Internet banking: relevance in a changing world

Surprising, but true – Internet-based activities are not only reserved for the young generation of “digital natives”. A 2008 survey found that Generation X (those born between 1965 and 1976) use internet banking significantly more than any other demographic group, with two-thirds of internet users in this age group banking online.

Generation X users have also declared their preference for apps like Facebook to share content, connect and be part of a larger community.

This is ironic because online banking as we know it today offers minimal interactivity. Unlike in a branch, where the convenience of two-way interaction makes it easier to carry out a large number of transactions, the one-way street of e-banking has only made routine tasks such as checking account balances or making transfers possible.

It’s not hard to put two and two together. There is a clear opportunity for banks to transform today’s passive internet banking offering into one that offers a richer and more interactive customer experience.

Banks must therefore redesign their online offering to meet the new expectations of customers. Additionally, internet banking needs to travel to popular online customer hangouts instead of waiting for customers to get there.

There are clear signs that the shift towards a ‘next generation’ online banking environment is already underway. It’s only a matter of time before these trends become the norm.

use of social networks

Future-oriented banks use existing social networks on external websites to increase their visibility among interested groups. They also use social software technology on their own websites to engage the same communities in two-way discussions. As a result, their internet banking has taken on a more ubiquitous personality – customers engage with the bank along with its products and services, even if they don’t actually do business online.

Aside from the increased visibility, banks can gain tremendous customer insights from such unstructured, informal interactions. For example, a discussion about the uncertain financial future in a group of 18-25 year olds could be a signal for banks to offer long-term investment products to a previously untargeted segment. Taking this a step further, a positive buzz around a newly launched service can create valuable word-of-mouth for the company.

Collaboration through Web 2.0

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The collaborative aspect of Web 2.0 applications has enabled banks to retain customers more than ever before. Traditional methods such as focus group discussions or market research suffer from the disadvantages of high cost, limited scope and potential for introducing bias. Feedback forms are only intended as a post-mortem. In contrast, Web 2.0 has the ability to grab a huge audience from the start and do so consistently. Thus, an interested community of interested parties and customers participates in the joint development of products and services that can meet their expectations.

The proliferation of Web 2.0 enables the provision of e-banking via multiple online locations and web-based gadgets such as Yahoo! widgets, Windows Live or the iPhone. This means that next-generation online banking customers will enjoy improved access and convenience

A New York-based analyst firm found that 15% of the 70 banks it tracked had adopted Web 2.0, some within the last 12 months.

Standard Chartered Bank employees connect with their colleagues on Facebook and use the platform to share knowledge, clarify questions and participate in discussions about ongoing company activities.

Bank of America, Wachovia Bank and Commonwealth Credit Union have established an interactive media presence to create awareness and maintain dialogue with interested communities. They’ve used a variety of methods, from creating YouTube communities to launching campaigns on Current TV, a channel where viewers drive content.

Personalization of online banking

Vanilla e-banking divides customers into very large, heterogeneous groups – typically companies, private customers or SMEs, each with some type of internet banking site. This is in stark contrast to how banking companies want to see their customers. Banks are moving towards customization and treating each customer almost as a ‘segment of one’ across other channels, and online banking will follow suit. For example, a separate website for building society customers and another for private banking customers would be conceivable in the future.

Interestingly, a few years ago the National Bank of Kuwait had the foresight to do this – it allowed customers to dictate what products they would see and access and was rewarded with a dramatic increase in online transactions.

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Yes Bank’s Money Monitor allows customers to choose their landing page – for example, they can set “All transactions”, “Net worth” or “Portfolio” as the default view. Other features include the ability to categorize transactions based on customer preferences and print custom reports.

Empowerment on the Internet

Without a doubt, internet banking has created a more informed and empowered class of customers. This will rise to the next level once customers can proactively participate in many more transaction-related processes. The Internet has already enabled customers to compare product loan offers, simulate financial scenarios and design customized retirement portfolios. In the future, they would be able to complete related transactions – which means that after comparing interest rates, they could make a loan online, and once secured, they can start paying it back online as well.


The advent of Web 2.0 technology, coupled with banks’ desire to highly personalize their e-banking, is likely to lead to a “portalization” of Internet banking. The idea that banking customers can create their own areas online, filled with everything that is relevant to them, is not that far-fetched. Customers can personalize their internet banking site to reflect the positions of multiple accounts at different banks; They could add their credit card information, subscribe to their favorite financial news, consolidate their physical wealth position, share their experiences with a group and do more – all from one “place”.

Money Monitor allows customers to add multiple “accounts” (from a choice of 9,000) to their site. Accounts can be savings or loan accounts with major Indian banks or with utility companies, credit card companies, brokerage firms and even frequent flyer programs. Users can customize their pages as previously described.

In parallel, as banks seek to develop their Internet banking vision for the future, they must also address the key issues of security and “adequate defence”. While letting clients work as ambassadors is every marketer’s dream, reasonable precautions must be taken to prevent the proliferation of malicious or spurious advertisements. Therefore, before an individual is allowed to participate in a networking forum, they must have built a positive track record with the bank. The individual must be an approved customer of the bank and have used a minimum number of products over a reasonable period of time. Qualitative information about the individual’s interaction with the bank’s support staff (e.g., frequency and nature of calls to their call center, outcome of such interaction, etc.) can be invaluable in determining the “right” type of customer , who can be recruited a possible advocate.

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Collaborative Web 2.0 applications may require opening up banks’ websites to external technologies and sharing information with third-party websites, raising the specter of data and infrastructure security. A robust mechanism of checks and balances needs to be put in place to ensure that third party websites are secure, properly certified and do not pose a threat to home bank websites. Likewise, before a third-party widget can be placed on a website, it must pass strict security checks.

Before allowing users to link to another website, due diligence must be exercised to avoid the possibility of inadvertently downloading malware, which in the worst case could even lead to phishing emanating from banks’ websites .

It is just as important for a bank to protect its customers from invasions of privacy, data theft or misuse. The concept of portalization envisages the use of technology to bring information from websites of other banks or financial service providers to the website of the home bank. The house bank must ensure that the personal or transaction-related information of its customers, which may be shared with other providers, cannot be leaked or obviously misused.

Banks would do well to partner with an internet banking solution provider that not only has the expertise to translate their vision into an innovative e-banking experience for the user, but also has the foresight to push the boundaries of security define. When security concerns are properly addressed, next-generation internet banking is rife with exciting possibilities. Banks that seize the opportunity may find that internet banking can become a means of differentiating from competitors, rather than just a cost-cutting tool. Providing a more powerful and interactive e-banking experience is clearly the way forward.