by Greg Crandell and Ron Daly
When the financial institutions’ e-statement industry was born three years
ago, issues of Push vs. Pull, HTML vs. PDF and costs of electronic versus
paper delivery drove the debate. Now these issues have given way to a new
discussion of whether e-statements are a tactical option to save costs or a
strategic opportunity to sell more products and provide richer customer
service. One thing we have learned since 1999: savings on statement
printing and delivery are just the tip of the iceberg.
Financial
institutions using e-statements as part of a Web strategy have found that
they can be used as a strategic contact point to inform and interact
with customers. By using e-statements with email notification, institutions
have been able to increase business and generate additional revenue by
pulling customers to their Website for information and targeted offers.
Many e-statements link to other Web-based services and information
reducing transaction costs, enhancing interactivity, and enabling
self-service. The most common links are to loan applications, online
banking, newsletters, customer service, and even live chat.
Cost Savings
Forecasting Adoption: In estimating your
institution’s adoption rate expect approximately 50% of online
banking users to opt for e-statement;, and an equal number of
non-online banking users to sign up, if
e-statements are offered without online banking registration
required.
Using traditional snail mail, financial institutions spend $0.75 to $1.25 or
more to generate and deliver a single statement. Included in this figure are
the materials expenses (such as paper and postage) and the labor associated
with generating and mailing statements. The ability to reduce, even
eliminate, these recurring expenses results in significant savings, even at
conservative adoption rate.
We estimate that for every 10,000 retail customers, an institution can
save at least $7,000 per year, assuming 12% adoption, or $12,000 per year
with a 20% adoption rate. And these savings could be as much as three times
higher depending on an institution’s current costs. These adoption rates are
definitely realistic based on our experience. One of our longest tenured
clients (two years) has reached nearly 20% adoption for account statements
and 25% for mortgage statements (see below). And the savings grow as more
users sign up and postage rates increase.
Table 1
Potential Savings from E-statements
annualized
|
|
Adoption Rate |
|
Total Customer Base |
12% |
20% |
| 10,000 |
$7,000 |
$12,000 |
| 50,000 |
$35,000 |
$60,000 |
Source: DigitalMailer, 1/03 Assumes monthly statements
For example, 10,000 x 12% x $0.50/mo x 12 months = $7,200
Service Enhancements
Beyond cost savings, e-statements can greatly aid financial institutions
in improving customer relationships and thwarting competition. With an
e-statement service in place, the financial institution can leverage it to
deliver more timely service. E-statement delivery eliminates monthly
mailings of cumbersome paper statements that must be manually reviewed and
stored by the customer. With e-statements, the customer can view their
statements online, store them electronically, and print them if they wish;
and they can expect their statement will be available to them days before
the paper statement would have arrived.
But that’s just the beginning, the e-statement can become the entrée
point for a host of self-service options such as: check images,
balance/activity triggered alerts, deposit confirmations, check reordering,
funds transfers, and all types of dispute resolution.
Sales Growth
Along with cost savings and service enhancements, e-statement services
are providing sales and promotional opportunities. Financial institutions
are starting to use the e-statement and email vehicles to deliver
newsletters and targeted promotional materials through links to Website
content.
While most institutions are struggling with ways to generate new loans,
one Mid-Atlantic credit union has found that targeted e-statements are
proving to be one of their best loan-generation tools. The credit union
began a strategic initiative to increase loan volume by targeting their
members through e-statement and Website campaigns. Using database
information and their e-statement engine, the credit union used the 44,000
monthly marketing opportunities to generate new loans. The credit union’s
MCIF system identified members that most likely had car loans and credit
cards elsewhere. Once identified, their e-statement program delivered
tailored offers with the following results:
- The CU presented 2,945 targeted offers to non-credit
cardholders for a new credit card via banners in their e-statements; 57 new
credit card accounts were opened for a 2% response rate, with a total credit
limit of $500,000 and $275,000 in outstanding balances within two months.
- During a three-month period, 8,713 members received targeted
offers on their e-statements for new car loans; 117 accepted for a 1.5%
response rate and $2.3 million in loans.
While all e-statement products should provide a financial institution
with cost saving opportunities, only targeted marketing can put the right
offer in front of the right member at the right time. The credit union’s
marketing manager explained it this way:
Each month our e-statement program saves the credit union $8,900 in
statement costs and puts 44,130 marketing offers in front of my e-statement
members. Last year the CU saved over $80,000; however, the cost-savings pale
in comparison to the substantial opportunity for increasing revenue by
cross-selling our products and services.
PUSH vs. PULL
When considering e-statements, a financial institution needs to address a
number of issues that mix technology, customer service, and marketing. The
first of these is the decision whether to push
e-statements via email, or to notify customers via email and pull them back
to the institution’s Website for statement viewing.
The push approach emails or pushes an image of a
statement to the customer as an email attachment. Customers view their
e-statements by opening the attached file. This approach is convenient for
the member since the image is delivered to their email box and no additional
steps need to be taken. A receipt notification back to the bank can provide
confirmation that the email was received at the intended address. Most push
providers use PDF-formatted attachments to closely emulate the printed
statement and save costs.
The pull approach pulls the customer back to the
institution’s Website each month to access their e-statements. This approach
provides an added level of: security for the customer's financial data and
provides more flexibility in crafting a personalized message. Each month,
an email notification is when the user’s statement is available for viewing.
The notification contains a link to a secure login page that prompts the
customer for their account number and a password. Once the security
verification takes place, the customer can view their statement via a secure
socket layer (SSL) connection.
But the problems with the push approach became clear once
institutions started to deploy e-statements. First, while the PDF format
closely resembles the paper format, it carries a number of liabilities: 1)
customers may have to download and install the PDF reader;
2) PDF pages have somewhat different navigation than typical Websites; and
3) PDF files are sometimes restricted by workplace networks. The last point
is the biggest problem; many people check their email, shop online, pay
bills, and more while at work.
While the push approach proved less viable because of technical
considerations, it also proved less attractive for another reason. Statistics
show that customers drawn to an institution’s Website to pick-up
e-statements are spending significantly more time on the site and are
increasing services. NSFCU’s Web traffic tripled during the first year after
launching e-statements (see chart on previous page).
A Strategic Contact Point
Gaining a customer’s permission to use their email address has always been a
challenge facing retail institutions. E-statements have become a successful
vehicle for gaining this permission and have become a formidable digital
communications tool. They have helped customers establish an “e” comfort level
and allowed the institution to become an invited guest in the customer’s email
box, while building an online relationship with that customer.
Studies indicate that about 75% of e-statement customers are willing to give
their financial institution permission to use their email address to communicate
electronically with them on other topics – as long as this permission is not
abused. An example of this can be found in the alert sign-ups experienced by a
Northern Virginia credit union:
Table 2
N. Virginia CU Opt-in Statistics
- 82% request special offer or
new product alerts
- 67% request loan rate change alerts
- 63% request share rate change alerts
- 63% request CD rate change alerts
Source: Digital Mailer, 1/03
With the level of permission granted by customers opting for e-statements and
email alerts, financial institutions can target both product and service
messages to their customers.
Case in point: Since implementing e-statements in September of 2000, the
Mid-Atlantic credit union mentioned earlier has achieved an 18% adoption rate
for checking accounts and a 25% rate for first mortgage statements. The credit
union’s 2002 member survey revealed that 9% of its membership used e-statements
(and the custom email notification) as a source of credit union information.
The Next Generation
The Internet and Web-based technology have significantly reduced the cost of
check image storage and retrieval. In 2002, vendors began rolling out the next
generation, e-statements with integrated check image access. This new product
allows an institution to use its Website to promote self-service technology and
provide instant access to information. More importantly, it can free up
personnel while taking the institution to the next level of customer service in
the eyes of their customer.
Institutions across the country are seeing significant adoption rates when an
e-statement/check image product is rolled out. One Midwest credit union’s
program attracted hundreds of e-statement sign-ups each week. Why? Customers
already accustomed to check truncation appear quite willing trade a paper
statement for an electronic version with 24-hour access to check images.
E-statements with check images create customer value and another opportunity
for institutions to save printing and postage costs, generate new business, and
retain existing customers. Best of all, for many institutions, the technology is
already in place at their check processor (e.g., Federal Reserve Bank or
corporate credit union). It’s just a matter of hooking it all together.
Early adopting financial institutions are looking to take fuller advantage of
the marketing and service opportunities afforded by next generation e-statement
solutions. With this in mind, e-statement providers are developing more
interactivity and improving digital communication with every product release.
E-statements are one of the best new technologies to come along in a long
time. Not only are you able to enhance customer relationships and increase
sales, you can build the business case on a quick payback with hard dollar cost
savings. What a nice change!
Ron Daly is President/CEO of DigitalMailer with prior
experience as CFO at a large credit union.
Greg Crandell is VP Business Development at DigitalMailer
with prior experience in financial services and high tech product management and
marketing.
DigitalMailer www.DigitalMailer.com
provides digital communication products such as, E-statements, alerts, and
e-checks, (866) 994-4900,
info@digitalmailer.com.
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Is there anyone left in America that doesn't have an account at Bank of America? Probably a few, maybe even some of our readers. But if you haven't logged into your account lately, you might have missed the subtle "green marketing" the bank is using to encourage customers to go paperless. 
