We just completed our latest Online Banking Report. It will be mailed to subscribers this week.
It's also available online here. There's no charge for current subscribers; others may access it immediately
for US$495.

---------------------------------------------------------

Improving Online Account Opening ROI
Ten strategies to increase online application conversion rates

102 pages (published 21 June 2009)

In this report (abstract PDF), we focus on ways to increase conversions and improve your results when opening financial accounts online or over a mobile phone.

The online application is the new branch new-accounts desk. And, just as you provide ongoing support, training and incentives to branch-based sales staff, you must continually fine-tune your online sales process.

In our experience, this is an area that needs attention at most financial institutions. Things have greatly improved during the 10+ years we've been tracking online applications. However, during the research for this report, we reached dead-ends at three of the 10 applications tested (note 1). That just can't happen.

The report outlines a 10-step approach to improving the process: 

• Direct users to the application
• Set expectations
• First things first
• Guide customers
• Bundle mobile access & alerts
• Upsell
• Fund
• Ask for referrals
• Stay in touch
• Humanize the process

We reviewed the online applications of the following companies:

• Bank of America
• BECU (powered by uMonitor)
• Capital One
• Chase Bank
• First Arkansas Bank & Trust (powered by FirstROI)
• Flagstar Bank (powered by uMonitor)
• HSBC Direct
• Huntington Direct (powered by CashEdge)
• M&I Bank
• National City
• Verity Credit Union (powered by Andera)
• Wells Fargo
• Zions Bank

Finally, a 10-year forecast for online account-opening volumes in the United States is presented.

M&I Bank has an attractive and informative application start page (9 June 2009)
Note: The online banking guarantee at the bottom is a good way to improve user trust.

Note:
1. Granted, user error was the problem in two of the three failed apps; however, we weren't purposely trying to make mistakes. The online application should have provided assistance in correcting them, rather than leaving us hanging.

Earlier this week, Visa launched its Facebook Business Network. While the first to use Facebook, several other major financial institutions have opened small biz networks on the Web in the past six months:

• Advanta's Ideablob launched last September at DEMOfall (previous post here). It's a unique website with monthly contests awarding $10,000 to the best idea, as voted on by users. It's an intriguing concept with decent traction, almost 30,000 unique visitors last month according to Compete (see chart below). (Full disclosure: I just realized I'm wearing an Ideablob t-shirt; schwag can still pay off!)
  
• American Express's OpenForum: As the name suggests, it's a business forum and resource directory, not unlike Bank of America's (see below). American Express has added posts from several prominent bloggers such as John Battelle's Searchblog and Anita Campbell's Small Biz Trends to keep the site fresh. The site has 5,400 members and monthly traffic of about 11,000 unique visitors, up threefold from a year ago.  
  
• Bank of America's Small Business Online Community, a general forum and resource directory, launched in October 2007 (see original post here). It's primarily a forum, with some additional articles on the side. Total membership is just under 15,000.
  
• Capital One's Slingshot, launched in February, is primarily a business directory. But it does aim for community involvement with user-submitted business reviews and comments on certain topics.
  
• HSBC's (UK) Business Network: Another forum-and-blog site similar to AmEx's OpenForum. So far it appears lightly used, with just six blog entries this year and 270 member profiles.
  
• Intuit's Quickbooks Group: Although not a financial institution, the Quickbooks site is a good example of an active community with more content, including ten blogs, and as much traffic as the others combined (not including BofA which is unknown) with nearly 90,000 unique visitors, almost double the number a year ago.
  

 Unique website visitors in May 2008 (source: Compete)

The current reader poll on American Banker's homepage (here) is seeking opinions on Capital One's new "decoupled" debit card. It's a new MasterCard debit card that can be attached to any checking account by processing transactions through the open ACH system. Cards can be used in PIN or signature mode. Capital One began issuing the new product to credit card customers in March and has signed a co-brand deal with an unknown grocery chain. 

Interestingly, of the 70% of respondents with an opinion (excluding the "too early to judge" category), more than half chose "Holds potential to disrupt status quo" (see chart above). The poll was first posted Friday morning (June 8) and runs for a week. Check here Friday for the final results. 

While it's certainly not a scientific sampling, and it's in the free zone so anyone can respond, the results tell me that the product has the attention of the banking community. Whether it catches on with consumers is another matter.  

For more information on Capital One's new product:

• Aite Group 13-page report
• Javelin's blog entries part 1, 2, and 3
• Colin Henderson's Bankwatch post
• American Banker's June 5 article 

Tired of competing with 1.9% dealer financing? Fight back with online car buying services. Many financial institutions, especially credit unions, have offered car-buying services online. With 67% of new car buyers researching online last year according to JD Powers, there's ample opportunity to get in front of car buyers BEFORE they arrive at the dealership. However, for the most part, major banks have stayed away from this area, in part so as not to annoy their dealer-financed customers.

That may change as one big player, Capital One, enters the business, albeit with fewer channel-conflict issues. The credit card giant is already a big player in online auto finance and generated 1.5 million auto loan applications across its 44 million customer base last year alone. It recently launched its new DriveOne <driveone.com> service in several markets (click on inset for closeup).

DriveOne is a slick car-quote service that rivals anything we've seen online. The design is state-of-the-art, easy to navigate, and, with no advertisements, it's much faster than others. The site, powered by Zag <zag.com>, features branded data from Kelly Blue Book <kbb.com>. Furthermore, it's closely tied to the lender, with a slide-bar payment calculator built in to the main user interface (see right-side of screenshot left).

DriveOne will connect buyers to dealers who must agree to sell vehicles at a fixed price no higher than Kelley New Car Blue Book Value. However, dealers are still free to negotiate add-ons, such as security systems or additional warranties. In addition to the fixed prices, buyers receive a $250 (new cars) or $400 (used car) rebate direct from DriveOne, no matter how they finance the purchase. Dealers indirectly fund this rebate with the fee paid to Zag whenever they sell a car through the program.

Powered by Zag
The DriveOne platform comes from Zag, a car-buying service launched early last year by Scott Painter, the founder of CarsDirect.com and BuildToOrder.com. The company used seed money from Elon Musk, founder of X.com/PayPal. One of Zag's investors is Capital One, which led the third round in Dec. 2005.

In Nov. 2005, the company acquired Autoland, the leading auto-buying service bureau for credit unions, with 300 clients serving a total of 8 million members, primarily on the West Coast. Total annual vehicle sales are more than $270 million. The company says it will have approximately 50 of the 300 credit unions using the DriveOne platform by year-end.

Last month, Zag acquired Automotive Invitational Services that serves 6 million members across a dozen AAA clubs. Zag says it will be offering DriveOne in seven states by the end of this month and will be working with 3,000 dealers by year-end.

--JB

Ten years after the first loan was originated online, there is still a surprising lack of effort at mining various lending niches. Mainstream categories, such as mortgages and credit cards, are rife with great marketing efforts. Home equity and car loans are also marketed effectively by a number of players.

But when it comes to smaller niche markets, such as small business or personal loans, the big players have for the most part stayed away.

One exception is Capital One, which recently added a new category to its main navigation bar, "Healthcare Finance (click on inset for closeup).

Healthcare Finance offers personal loans to consumers seeking to pay for the following categories:

• Dental
• Orthodontics
• Cosmetic
• Fertility
• Vision

The website features a 1.9% banner ad, but the fine print says that the rate will vary from 1.9 percent to 23.9 percent, quite a range. Loan sizes vary from $300 to $25,000.

Capital One is using Google Adwords to support its efforts. For example, searching for "loans for dental work" displays this ad (click on inset).

Action Item
Compared to other loan terms, the health care-related terms are relatively sparsely sponsored. You should consider adding these terms to your search-engine marketing plan. To make it pay off, you should build a landing page that speaks to the benefits of using your personal loan or line of credit for such expenditures.

More info: We'll take a closer look at Capital One's Healthcare Finance options in the next Online Banking Report to be published at the end of February (OBR 127).

--JB

David Spade's "no guy" has helped make Capital One's No Hassle credit card customer service parody one of the most-recognized consumer advertising campaigns of the year. According to the company, the commercials have helped lift the Capital One's name recognition to 98% (see note 1).

Along the same lines,
American Express is test marketing a no-fee automatic-rewards card called Clear. The card, which is available through its website (click on inset for closeup), features no fees (late, overlimit, annual) and an automatic rewards fulfillment, a $25 cash card every time you spend $2500 on the card. Cardmembers also receive a free credit report and credit score each year.

Finally, Citibank is about to jump on the back-to-basics movement with its no-late-fee Simplicity card expected to debut this week at an event in New York City (note 2). The card will come in three flavors: plain, cash-back, and rewards. The bank's website does not contain information on the card yet, but there is a separate customer service number listed that features a "press 0" option to be immediately connected to a live service rep.

Analysis
Although many consumers put up with penalty fees, there is always a point where they just won't take it anymore, especially if lower-cost options are readily available. That's why Blockbuster, faced with increasing competition from NetFlix, eBay, and WalMart, took a significant revenue hit when it eliminated late fees in its core movie rental business.

Citibank and the others are looking to win back consumers that have migrated to debit cards and/or credit unions to avoid penalty fees and interest charges. The cards also appeal to those with a strong aversion to fees either because they've had problems in the past or because they simply cannot stomach bank fees of any type.

--JB

Notes:
1. USA Today, 13 March 2005
2. Citi Simplicty was launched 14 October 2005
    - read the press release
    - see the website, www.citisimplicity.com

With the success of ING Direct and other direct banks, there has been a lot more attention given to selling savings accounts and certificates online.

One of the new players to watch is Capital One. They are beginning to apply their marketing skills, honed in the brutal credit card market, to deposit products.

Googling "online banking" today, we noticed Capital One in first position on the right-hand sponsored links area (see inset).

Clicking through you are delivered to a page that markets deposit products much more aggressively than most banks (see screenshot below). Capital One leads with a chart showing its rate compared to the national average (see inset above).   

The bank offers five different savings products on the main page, each with its own distinct Open Account button:

• 3.15% High Yield Savings Account (the lead product at the top)
• 4.03% No Regrets CDs (allows purchasers to bump-up their rate)
• 3.25% Money Market Accounts
• 4.50% Certificates of Deposit
• 4.29% IRA CDs

Analysis
The relatively high rates (APYs) are a big part of the appeal. But there is more to it than just price.

Capital One does a great job of laying out the options, including:

• product comparison chart
• detailed features and benefits at every step of the way
• animated demonstration of how easy it is to setup an account and move money back and forth from any checking account (at any financial institution)

Click on this thumbnail for a look at the main savings page at Capital One.

--JB

Capital One

www.capitalone.com

Along the same lines, but with a significant new account incentive, is Capital One’s (Falls Church, VA; 12 million cardholders) tie-in on Priceline.com. Bidders for airfare deals on Priceline can have their bid increased by $50 at no cost to them if they apply for a credit card. After receiving some 80,000 card applications through the program and paying nearly $4 million to Priceline, Capital One has opted out of the tie-in. But Priceline.com won’t be left at the altar, FirstUSA (Wilmington, DE; 25 million cardholders) is stepping in to take over the program. May the deepest pockets win!

We visited the largest search/portal sites at the end of September to see who was advertising what for users seeking information on business loans.* We were surprised to find the search term sparsely used by financial services companies. The only advertisers were The Lending Tree pitching its online loan auction service at Infoseek and Excite; Intuit promoting CashFinder.com and Quicken on Infoseek; Capital One hawking a 9.9% credit card on Yahoo, and ConsumerInfo.com with a small buy at Infoseek.

Source: Online Banking Report, 9/30/98 *Methodology: We searched on the term “business loan” (parenthesis included) at each of the sites from a Seattle Netcom POP. We hit reload 10 times to measure how often banners were presented. This is only an approximate measure of banner advertising. Time of day, geogrpahic location, and user profile could all impact which banners are presented.