In these uncertain times, your 2004 budget won’t increase without a battle. Following are some of the major ways to make the case for increased investments. See also for a more thorough discussion.

•  Account retention

• Competitive necessity

• Premium service fees

• Incremental cross sales, especially loans
  and credit products

• Increased transaction fees

• More effective use of marketing dollars

• Cost reductions through self-service

If you are looking for the biggest bang for your buck, look to online lending and small- and micro-business initiatives. According to Celent’s groundbreaking study across 1.5 million Digital Insight users (in 2001), online lending generates four times the combined value (NPV) of banking/bill pay. Business services were even more valuable, resulting in returns of nearly six times that of banking/bill pay (see below).

Table 1

NPV from various online banking products

Source: Celent, 10/01  For a better understanding, read Celent’s Customer Retention and Cost Savings Drive Online Banking ROI, Oct. 17, 2001
(1) NPV over 5 years at a 50,000-customer bank; includes direct revenues, cost savings, and retention. (2) Per-customer figures are across all customers, on- and off-line, consumer and small business.

2003 Thinking Exercise:
Premium Online Banking Channel

If a picture is worth a thousand words, what’s a live demo worth? Even though we go to great lengths to describe innovative new services, it doesn’t really sink in until you’ve personally sampled it. To loosen the cobwebs, choose this year’s exercise, 1st Source Bank’s premium online banking (below), or any previous ones:

-          Alerts (2002): Use fyiAlerts from Charter One

-          Savings (2001): Open a savings account and setup automatic transfers at ING Direct

-          P2P Payments (2000): Pay for an eBay purchase with PayPal (now owned by eBay)

-          Account Aggregation (1999): Signup and use account aggregation at VerticalOne (now Yodlee)

2003 Exercise:
Premium online banking with 1st Source Bank

South Bend, Indiana-based 1st Source Bank ($3.3 billion) is one of the first financial institutions to launch a premium option for online banking customers. For this exercise, you don’t need to signup for an account. A visit to the bank’s website should give you enough food for thought.

Time Needed:

-          30 minutes

Material Needed:

-          pencil and paper

Instructions:

1.       Visit the bank  www.1stsource.com 

2.       Find the online banking section.

3.       Observe how the bank positions the various options for online banking. Make sure you look at the comparison chart.

4.       Now think about your own online banking features and benefits. How could they be organized into free and premium channel(s)?

5.       Create a comparison chart similar to 1st Source’s  www.1stsource.com/onlineFeatures.cfm .