We recently had the opportunity to interview Jim Bruene, author of the popular blog Netbanker. Netbanker is a leading online finance and banking blog which covers everything from online banking to person-to-person lending to mortgage lead generation. Jim has been providing insightful analysis and research of the online banking and finance industry for over 10 years.

We asked Jim his thoughts on innovations in the online banking world. Here is what he had to say:

How has the increased use of the Internet transformed the way banks market to them?

The online channel (including email) provides a very low cost way to get marketing messages in front of the your online banking customers who are frequent website users. So online messaging is one of the first things banks look at today before adding more expensive print and offline media to the mix. And the ability to get your advertising in front of consumers as they are doing a rate/product search on a search engine has changed the dynamics of prospecting for new accounts. So the marketing mix has definitely changed and will increasingly be weighted to online tactics, although none of the old techniques are in danger of disappearing, except perhaps telemarketing.

What is the most over-hyped new technology or strategy (in terms of bringing real value) out there today?

Historically, the most over-hyped technology/strategy by far is mobile services. It’s finally just beginning to catch on (in the U.S.), 10 years after it was first hyped. I don’t think there’s anything that is being seriously over-hyped today. Most of the new things we are looking at have real promise because of the size and sophistication of today’s users. A few things won’t live up to their press releases, but that’s always expected.

Are the market conditions (e.g. credit markets and interest rates) increasing or decreasing the importance of the online channel? In what way?

For mainstream online banking, the market conditions aren’t that relevant. No matter what Wall Street is doing you still have to watch your balance and pay your bills. It’s a bit harder for the online savings specialists to poach customers when they can only offer rates 1-2% higher instead of 3-4%. However, the genie is out of the bottle in that market and consumers will continue to seek higher rates online, they’ve learned.

One niche market benefiting from tighter credit is the loan exchanges: both the new person-to-person lenders such as Prosper and Lending Club and other types such as LendingTree and Virgin Money. We know of at least a half-dozen more that are on the drawing board and could come to market in the next year or two. The personal finance press loves these sites and you can expect plenty of coverage this year and next.

How will the consumer experience change on bank websites over the next year?

It may not be next year, but going forward online banking will require less time and energy on the part of the end-user. Instead of logging in three times per week to see what transactions have cleared, consumers will receive periodic notices on their mobile phone, Facebook account, or regular email address. This is not a new development, but the mobile phone as a receiving device for banking info will accelerate the trend towards the use of alerts to stay informed rather than logging in.

What new product offerings do you see banks rolling out to consumers?

Although not so much a new product, really just an evolution of customer communications, will be mobile alerts that are increasingly two-way (you can reply back to move money or pay a bill). In terms of web-based delivery, we’ll see more banks do what Wells Fargo has done with its MySpendingReport, that is provide simple tools for users to track and view their spending. I also think we’ll see more banks and credit unions put in more social-media inspired services such as user forums, blogs, and Facebook widgets/apps.

You were in this business in the late 90’s when the Internet bubble burst. Do you see any similarities between the market we’re in now and what was going on back then? What are the biggest differences?

In terms of online financial services, there never really was much of a bubble. Online banking was just getting started in 1999/2000 so there weren’t many casualties, other than in the mobile area and a few non-bank portals that never achieved critical mass. And I don’t see too much overinvestment now. Financial services and banking are huge markets with enormous potential both to increase revenues, reduce costs, and improve overall customer satisfaction. The bubble today is in brick and mortar. I’ve been a banker and I understand the power of the branch for sales, service and brand image, but their value has peaked. No, I don’t think branches are going away, but over the long run, like the next 50 years, their influence will decline substantially.

Thanks Jim!

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