Has Google found its iPod? Not the music player, but an end-to-end, ecommerce system that is safe, convenient, and above all, drop-dead simple to use? Something that does for online commerce what Apple did for digital music. That's a tall order, but we believe the search giant may have just such a hit on its hands with Google Checkout.

For more than a year, there has been a great deal of speculation about Google’s entry into the payments arena. After months of quiet testing with carefully selected beta merchant partners such as Starbucks and Buy.com, Google Checkout was officially released yesterday <checkout.google.com>. Although the reaction in online blogs was mixed, we think it's a winner. The only question is whether it's a home run or a grand slam (or World Cup equivalents, one goal or four).

Google Checkout (previously known as Google Payments or Gbuy) is an online-payments tool integrated with the user's Google account. On the surface, it's similar to PayPal, but the true strength and potential threat is its close ties to Google’s already industry-dominant search function.

At this point, Checkout's functionality is more limited than PayPal's. There is no stored value, no subscription payments, no eBay integration, no non-credit card options, no integrated debit card, or money-market account. For the end-user, it's closer to a virtual wallet than a PayPal substitute. However, it goes way beyond what the ewallets of the late 1990s offered, taking control of the entire checkout process, a potentially disruptive technology in online retailing.

How it works
Searches that match a Google Checkout advertiser include a shopping cart icon embedded within the AdWords' text box (see Google search on "Starbucks store" above). Users can buy products from these merchants in a few clicks without having to enter any additional information (see Google Checkout icon in lower left of the Starbucks shopping cart shown at right). This eliminates the dreaded merchant-account set-up process that causes massive shopping card abandonment problems, especially at relatively unknown merchants where privacy fears are greater.

First-time users are prompted to enter their credit-card, billing, and shipping information, which Google stores in its servers (see screenshot left). Subsequent purchases can be made with a simple Google username and password. Users can store additional payment and/or shipping options at any time. Complete purchase histories can then be monitored from their Google account.

Currently, just 100 merchants are participating (see places to buy), but given the potential merchant savings, expect that to change quickly. Of the 100 Checkout merchants, 24 offer a $10 discount off purchases of $20 or more (see DayDeals screenshot below).

Like PayPal, Google shields the buyer’s credit-card number and other personal information beyond what is necessary for shipping purposes. However, Google also provides the option of keeping the user's email address confidential, a spam-limiting function not available via PayPal.

When a user selects the confidential option (see screenshot below), Google forwards the seller's confirmation message to the end-user.

Sellers are paid directly through their own Google Checkout account. Google has significantly undercut PayPal on pricing, at least for smaller merchants. Google's fee is 2% of the sales amount plus a flat $0.20 transaction fee compared to PayPal’s typical 2.9% plus $0.30 (PayPal has a sliding scale with higher-volume, $100k/mo and above, merchants paying 1.9% plus $0.30).

In addition, Google advertisers earn credits against their processing fees. For every dollar spent on Adwords, sellers can process $10 worth of sales with no processing charges other than the $0.20 transaction fee. It amounts to a 20% discount on AdWords' spending, provided there is sufficient Google Checkout volume (i.e., at least 10 times the amount spent in AdWords).

Finally, sellers can create their own Buy Now buttons at the Google site, then drag and drop the HTML code into their websites. This allows small business sellers who are not currently ecommerce-enabled to immediately begin accepting Google Checkout.

Google is expected to provide additional data as the service matures. Having a hand in the process from product search all the way through to the purchase will allow Google to keep tabs on which ads actually result in a sale. This could mean changes to Adwords' pricing or structure.

Analysis
The pitch to consumers is appealing. In addition to the privacy shields, Google promises to mediate disputes, and gives users a central place to track purchases. But the biggest consumer benefit: a common user interface for checkout, something that previous ewallets never provided. As you can see in the screenshot below, after shopping the merchant site, the contents of the cart are transferred to Google. At that point, Google takes over, offering the end-user the following options:

• Change shipping method with all costs itemized
• Add a coupon code
• Change credit card
• Change shipping address
• Shield email address from merchant
• SIgn up for promotional messages from merchant
• Links to the user's Google account
• Concise summary of the billing info, including exactly how the charge will appear on the user's credit card statement
• Concise summary of the merchant's return policy

Will consumers give up more personal information to the largest data repository on earth? Initial polls seem to suggest so. In addition, you can bet that merchants will create incentives to move credit-card and/or PayPal volume to Google to save as much as 3% on card processing. For a retailer with a 10% margin, that's a potential 30% lift.

You might be thinking that free credit-card processing is a short-term loss leader that will end as soon as a critical mass of merchants adopts Google's system. We don't think so. Put yourself in the shoes of a Google advertiser. You now know that you'll earn a 20% discount on your AdWords' buy. Will you let that drop to the bottom line, or might you use some of that windfall to goose your bids on Google a bit? If it's an efficient market, eventually much, if not all, of the "free" card processing will flow back to Google in the form of higher bids. And since not all merchants will qualify for the 20% discount, Google might actually increase its total take due to the "discount." Brilliant.   

Citibank's role
The program should have little impact on retail banks, since at this point Google Checkout must use a bank-issued credit or signature debit card to participate. However, Citibank is paying Google to be the "preferred card" on both the Google sign-in page (click on inset above for closeup) and the credit-card registration page (click on inset right). The credit-card giant is hoping the $5 (or 1000 Thank-you points), will entice users to enter their Citi card into the Google wallet. The $5 bonus offer ends Aug. 1.

Retail banks might want to consider supporting the payment service with a secure gateway to various online payment alternatives so users can manage their PayPal, Google, and other accounts directly from a secure online banking area.

If you are a credit card processor, however, this could eventually pose a threat to your market share and/or margins. Even without factoring in the AdWords' credit, Google's highly publicized 2% discount rate, along with a lack of monthly fees, is a bargain, especially for small businesses. However, given the reluctance of businesses to change banking relationships, it will be years before the impact is felt.

--JB

Aite Group’s Gwenn Bezard thinks he’s figured out the avenue cell phone carriers may find themselves taking on their way to becoming financial services providers: By selling air time to nontraditional markets like the under- and unbanked through prepaid cards. Over time, he thinks, serving that market could lead them to become merchant acquirers.

Cell phones are the great disruptive technology for the financial services industry: To the extent that mobile payments take market share from other vehicles, they have the potential to atomize the value of bank brands and even minimize payments cards’ market share.

Continue reading "Prepaid Topup May Mainstream M-Payments" »

Capital One Financial Corp. will be one of the nation’s 10 biggest banks based on deposits and managed loans when it buys Long Island’s $57.6 billion North Fork Bancorporation for $14.6 billion in cash and stock.

That Capital One has turned itself into a national depository institution with branches and checking accounts is yet another indication, if one is needed, that credit cards are no longer a stand-alone business.

The deal gives Capital One a toehold in the lucrative New York market, and apparent expansion prospects there. It also builds on last year’s $5.3 billion acquisition of Hibernia Bank, which closed in mid-November. According to Capital One’s 10-K, Hibernia experienced what it called substantial growth in deposits after Hurricane Katrina.

Unremarked by media coverage was the irony that a business that’s still very profitable apparently feels it needs a cheap source of funds, and customers to sell to, in order to weather the many challenges now threatening its core competency.

Unremarked by the media, perhaps, but not by the stock market, which didn’t respond well to the news: Capital One stock, which closed on Friday, March 10, at about $90, closed on Monday March 13, the day of the announcement, at $83.10, and at $82 the next day. Morgan Stanley’s Kenneth Posner estimated in an investment advisory that the deal was neutral to Capital One earnings, and allowed Capital One modest synergies from the deal, worth $400 million in strategic value at best. He recommended buying on Monday if shares fell.

Standard & Poor’s said in a note that it felt the deal was priced fairly at about 15 times their 2006 earnings estimate for North Fork of $2.08 per share, and a price/book ratio of 1.6 times earnings. “We thought the recent weakness (in North Fork stock, prompted by concerns about its deep exposure to residential mortgages) presented investors with an attractive entry point. Apparently, Capital One arrived at the same conclusion,” wrote the note’s authors, Jason Seo and Mark Hebeka.

At least Capital One was acting out of relative strength: Its 2005 net income was $18 billion, up from $15.4 billion in 2004. But the company clearly felt it was wise, at a minimum, to continue diversifying away from credit cards. Capital One’s year-end credit card balances were $19.7 billion, compared with $20.5 billion in 2004, and average loan balances fell in 2005 to $12.07 billion, compared with 2004’s $12.24 billion. Interchange revenues grew to $514 million, compared with 2004’s $475 million. On a managed basis, Capital One reported $105.5 billion in outstanding loans, compared with $79.8 billion in 2004. Hibernia’s results were not included in Capital One’s 2005 results.

The company was clearly acting defensively, and recognizing that future growth in the credit card sector will be nothing like what it was only a few years ago—even for a company as well managed as Capital One—and that it won’t be again, anytime soon.

“(The deal) says a lot about their future as an entity,” says Michael Auriemma, president of Auriemma Consulting. “I’m not sure I’d have predicted they’d be buying banks, but there’s a strong realization that credit cards belong in an institution with retail customers—the amount of information- and data-sharing synergies by having both is phenomenal, and credit cards are challenged in terms of growth of new acquisitions these days.”

Capital One apparently has no bone to pick on that score. In its recent 10-K, it said that “The competitive environment is currently intense for credit card products. Industry mail volume has increased substantially in recent years, resulting in declines in response rates to the Company’s new customer solicitations over time. Additionally, the increase in other consumer loan products, such as home equity loans, puts pressure on growth throughout the credit card industry. These competitive pressures remain significant as a result of, among other things, increasing consolidation within the industry.”

Auriemma thinks, though, that Capital One can continue to be highly successful in the future. “There’s a lot of room to make a lot of money, and to grow your credit card business without growing new accounts,” he says. This, he says, includes building bigger balances, increasing consumer spending, and using the data from the payments stream to cross-sell other products to credit card customers. “This (deal) is less about new customer acquisition and more about managing existing customers, looking for a funding source, and diversifying revenues.”

By remaining on the offensive, Capital One apparently also hopes to keep Wall Street happy, and itself independent. Aside from Advanta Bank Corp., which reported 2005 net income from continuing operations of $116.7 million, America’s other monoline banks, once wildly profitable businesses, are gone with the wind. And Capital One itself isn’t entirely safe from acquisition; its float is only $25 billion, so it could clearly be bought by a large bank. Last year, Bank of America bought MBNA for about $35 billion in cash and stock, and other large banks—Wachovia Corp., for one—have said they’re interested in getting back into the credit card business.

North Fork reported 2005 net income of $948 million on revenues of $3.48 billion, and more than doubled its asset base after two 2004 acquisitions—Greenpoint Financial and The Trust Company of New Jersey. It has 360 branches in the New York area, including in northern New Jersey, and, according to Standard & Poor’s, it has about 4.8 percent of the area’s deposits. When the deal, subject to regulatory and shareholder approvals, closes in the fourth quarter, its top executives stand to get a payout of about $288 million, including chief executive John Kanas, who could receive as much as $185 million. Kanas joined the bank in 1971 and became president and chief executive in 1977. (Contact: Auriemma Consulting Inc., Michael Auriemma, 516-333-4800; Capital One Bank, 804-284-5800; North Fork Bank, 631-531-2058)

Right around the corner is a world with neither cash nor payment cards. Contactless payments mechanisms—built into cell phones or even jewelry—are helping create this world, and the result will help change banking, thinks Theodore Iacobuzio, managing director of Tower Group’s executive research office.

The reality is that companies that once fed the banks’  payment networks—merchants, for instance—will be future competitors. But banks shouldn’t panic about this, any more than when, not so long ago, the Internet was supposed to be extinguishing banks. And banks won’t be disappearing now, either, thinks Iacobuzio: the anxiety over banking’s future, so prevalent in boardrooms around the country, is overdone.

Continue reading "Cash and Cards Are Both Endangered Species" »

People have grown wary of credit cards. They’re paying them off faster; generally, debit cards are edging them out as payment vehicles. And at least for now, home equity loans are increasingly more popular than credit cards among consumers (click on inset for more details and see tables below).

The result? Credit card portfolios are losing profitability, even though net losses and delinquencies are down, and serious questions about the industry’s future are surfacing. So are questions about how wise banks were when they snapped up most of the monoline credit card operations last year. The business model needs an overhaul, says observers, but so far, issuers are just changing the oil. And there may be no way out.

Continue reading "Credit Card Portfolios: More Pressure, Less Profitability." »

The potential of cellphone-based mobile payments to eventually squeeze banks out of their central role in payments can already be seen in East Asia, says Andrei Hagiu, a principal at Market Platform Dynamics, and by ignoring it, American banks have nothing to lose but their business.

Hong Kong’s Octopus prepaid debit card (see inset) is one example: Issued by Hong Kong’s subway system and several other transportation companies—with no bank involved—Octopus cards drive about $2.2 billion in annual payments volume.

Continue reading "Mobile Payments: Japan Leads the Pack" »

Germany’s federal monopolies body, the Bundeskartellamt, received a legal complaint from the German Retail Association, alleging that interchange fee charged MasterCard and VISA, which average 150 basis points, prevents widespread credit card acceptance in Germany.

In a statement, the Association, a lobbying group, said that credit card payment account for only 5 per cent of all retail sales in Germany. The complaint calls on the Bundeskartellamt to cut interchange fees and to increase payment card transparency. It claims these steps will improve competition in the credit card sector. Spain, says the group, has ordered a step-by-step reduction of interchange to between 0.54 per cent and 1.10 per cent by 2008.

In part one of our series on website usability, we looked at the all-important homepage. But the best homepage won’t do you much good unless you can convert visitors into paying customers. For that you need an effective sales process capped by an easy-to-use application. Online credit applications have evolved considerably during the past five years and are now relatively painless to complete, usually far superior to their paper counterparts, which are plagued with missing data, illegible markings, not to mention transcription errors in your own back office.

At OBR, we’ve looked at online application-form design on a number of occasions, finding a wide variety in quality (see Table 11, below). This time, we are using a more rigorous approach applying our proprietary OBR WebCheck criteria www.webcheckanalysis.com  and scoring Citibank’s application across 54 criteria. Although the bank’s application is very good, there is still much room for improvement, as witnessed by its sub-50% score.

Citibank credit card application

Card application

Table 12
Citibank Credit Card Application Process

OBR analysis using WebCheck* criteria

Source: Online Banking Report, 2/04 Wt = weight with 5 the highest importance

Without expansive brick-and-mortar operations to generate business, card companies typically devote far more resources to direct marketing and cardholder retention than retail banks. You can learn a lot by watching what the card companies do online.

One

Develop a Killer App

Profitable online originations involve good marketing and a great application. It must be short and sweet and loaded with imbedded help for every term, otherwise only the desperate or dishonest will submit it. Most major credit card applications today are a model of simplicity. For example, Juniper’s online application (below) consists of a single screen posing just seven questions beyond standard identification information (name, address, phone number, etc.).

Two

Screen Out Improper Applications Before Submission

One of the main problems with non-preapproved credit card applications is all the worthless applications received. Not only has time been wasted researching the applicant’s credit report, but also your company must carefully follow regulatory requirements for communicating denials, lest you become a target of class-action litigators. Financial institutions, especially credit card issuers, now start the application process with two or three screener questions to reduce the number of applicants applying for products for which they are completely unqualified. This is a win-win, saving the bank application-processing costs, and helping applicants prevent lowering of credit scores due to application denial. Juniper uses a popup to deliver the screener questions (below).

Three

Segment Your Base with Regular, Gold, Platinum, and So On

We believe that premium channels will be the next big thing in online banking. That’s why we selected Money HQ from Online Resources as our top innovation of 2003. A review of the credit card industry provides clues as to how online banking may play out. American Express was a segmentation pioneer, rolling out a Gold Card in 1966, only eight years after the introduction of its standard charge card. After the huge success of the Gold strategy, widely copied by bankcards in the late 80s, the company further segmented its card base with the Platinum in 1984—again, widely copied by bankcards in the mid-to-late 90s. Now American Express operates a half-dozen card lines: Green, Gold, Platinum, Optima, Delta SkyMiles, and Blue, with plenty of sub-segments of each.

We expect to see the same thing happen with online banking. Now that leaders such as BofA, Wells, and Citibank have offered online banking for 15 years or more, and with penetration closing in on 50% of their checking account bases, the companies will begin offering different versions of their online programs. Expect to see differentiation around payment capabilities, credit access, account aggregation, service levels, human attention, and account alerts (see Table 9, below).

Table 9
Premium Online Banking Offerings

possible features and benefits

Source: Online Banking Report, 2/04

Four

Use Real-time Payments to Drive Users Online

According to Gartner’s latest research,* in the United States, biller direct payment is used by six million more adults than online bill payment through a bank, 18 million vs. 12 million. However, according to Gartner, respondents prefer bank sites for payment by almost two-to-one, 19 million vs. 10 million, although both options trail preauthorized debit, preferred by 26 million, and snail mail preferred by 116 million.

Banks can tap into the growing popularity of electronic payments by offering simpler bill-payment sites that allow users to make one-time payments or setup preauthorized debits, without a lengthy signup process.
Banks can also win more user by offering more choices, such as paying via credit card.

Table 10
Bill Payment According to Gartner

millions of U.S. adults paying bills online

Source: EBPP Future Blends Direct Bank Aggregation Models, Jan 13, 2004, by Avivah LItan, Gartner, http://www.gartner.com/  $95,
data from survey fielded May 2003
AutoPay =  preauthorized electronic debit
*Can choose more than one option, so the sum is higher than 100%
**Total the still wants to receive bills via snail mail

Five

Cross-sell

Credit card issuers have long been far more aggressive than banks pitching ancillary services, such as credit card registration, credit report monitoring, and credit insurance. They are beginning to take that approach to online marketing. For example, last year, Chase’s credit card group sent me more than 40 sales/service email messages. Issuers have also found profits selling all types of unrelated products and services from flashlights to magazine subscriptions. While, we don’t think banks should start pitching knife sets online, they could be more aggressive in selling related products, especially credit report monitoring, insurance, and value investments.

Six

Use Email for Retention

Credit card issuers are much further along in providing email messages to users. Card companies are using email to remind users of payment due dates, confirming charges and payments, marketing messages, balance transfer offers, line increase notifications, credit card check offers, e-statements, credit report and other ancillary product sales, holiday messages, and other relation-enhancing messages: even early collection efforts have gone electronic. Chase is one of the most prolific emailers. During 2003, we received  at least 70 email messages from the bank about our active credit card account, 46 of the messages (at least the ones we saved), were marketing/service oriented (see example left) and the other 24 had to do with scheduling and confirming payment of the bill (see OBR website for more examples).

Seven

Provide Compelling Online Account Management

Card issuers provide an online experience on par with similarly sized banks; however, some are becoming more creative with their account-management websites. For example, American Express offers its Small Business Dashboard to manage charge card (see screenshot left). One of its distinguishing features is a credit-status bar that graphically shows whether the charge account is approaching its limits (e.g., green means in good standing, yellow means charging privileges at risk, and red is account suspended).

Card issuers are also making online statements interactive with the ability to click through to get more information or dispute a charge, contact the merchant, or re-sort transactions.

Eight

Make Transfers Simple

For several years, companies such as Bank of America www.easybt.com  have provided simple online balance-transfer solutions for cardholders. Banks too should make it simple for users to consolidate deposit and loan balances in a similar manner using account aggregation technology and interbank-funds transfers. Citibank’s new A2A service and Money HQ from Online Resources are on the right track.

Nine

Integrate with Direct Marketing

The latest trend is to provide special URLs and/or application numbers in preapproved snail-mail solicitations so recipients can respond quickly online. For example, Fleet’s www.applybizcard.fleet.com  This is a win-win, giving the customer faster direct access to the special offer and providing an interactive environment for the card issuer to encourage balance transfers or other upsells. This integrated technique will quickly become a standard practice for financial direct marketing.

Ten

Get Rid of the Paper

With ever increasing printing and postage costs, the business case for e-statements continues to grow stronger. Although paper-suppression efforts are still in their infancy, we expect credit card issuers will be the first to successfully wean a critical mass of users off paper. Although it will take years of marketing efforts, for example, we’ve already received eight messages from Chase encouraging us to switch to a
credit card e-statement; the formula for adoption is relatively simple: 

Before you reach beyond your customer base with the marketing techniques described on the previous seven pages, make sure you are maximizing the loan business among your existing customers. Here are 40 tactics to help you defend your current portfolio from the online poachers.

New Loan Originations

1. Rate Search/Rate Watch: Users select the loan type(s) they are interested in and you provide a comparison table with rates, points, monthly payments, and other loan details. Offer an option to be kept up to date via e-mail.

2. urrent Loan Analysis for Refinance/ Trade-in: Users input the details of their current loan (amount, month it closed, current home value, APR, variable rate info), then choose from a list of attributes they are seeking from a new loan (lower rate, fixed rate, cash-out, etc.). Then your server returns a list of loan programs that fit their needs. Provide a “trade this loan in” button for users to act on the advice. Offer an option for continued e-mail updates to the analysis.

3. Loan Recommendations for Existing Homeowners: Same as above but for users interested in a new loan, rather than a refinance.

4. Loan Recommendations for First-Time Buyers: Same as above but with an emphasis on rent vs. buy analysis.

5. About Your Company: Provide as much information about your company as you can find, especially if you are originating mortgages. These are complicated, risky deals, and users want to know they are dealing with an established/successful firm. On the Web there is no such thing as too much information, only poorly organized info. Organize the details into a pyramid, with a single page of key facts on top (such as licenses, affiliations, FDIC insurance, etc.) and allow users to drill down for more. Hire an intern to spend a month digging up information and transferring it to HTML.

6. Use a Two-Step Loan Approval Process: For most loans, concentrate on prequalifying the applicants as fast as possible, ideally while they are still on your Web. Make the approvals conditional on verifications of collateral value, employment, etc.

7. Make the Loan/Prequal Application Interactive: On the Web you will no longer have such a thing as a “standard” loan application. It will be dynamic, changing as each user fills it out, so that only the key questions are presented. A simple example: If the applicant doesn’t own a home, skip the mortgage payment questions. A more advanced application: Do a credit score during the first part of the application, if the result is marginal, ask more detailed questions about other credit references and household income sources.

8. Lock-in a Rate: Offer a rate lock-in button for both new and existing applicants. Pressing the button would take existing applicants to a summary of their loan application and the choice to lock in now or continue to monitor the market. For new applicants, the button would link to a prequalification application that included the option to lock in today’s rate.

9. Lead-Generation Devices: Put something on your Web of value that requires loan shoppers to identify themselves. For example, Salem Five’s online coupon for $100 off closing costs (see previous page).

10. Provide an Instant Prequalification Letter Online: After an application is approved online, offer users the option of printing a prequalification letter for use in home/car shopping. The letter should be on your letterhead with a digitized signature. Also send an e-mail for further proof of the applicant’s prequalified status.

Cross Sales to Existing Customers

For your line of credit and credit card products (i.e., revolving credit), the road to a profitable customer is two-fold. First, you must book the new account, then get the line activated. Your Web site provides a number of cost-effective ways to increase usage/outstandings from your existing portfolio.

11. Balance Transfer Form/Special Offers: Allow revolving credit customers to transfer balances online with a few keystrokes. Incorporate an
e-mail confirmation so users know the balance transfer was properly executed. Test balance-transfer rate specials delivered online (via Web/e-mail).

12. Online Bill Payment/Credit Card Checks: Allow revolving credit customers to write online checks directly from their credit accounts. Incorporate an e-mail confirmation as above.

13. Skip Payment Application: Allow users to apply online for permission to skip a payment. If possible, give the user an instant answer based on past account performance. At least, provide an answer by
e-mail within 24 hours.

14. Line Increase Application (emergency and permanent): Same as above except for temporary and/or permanent line increases. Use e-mail to confirm.

15. Line Increase Notification/Usage: Whenever you increase a credit line, whether the user applied for it or not, post a message of congratulations on the Web and offer options for accessing the new credit amount. You might also consider an “opt out” option so users could click on a button if they don’t want the line increase.

16. Installment Loan Increase Application: To increase outstandings and profitability, it may be useful to think of your installment loans more like revolving credit than fixed obligations. Let loan customers apply online to access the paid-down portion of an installment loan and/or increase the size of the loan. The additional loan amount could be accessed online.

17. Installment Loan Rollover Application: Along the same lines as number 16, think of your installment loans as portable. For example, if the user is thinking about trading in the car you’ve financed, allow them to simply roll over the existing loan balance while applying online for any additional amount needed to cover the new car. Naturally, you would reserve the right to reset interest rates to current market rates.

18. Ancillary Loan Services Sign-up/Offers: Sell your fee-based services online (credit insurance, card registration, credit bureau monitoring, etc.) with a simple “one click” sign up. Consider offering a new kind of credit insurance that provides better value to the more financially savvy individuals likely to interact with you online.

19. Annual Insurance Check-up: Each year, remind loan customers to login to your Web for an insurance check-up. Users would compare their existing coverage vs. recommended levels, and purchase additional insurance if needed.

Don’t skimp on the customer service portion of your loan origination Web. Make sure it does a good job of highlighting the services you provide on- and off-line. Many loan shoppers will check out the customer service area before proceeding with the loan application.

20. Twenty-Four Hour Online Loan Service Center: Even if it’s just being staffed by your regular loan center group, we think it’s important to give prospects the sense of your commitment to online customer service. Include simple check-box forms to handle routine customer service queries. Confirm every e-mail received with an immediate “we’re working on it” e-mail response. A few days after a question is resolved, at least from your end, you might consider sending a follow-up message asking whether the matter had been resolved to the user’s satisfaction.

21. Online Service Guarantees: Back up your marketing hyperbole by putting your service standards in writing. For example, “e-mails answered within four hours,” or “or line increase applications approved within 15 minutes.” In a world where no one wants to commit to anything in writing, this alone could make your loan services stand out from the competition.

22. Loan Status Reports: For loans in process, post loan status reports on the Web and send daily e-mails until the loan is closed or the user opts out.

23. Account Access: Allow users to login to see current balance, available credit, loan disbursements, payments credited, next payment due date, previous year and YTD interest paid (for tax returns), escrow account balances/transactions, and any other loan transactions.
24. Online Payment: Allow users to make loan payments online. Include a checkbox to indicate whether the user is paying only the minimum due, or the entire balance, or something in between. A link to a calculator would be helpful here. Users could also be given the option to set up autopay (preauthorized debit) by checking a box on the payment form. Finally, a link to the skip-pay application would be appropriate.

25. Payment-Due Reminder: Post payment-due reminders on the Web, and more importantly, send reminders via e-mail. Consider allowing payment to be authorized by replying back to the e-mail.

26. Payment Confirmations: Post payment-received confirmations on the Web and send via e-mail.

27. Collection Reminders: Use the Web/e-mail to gently remind users when payments are overdue. Provide one-click payment options including charge to a credit card.

28. Balance/Overlimit Alerts: Post alerts on the Web when the loan balance reaches a preset maximum dollar amount or line utilization percentage. Also send via e-mail.

29. Activity Alerts: Post alerts on the Web when loan transaction activity is more than a preset maximum level. For example, more than three charges received on a credit/debit card during a 24-hour period. Also send via e-mail.

30. Extra Principal Payment Option: Allow users to make extra principal payments online. Send an e-mail to confirm the extra payment amount.

31. Personalized Amortization Table: Allow users to generate a complete amortization table for their loans. Integrate the table with a payment calculator to run “what-if” calculations on additional principal payments, lower interest rate, higher loan amount, etc.

32. Refi Watch: Allow users to set a rate and points target for refinancing. Then send an e-mail when prices hit the target. Though you may be cannibalizing your higher-rate loans, you’ll have saved a customer.

33. PMI Insurance No Longer Needed Notice: Post a notice on the Web when mortgage insurance is no longer required. Also send
an e-mail.

34. Searchable Loan Agreements/ Disclosures: Post the actual loan agreement and any additional forms signed by the customer when the loan was originated.

35. Credit Bureau Monitoring: Include information/links to the major credit bureaus to assist users in monitoring/evaluating their own credit history.

36. Credit Counseling Services: Post information and links to legitimate credit counseling services available on- and off-line.

37. Home Value Reports: Provide links to Web-based services that provide home values based on a search of public records.

38. Real-Time “Chat” Customer Service: Offer real-time customer service via “private chat mode.” For example, users could enter a virtual service booth, type in a question (or click on a form), and receive answers immediately on-screen from a real person.

39. Personal E-Loan Reps: Private banking customers have someone on call to attend to their every borrowing need. Online customers could have the same type of service, provided it was highly automated. Set up new customers with a real rep they can reach online via e-mail or Web form. This real person would provide individualized answers using a large database of prepared e-mail responses. This level of personal service could be made available in the VIP center described below.

40. VIP Online Service Center: Create a “VIP lounge” on your Web for your best customers. The lounge could be hidden from other customers via a special URL only provided to VIP members. Or it could be highly visible on your regular Web to encourage whatever behavior is necessary to join the club. Services could include: real-time customer service via online chat; discounts on ancillary services; loan rate discounts; higher line sizes; more payment flexibility; etc. Delivering premium services online has the potential to be far more cost effective than through traditional direct mail. Essentially you can clone your regular Web, add some new graphics, drop-in a couple VIP services, and you’re in business.