The notorious criminal Willie Sutton once was asked why he robbed banks. “Because that’s where the money is,” he replied.
Welcome to the 21st century, Willie. These days more and more of the money is online, and banks are embracing Web data analysis to secure their share of it.
Top-tier banks in the online space, such as Bank of America and Wells Fargo, are ahead of the curve in analytics use, according to Vipin Mayar, executive vice president, North America and general manager for data analytics at direct marketing agency MRM Worldwide. When they innovate, the rest of the industry follows their lead.
For instance, data analysis demonstrated how powerful online bill paying is. Yes, this feature has been around for a while. But when banks realized how “sticky” it was, they began to give the service away as a loss leader.
“Once customers have online bill pay, the likelihood of them transferring to another bank drops to nearly zero,” says Maria Herlihy, senior vice president of strategic consulting and analytics for KnowledgeBase Marketing. Bank data is shot through with kernels of knowledge like this, notes Mary Sams, vice president and principal of Audience Identification Inc., a DM firm that specializes in analytics for the financial services and publishing industries. But relatively few banks are taking full advantage of this information.
“I think there is a great opportunity for banks to use Web analytics to understand what customers want and need, more than they’ve done,” Sams says. But, she adds, the barriers most financial institutions face are “technology and math.”
“[Banks] have so much more data than any other industry we work with, in terms of transaction details and payment information,” she says. “It’s like customer service data. I don’t think most have figured out how to integrate it.” “It’s daunting,” agrees Herlihy. “[Banks are] capturing too much information. But some companies have learned not to capture every single keystroke.” Instead, they focus on metrics that can feed into site design or marketing strategies, such as the number of pages prospects looked at before a transaction was logged, or how many times visitors came to a site to review its content prior to taking any desired action.
Data as Guide
The smartest companies are those that start with marketing objectives and allow the data to serve as a guide to achieving them, says Mayar. “However, if you start from the other way, saying ‘Let me look at all the data [and see what it tells me,]’ you will be lost in an ocean of data.”
Relevant inquiries might include discovering which search terms and banner ads bring the best return; analyzing the lifetime value of customers who join via the Web against those who sign up in local branches; and determining how to market to online customers, who tend to be better educated, wealthier, and more specific in what they want from their banks.
Web path analysis is also very hot. Cutting-edge banks are exploring how to serve up the most relevant “next page” as visitors browse their sites. A busy, affluent prospect might be less interested in lengthy explanations of service and wish to move right to an offer and sign-up page. And an existing customer, about whom the bank has at least some transaction information, should be served up relevant, enticing offers for additional products.
Use of online analytics could have an impact on commercial banking as well. “Businesses have been anchored in the personal-banker world,” says Sams. “The Web gives them an opportunity to [interact] with their customers in ways they’ve not been [able to do] in the past. They can chat, e-mail and be in more constant contact with a variety of people in an organization. In the past they might have been in contact with one or two.”
The Numbers Don’t Lie
Sophisticated Web-based campaigns have had measurable benefits. According to a J.D. Power and Associates study, the typical online bank customer has been with his or her bank for 9.5 years, the same length of time as traditional customers. And they’re more likely to recommend their bank (3.25 times during the last year) than offline clients (2.91 times in the same period).
Positive online banking experiences also were found more likely to contribute to customer satisfaction. The report states that two institutions, Commerce Bancorp and Wachovia Corp., have a higher-than-average percentage of customers using their online channels. AMarnd both scored highly in customer satisfaction ratings.
“However, [online customers don’t] use additional banking products at a higher rate or have a bigger share of wallet with their current bank,” says Jeff Taylor, director of J.D. Power’s banking practice. “Part of this is explained by their younger age, but that can’t be the whole picture.” Perhaps, but a solution could be more finely conceived and executed cross-selling and upselling promotions. It seems banks have their work cut out for them.
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