turnoff? Using Web-based surveys, find the hot buttons of your market. Certain account-related functions, such as deposit confirmations are universal, but the desire for non-financial messages, such as community events, may vary widely by institution.
• Make vs. buy: At first blush, electronic messaging may look like a good candidate to handle inhouse. But realize the battle to get into your customers in-boxes is escalating and you’ll need state-of-the-art tools and knowledge. Even smaller companies may need to dedicate one-half FTE or more to stay abreast of the industry and handle spam complaints and blacklist problems. If that sounds too expensive, consider outsourcing your email distribution .
• Vendor selection: There are hundreds of companies that can handle email distribution for you, but given the stakes, you’ll want someone with experience and ironclad security. The well-respected online marketing publisher, MarketingSherpa completed a study in November identifying 59 companies that met their minimum qualifications of experience and size .
• Cost: As a rule-of-thumb, whether you do it yourself with soft dollars or outsource with hard dollars, emailing will cost 1 to 2 cents per message (less when you get into the multi-million category). If you send 300,000 messages a month, that’s $3,000 to $6,000 per month, a good investment if you follow the basic tenets of good email marketing.
• Pricing: While you wouldn’t dream of charging for your monthly member news, what about more specialized alert services, especially for small businesses? Bank One is the first major financial institution to test the waters by charging a $14.99 annual fee for its Premium Alerts (see next page). We believe there are good opportunities to charge for certain information feeds delivered by electronic messaging.

 

Premium Alerts from Bank One cost $14.99/year for banking customers but are free for card-only accounts.

• Mandatory vs. optional paper statement turnoff: Everyone knows the paper goes away eventually, but the key question is whether you can now begin to gently nudge, or even force, paperless options on your customers. Many early adopter credit unions require e-statement users to forego the paper, and several Net-only banks, including NetBank ($3/mo) and American Bank ($3/mo) charge fees for paper statements.
• We say go slowly. Don’t alienate your e-customers before they trust the electronic alternative. The best approach, if you can afford it, is to offer paper as a no-cost option on your core transaction accounts.* Then a year or two from now, you can begin to charge a fee for those who really want the paper.
• Print stream conversion vs. custom designs: Some financial institutions are simply converting their print-streams into PDF files and making them available to end-users. There is nothing wrong with this approach; in some ways, it’s a comfortable transitional method for users. However, long-term, you’ll want more flexibility to build cross-sales and relationship functions into the e-statement.

*Free or low-cost ATM-checking accounts can be forced into e-statements more rapidly.

 Service Design

• Online banking registration requirement:
  To maximize adoption, some financial institutions are not requiring online banking registration in order to receive e-statements. We think this is a good idea. With this approach, call center reps and branch staff can sign up customers for e-statements without requiring a visit to the Web. DigitalMailer has found that its credit union clients are able to double their signups by offering e-statements to all members.
• PDF vs. HTML: While the majority of users can open PDF files, it’s still more time-consuming, and in our experience PDF files are more likely to crash the PC. If you can afford it, HTML is desirable.
• Attached statement vs. notification with link: This is a difficult decision. You want to avoid sending attachments whenever possible. Attachments increase tech support and other costs. On the other hand, email notifications require action on the part of the user and may not be perceived as a valid paper statement substitute, thus reducing your ability to eliminate paper. You can mitigate this problem by offering a lengthy statement archive and reminders before you pull statements off the archives.
• Frequency: Will you send e-statements daily, weekly, monthly, quarterly, or annually? Will each statement contain only the transactions since the last statement, or will it be cumulative? Or will you offer both types, for example, daily statement of new transactions with a weekly/monthly summary? When possible, let the user decide. You might consider charging a modest fee for more frequent statements combined with alerts.
• Password protection: If you send statements as attachments, you must deal with this issue. It’s possible to password-protect the attachments, but it will increase your costs and make it harder for the user. If you decide against password protection, you must ensure that account numbers are masked or truncated in the e-statement. You must also educate users on safeguards to ensure the privacy of their in-box.
• Marketing messages/targeted banners: Once you turn off the paper, or make it redundant with e-statements, you will need electronic marketing tactics to maintain a positive business case. There are no common industry practices at this point, but we recommend beginning with a low-key approach. Again, you don’t want to scare away your early adopters with banner ads for cheap watches and ginzu knife sets.
• Check image integration: E-statements and online check images are great complements to each other. Five years from now, every major financial institution will offer both.
• E-statement forwarding: If you send attached statements without password protection, they will be easy to forward to others. This can be a benefit, but it also increases the risk that crooks or vandals will post customer statements on the Web for all to see. Assuming you don’t show full account numbers, names, or addresses, the security risk is minimal. Southwest Bank of Texas www.swbanktx.com  is even making statement forwarding into a profit center, charging $1.50 per forward. Ref: https://www.swbanktx.com/
  Personal_Banking/_e-statements.html
• Multiple email addresses: Will you allow
  e-statements to be sent to multiple email addresses?  Many banks allow up to three email addresses. That’s a nice customer service, but make sure you authenticate all the email addresses (and subsequent changes) by requiring confirmation of the change via a message to the original email address.
• Statement archive size: In researching this report, we saw archives ranging from 3 months to 2 years.* If you are serious about eliminating paper statements, you’ll need to measure archive length in years not months. We consider 12 months the minimum today, but that will increase in the future. We expect financial institutions to eventually offer lifetime archive options, possibly with annual fees for the older records. For instance, Zion’s Z-Vault costs $3+/month for indefinite storage of statements and other documents. A side benefit: massive statement archives provide yet another reason for your customers to stay with you.

*NetStock’s Sharebuilder offers lifetime archives, but most of their customers were added in 2001 or later.

Ongoing Operations and Security

• Bounced emails: You will need to keep on top of bounced emails with procedures to resend after a certain amount of time and to contact your customer if messages continue to bounce. Much of this work can be programmed into the system, but you’ll need human involvement for extreme cases.
• Change of email address: Email address changes need to be handled with the same level of security as postal mail address changes. And since they are far more frequent, you’ll want to automate the process as much as possible.
• Password changes: If e-statements are sent as password-protected attachments, you’ll need support staff to handle password-change requests.
• Electronic statement turnoff/vacation mode: You will want to make it easy for users to turn off electronic statements when they are away for extended periods. Citibank provides this option with its alert program (screenshot below).

Citibank allows users to turn alerts off and on with a radio button on the top of the screen.

• Tech support: All electronic messaging programs will require some level of additional tech support, more if you send attachments.

Lost/stolen/corrupted computer files: Another issue is lost computer files and
e-statements never received by the user; another argument against sending unencrypted files. You can mitigate this problem by educating users in backing up their local statement files, or offering an online archive service, such as Zions’ Z-Vault