Financial News

Online Banking Leads to Higher Customer Satisfaction
The more consumers use online banking to handle their banking tasks, the more satisfied they are with their bank, according to a study by Gomez, Inc. May 22, 2001

Account Aggregation Could Give Lift to Financial Services
To this point, online banking customers have enjoyed using the Internet as an additional channel, but research by Datamonitor suggests that account aggregation can become the online one-stop shop for financial services. June 21, 2001

Online Finance Sites Gain Popularity in Europe

The proportion of Europeans visiting business and finance Web sites has doubled in some markets over the last year, and the time spent on these sites has increased by up to 60 percent, according to Jupiter MMXI.

More than 20 million Europeans logged on to business and finance sites from home in May 2001, visiting local brands that offer online banking, financial information, online share trading and insurance services. Seventy percent of the visitors were male.

The proportion of French Internet users visiting business and finance sites from home more than doubled from 18.5 percent to 38 percent between May 2000 and May 2001. French visitors also increased time spent on these sites by more than 50 percent in the same period, from 19.5 to 31 average minutes per unique visitor per month.

In Britain, 36 percent of all Internet users accessing from home visited finance sites in May 2001, an increase of 28 percent from May 2000.

In Germany, the reach of business and finance sites increased by 19 percent from May 2000 to May 2001, with 35.7 percent of people online visiting these sites from home. German Internet users spent more than one hour (61.3 average minutes per unique visitor) on business and finance sites in May 2001, more than any of their European counterparts. Sites that offer online trading and stock market information are more popular among Germans than sites of traditional banks, although traditional banks are catching up, according to Jupiter MMXI.

Suprisingly, Internet users in Spain and Italy, who have been slow to adopt the Internet and many of its applications compared to their European neighbors, are second only to the Germans in the amount of time they spent on finance sites in May 2001. Spaniards and Italians visit not only sites of traditional banks, but also those offering financial information.

The Nordic region, which has been a leader among European nations in all things Internet, has the highest proportion of Internet users visiting business and finance sites. In Sweden, almost 60 percent of the online population visited finance sites from either home or work in May 2001. More than half of Norwegians (56.4 percent) and 45.1 percent of Danes online visited business and finance sites from home in May 2001.

Although the Swiss have one of the smallest audiences for finance sites in Europe (nearly one-third visited finance sites from home in May 2001) the Swiss spent an average of 27.9 minutes per unique visitor in May -- more than Internet users in Norway and Denmark, which have a much higher reach.

One reason for the increased use of financial sites, especially those that allow users to bank or trade, may be the increased comfort Internet users have with the security of their transactions. But the third annual IMPACT 2001 interactive consumer survey from Datamonitor found that security is only a concern for consumers once they are already using online financial services and it does not appear to deter consumers from making the decision to start using online financial services in the first place.

Rather than security, lack of knowledge and cost of using the Internet are overriding factors in keeping the online population from using electronic financial services. However security is not the biggest impediment to the uptake of online financial services. Datamonitor analysis of security concerns and use of financial services show that those who have made the decision bank online turn out to be more concerned about security than those who do not.

"When you ask people using the Internet what their major concerns are, security always tops the list," said Derrick Brown, Datamonitor e-financial services analyst. "Datamonitor's causal analysis reveals, however, that security concerns do not seem to stop consumers from making the decision to use online financial services in the first instance. In fact, people who use online financial services are more concerned with security than the general Internet using population. For online financial services providers, security is therefore key for customer retention, however it may not be the key or sole issue to address when enticing consumers online in the first place. In other words, security may help you keep customers, rather that acquire new ones."

Consumers in the United States and Britain are more concerned with security by comparison to the other countries surveyed. This could be as a result of a high degree of media exposure to online security breaches in these countries.

Other findings from the Datamonitor research include:

  In three of the six European countries surveyed, Internet users    who do not use online financial services are more likely to be    concerned about the expense of the Internet. For Britain and the    United States, expense does not appear to inhibit the online    population from using online financial services.

  Another major hurdle for online consumers' in starting to use    online financial services is their personal lack of knowledge of the    Internet. Whereas security is a retention issue that can be    controlled by the provider to a large degree (e.g., with marketing    and IT solutions), dealing with lack of knowledge is a much more    difficult acquisition issue as it requires a time, and possibly    financial, investment on the part of the consumer.

  In most countries, people with Internet access at work are    significantly more likely to use online financial services than those    with only access at home. In other words, consumers are doing    their online banking and investing in the workplace.

Datamonitor's IMPACT 2001 survey is based on more than 7,500 interviews covering the United States, Britain, France, Germany, Spain, Sweden and Italy.

Account Aggregation Could Give Lift to Financial Services


To this point, online banking customers have enjoyed using the Internet as an additional channel, but research by Datamonitor suggests that account aggregation can become the online one-stop shop for financial services.

Datamonitor found that 49 percent of online banking customers will be managing their affairs using an account aggregation service by 2005, when there will be 121 million online banking customers in Western Europe and the United States.

The consumer appeal of account aggregation rests on the convenience of being able to manage different financial relationships from a single Web page through PCs, mobile phones and wireless devices. Access to the service will enable customers to transact online between several accounts, regardless of how many banks these are spread over, make online bill payments and check portfolio performance.

Banks will be the key beneficiaries of the account aggregation wave. Those that can deploy a robust, secure and reliable service are in an ideal position to leverage existing customers for increased cross and up sell opportunities resulting from aggregated consumer data from all the users' accounts and a deeper personalized relationship between bank and consumer, Datamonitor found.

The research also found that the uptake in account aggregation services will be driven by concerns to maintain competitive equality on the part of the banks, coupled with the drive to be first to market. The majority of growth will occur between now and mid-2003.

While the majority of aggregation services are based around an outsourced model, Datamonitor predicts that banks will move the development and deployment of aggregation services in-house. As more non-financial services firms such as utility companies, Web portals and other lifestyle sites jump onto the aggregation bandwagon, banks will feel the squeeze as consumers source aggregation services from portal-type sites that have strong brand, vast consumer bases and extremely sticky product offerings.

The European account aggregation market presents a real opportunity for IT vendors that can rollout a secure and robust service. The significance of the arrival of aggregation in Europe is emphasized by the fact that IT spending in Europe will outstrip U.S. growth at rate of 93 percent compared to just 20 percent in the United States. The home market for account aggregation has traditionally been in the United States, as this is where the key vendors were founded and are currently based. Because account aggregation is already an established concept in many large U.S. banks, significant capital expenditure has already been sunk.

According to a study by Gomez, Inc., account aggregation is gaining momentum, but significant changes need to occur before widespread consumer adoption is achieved. The Gomez study identified key elements that enhance aggregation usability and improve the overall consumer value proposition, but also points out key stumbling blocks to its widespread adoption.

"For firms to succeed, they will need to provide advanced analytics and transactional functionality that in turn will depend on robust data collection," said Paul Jamieson, director of banking and payment services at Gomez. "Today, few if any are doing so."

The study also found that consumer awareness, data collection methodologies, security and privacy concerns and integration with trusted financial relationships all remain challenges:

  Only 13 percent of online users are aware of account aggregation,    though 19 percent express interest once informed of what these    services provide.

  Screen scraping, the most widespread data collection approach,    poses risks due to poor data integrity, limited historical    information and the lack of an audit trail. Gomez found that    although industry initiatives are currently addressing these issues,    consumer demand for data integrity will ultimately determine the    fate of screen scraping.

  After awareness, security and privacy concerns are the most    inhibiting factors to interest in aggregation. However, such    concerns will erode as firms better promote security inherent in    their offerings.

  Over 25 percent of consumers are likely to embrace aggregation    when it is sponsored by their primary bank and integrated into the    bank's overall offering. Further, 28 percent of high net worth    investors are likely to switch institutions if their firm does not offer    aggregation services.

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