A recent article in Bank Systems & Technology looked at the question of whether or not banks were reaping Web 2.0's potential. The subtitle of the article—"some institutions aren't realizing all that Web 2.0 has to offer"—is generous beyond belief.

The article takes the form of a panel discussion, with participants from Wells Fargo, Adobe Systems, Tower Group, and Hurwitz & Associates addressing questions about which banks are implementing Web 2.0 technologies, and why banks aren't embracing them more than they have.

The Tower analyst had some interesting things to say, while the rep from Wells Fargo understandably focused on internal initiatives, although (probably reflecting the part of the organization he works in) he made no mention of WF's blogging efforts.

What had me shaking my head in disbelief was the comments from the Adobe person. Her reply as to why banks aren't embracing Web 2.0 technologies more: "The main obstacle seems to be that institutions are hesitant to improve one section of their website too drastically for fear of making the other sites look even more out of date."

Robin Bloor of Hurwitz better captured reality with his response to the same question:

"It may simply be a matter of where to invest. A Web 2.0 project is very difficult to define in terms of specific business objectives. There are no obvious corporate successes to imitate, and no easy way to calculate payback."

My take: There are three major forces holding banks back from capitalizing on Web 2.0:

1) ROI. Despite all the talk about building customer relationships, most banks invest in sales, not in relationship building. If there's no clear link between the investment and a sale, most banks are reticent to make the investment. An example: Personal financial management. NetBanker now tracks more than 20 online personal financial management sites. Why is it that most banks (with the exception of a select few like Wells Fargo) aren't making an investment in a PFM or Wesabe-like capability? Because they can't see how it ties to making a product sale.

2) History. Besides "no obvious successes to imitate," there are past failures to avoid. Plenty of bankers still remember the online community efforts that banks dabbled in seven, eight, nine years ago. They jumped into those initiatives feet first back then and found that they were jumping into empty pits. This time around, they're more cautious and asking, "What's different this time?" Well, there are plenty of things different this time, but they still need to be educated about, and convinced of, these differences.

3) Banker say what? Ask 100 banks if they could launch a successful social media campaign, and 95 will say, "Huh?" (4 will say no, and 1 very deluded individual will say yes, unless she's from Wells Fargo). Even if some banks were willing to take a longer term view of the ROI on these investments, it's still not clear to many exactly what Web 2.0 is—and isn't. I, for one, wouldn't suggest tossing around words like "wiki" or "facebook" with senior execs at most financial firms.

So is Web 2.0 dead when it comes to banks? No. But the needle isn't going to move until one or both of the following happens:

PFM sites influence consumers' choice of institutions. Wesabe's Jason Knight has said that his firm doesn't compete with banks. And he's right, of course. But if (or when) Wesabe starts becoming an influence on its members' choice of firms in any significant manner, the banks will sit up and take notice. And then start, however belatedly, to get on the Web 2.0 bandwagon.

P2P lending makes a bigger dent in the big banks' business. Firms like Prosper can crow about the dollar volume of the loans being made on their sites, but, for now, many banks assume (rightly or wrongly) that these transactions are not cannibalizing their business. If this view changes, however, banks will start whistling a new tune regarding Web 2.0.

Ron Shevlin is vice president of client solutions at Epsilon. Prior to that, Ron was an analyst at Forrester Research. He opines (translation: rants) about financial services marketing at Marketing ROI: Whims From Ron Shevlin. The opinions expressed here are Ron's, not those of NetBanker, his employer, or any other sane person or party for that matter.