I never understood the fight against Wal-Mart's limited-purpose banking charter. I say let it "enjoy" all the benefits of being a bank: CRA statements, regulatory audits, compliance committees, and endless questions about trigger terms and the alphabet soup of regulations. Maybe a banking charter would have distracted it from going ahead and providing pretty much the same thing, but as a non-regulated retail partner instead of a bank.   

Take Kroger for example. They are entering the financial services arena through their retail grocery stores with a menu of financial products outsourced from other companies (link here; also see note 1 and screenshot below).

According to a story Monday in the Lexington (KY) Herald-Leader (here), the grocer began quietly rolling out the services to its 2400 stores in February. Most of the  services are sourced through various Royal Bank of Scotland units.

Other than deposits, it's a full-service offering including:

• Credit card issued by RBS National Bank (a unit of Royal Bank)
• Mortgages through a joint venture with CCO Mortgage (a unit of Royal Bank)
• Home equity loans through Charter Bank (a unit of Royal Bank)
• Gift cards issued by Charter Bank
• Pet insurance through PetFirst Healthcare
• Identity theft services through Trilegiant's PrivacyGuard

Analysis
Kroger's product offering seems reasonable and no doubt will have good visibility in the company's stores. But few of these items are impulse buys and much of the success will hinge on whether the Royal Bank phone sales agents can close the deals. The item that has the best chance of earning its keep: pet insurance, a surprisingly popular search term (see Online Banking Report, #95) and one that can be cross-sold effectively with other pet items. 

Will Kroger Personal Finance be be a success? With low fixed costs, it might turn a nice profit, but probably not nearly as much as the rent that bank clients pay for in-store branches (a core Wal-Mart strategy). But will it impact the industry? Highly unlikely.

I'm sure Wal-Mart will be following this rollout closely. If they find it's working at Kroger, you can bet they'll be doing the same thing within a few years, and probably at much lower prices. So, if you think you've dodged the Wal-Mart Bank bullet, think again. 

Note:

1. The homepage of Kroger's personal finance site <krogerpersonalfinance.com>, is dominated by a pitch for its MasterCard rewards card. The only link so far to the broader offering is the "new products" link hidden on the right leading to the following page <krogerpersonalfinance.com/Max/KPFhome.htm>.

I first wrote about the benefits of email alerts in the third issue of Online Banking Report nearly ten years ago (OBR 3, June 1995). Since then I've enjoyed watching the service unfold, and I've never met an alert I didn't like -- until this week.

An email messaging pioneer, Charter One Bank, with a suite of email/fax/voice alerts named OBR Best of the Web in 2003, laid an egg this week.

I've had an account there for years and have received seven or eight hundred daily mini-statements in that time. Surprisingly, those daily messages have remained absolutely the same. No advertising, no service messages, no cross-sales. Not even a holiday greeting.

Imagine my surprise when last week I received, in addition to my daily statement, a New Message Alert (click on screenshot above) that said in part:

On March 21 a new message was delivered to your Online Banking Message Center. Please click here to view this important message.

Surprisingly, it didn't occur to me that this could be a phish (it wasn't). I really was afraid something had gone terribly wrong with my account. I couldn't remember my username or password and the "lost password" function returned an error message. So I had to wait until I was home where it was written down.

As I anxiously logged into my account, expecting the worst, I wondered how I would cover the check I'd just written off the account. The first thing I did was check my balance. Phew, it was what I expected, just enough to avoid monthly fees. Then I crossed my fingers and navigated to the secure message center where the all-important message waited.

Imagine my "customer experience" when I found that Charter One had sent me on this harrowing chase only to inform me that (click on screenshot below):

Effective April 10, 2005, Charter One Bank’s Online
Banking service will no longer process one-time or
recurring online transfers to or from a passbook
savings account.

Not only do I not have a passbook savings account, I have no other accounts beside checking, so I am ineligible to make any type of transfer on the system. What a terrible waste of my time.

Seven days later, I get yet another message insisting that I log back into the site for another "important message." This one wasn't much better. The bank was alerting me to an upcoming bill payment service slowdown. Never mind that I had never sent a bill payment nor activated the service in more than two years of maintaining an account at Charter One.

Moral of the Story
As a consumer, after enduring two false alarms, I feel this way about the bank:

1. They do not know me as a customer.
2. They do not care if they waste my time.
3. They have no ability to send targeted email.
4. They lack a basic level of common sense.
5. They do not know how to communicate through email.

Analysis
It would have been so easy to keep this from happening. The bank could have done any of the following:
a) Sent these message only to users of the specific accounts/functions
b) Assuming their system doesn't allow (A), they could have sent the entire message to my Internet email address so I didn't have to login to see it
c) Not sent the message at all to my Internet email and simply posted the message within the online banking area

Takeaways
The email relationship with your customer is powerful, yet extremely fragile. A few irrelevant "important information" messages, especially if a website login is required to access the message, can kill the entire channel.

-- JB

As we mentioned last month, Charter One has been on a tear, introducing new state-of-the-art Web features at a breakneck pace. We gave the company a Best of the Web award last month for its new fyiAlerts. This month Gomez Advisors named Charter One the second best overall online bank, a seven-notch improvement from Q2. Charter One moved past Wells Fargo and Bank of America and now trails only Citibank (see Table 2, below):

Table 1

Gomez Rankings

U.S. online banking offerings, Q3 2002 vs. Q2 2002

Source: Gomez Advisors, 10/02
"arrow up" = Moved up at least 5 notches from the previous quarter.

*First Union score, Wachovia scored 5.08

Cleveland-based Charter One, with $39 billion in assets, is the 29th largest bank in the U.S. In September the bank had 330,000 online banking customers, more than 25% of its 1.3 million active checking accounts.

We first became aware of the bank’s prowess this summer after a string of product announcements including fyiAlerts. To get a better idea of how Charter One has quickly moved to the forefront of online banking, we signed up for an account and will detail our experience during the next few issues. Part 1 covers the online account opening process.

The online application is delivered through a popup screen that keeps users apprised of where they are in the process.

Account Opening Process

Although the fulfillment process appears flawed (more on that later), the bank’s online checking account application is well designed and easy to complete. Applicants need their driver’s license or passport number and an existing credit card or deposit account number to transfer the initial balance.

The application consists of 8 screens and about 50 pages of disclosures. It took us just under 9 minutes to complete the entire process including more than 2 minutes skimming the disclosures (time spent digesting the 50 pages of disclosures will vary widely). The initial deposit can be transferred from a deposit or credit card account at any bank. We chose the credit card option which has a $1,000 limit.

In our case, the application process was smooth until the last step. We completed the application on the evening of Oct. 14. We received an on-screen confirmation (screenshot, upper right) with a vague discussion of needing to conduct “certain security reviews” and putting our account on “post no debit hold pending receipt of the application/signature card.” It went on to say that a new account kit would be mailed within three business days. So far, it’s been seven days and we have yet to receive any word from the bank, not even a simple email confirmation of our online application, even though we were told one would be sent (top of screen, right).

To compound the problem, there is no online method of checking the status of your new account. You can’t set up online banking until you have an account number, and you don’t get an account number until the new account kit arrives by mail. We do know that Charter One tapped our credit card for the deposit amount, so presumably we just have to be patient. But this is no way to treat a new customer.

Being 2,500 miles away from Cleveland, we understand if the new account material arrives a week later, but the bank should be communicating via email and/or phone to assure the new customer that their account is being processed. Other than the credit card charge, we have no verification that Charter One even received our account application. At this point, customers may reconsider their decision to open an account. Luckily the bank provided a toll-free number to call with questions.

Analysis

Pros

•    Navigation in the upper left-hand portion of the application keeps users apprised of where they are in the process (see screenshot, facing page)
•    Allows initial deposit from credit card ($1,000 max) or ACH from deposit account
•    Allows new customers to set up overdraft protection from any credit card, even competitive ones
•    ATM access is optional
•    Allow passports to be used for new account verification in lieu of a driver’s license
•    Disclosures include a table of contents
•    Option to print disclosures from PDF file

Charter One needs to rewrite its closing “thank-you” screen. Really, what does “post no debit hold” mean?

Cons

Major

•    No email confirmation
•    No account access during confirmation process
•    Slow follow-up after initial application (should be within 24 hours)

Minor

•    Thank you is buried in final screen of application
•    No option for disclosures to be emailed

Continued next month

CharterOne’s FYI Alerts

You need a program to keep up with Charter One’s (Cleveland, OH; $39 billion) innovations during the past few months. We will take a closer look at the company’s highly rated product offerings (#9 overall on Gomez) later this year. In the meantime, check out its most recent development, an alert service developed with the help of Chicago-based CenterPost www.centerpost.com  

Charter One calls its FYI Alerts, “state-of-the-art.” They certainly are. It’s by far the most comprehensive service available today, and the first U.S. retail bank offering voice messages as a delivery option. Users can choose balance or activity alerts and can schedule the delivery of mini-statements on a daily, weekly, or monthly basis. Each particular alert can be sent via email, wireless, fax, or voice message. The service was introduced in mid-August for consumers and the first week of September for businesses. The service is free for both consumers and small businesses, and that is unlikely to change according to Michael Dobbins, SVP of Direct Banking. The bank looks at it as a significant differentiator for picking up new checking accounts and increasing customer satisfaction. To a lesser extent, it also expects to reduce call center expenses with fewer customers jamming the phone lines on payday to check their balance. With no promotion beyond its Web site, the service picked up 3,500 users during the first few weeks. Marketing kicked off on Sept. 6 with an email to its 330,000 online banking customers. In-branch promotion and statement inserts were set for later in the month. To speed adoption, the bank will offer to enroll VRU customers immediately following a telephone balance inquiry.