With the credit market still in a state of disarray, traditional credit card companies are looking for ways to diversify their sources of funding. Two of the industry’s largest competitors in the card arena, Discover and American Express, have recently begun to offer a portfolio of savings products that compete directly with longtime leaders in this space like ING Direct, and relatively new entrants such as Ally Bank. This is similar to the tactic employed by Capital One nearly 10 years ago as it spawned the Direct Banking division which offers online only accounts with highly competitive rates. What makes this push even more intriguing is the fact that both Discover and American Express are offering rates that exceed competitor products during a time when the overall rate environment has been declining steadily. The below table illustrates the rates for high yield savings accounts at the end of August. Having a high rate, especially in this difficult rate environment, is one way to grab a lot of attention in the marketplace.

While having a best in class rate is all well and good, these two companies realize that getting the word out about their new products is even more important. One of the best ways to do this in the online forum is through utilization of key search terms. In this particular case, non-branded search terms are important since these will be used by prospects without an affinity toward a specific company. Otherwise they would have just gone directly to that company’s website or at the very least conducted a search using a branded term.

As we can see above, both American Express and Discover are capitalizing on one of the most commonly used non-branded terms driving prospects in the savings industry (“online + savings + account”). According to Compete research, this term is actually the 3rd most popular non-branded search term used by prospects going to savings content pages. By bidding on heavily used non-branded terms, these banks are putting themselves in front of a large number of savings prospects that are open to exploring their options at multiple companies. The data below indicates that this strategy is helping both companies increase prospect volume over the past few months, particularly when looking at the traffic for American Express.

Due to the high interest rate and use of sponsored search by both American Express and Discover, each company was able to attract increasing prospect volumes for their savings products in both July and August. Growth in prospect numbers from June to August for both firms has been substantial with Discover Bank increasing prospects by 38% and American Express driving 238% growth during that span.

While both of these companies have a long way to go to match the current online savings leaders in terms of shopper volume (ING Direct attracted over 900,000 online savings prospects in August), having a premium rate and high exposure in search are two key strategies to make headway in the market. As these products increase in popularity, it will be interesting to see if there is a reaction from the banking community and if so, how they respond to the products offered by American Express and Discover.

It seems that every day we hear different news about the economy in terms of a turn towards recovery. The stock market is continually fluctuating based on news in the job market, housing prices, and the nation’s financial institutions. While the hope is that there is nowhere to go but up, many of our banking centers are still struggling within the current climate. As a result, 36 banks have already failed in 2009 before we have even reached the month of June.

Due to the current economy, both banks and consumers have focused even more on the quality of their relationships. Many bank struggles have been due to relationships with consumers of questionable credit rating. As consumers have been unable to make good on loans, banks have struggled with the consequences. Not only are consumers with better credit appealing on a stability level, but they also are more likely to carry higher bank balances than the average consumer. In a recent survey of savings shoppers, Compete discovered that about 2/3 of those with excellent credit have an average savings balance of greater than $10,000 compared to 1/3 for those with a lower rating (Figure 1).

On the other end of the spectrum, consumers are also looking for stability within the financial institutions they choose to do business with. In light of the many bank failures, it is not surprising that consumers in market for savings products are increasingly seeking out institutions that will still be operating well into the future. The Compete survey found that 41% of savings shoppers are now looking specifically at the financial security of the bank as part of their search criteria. Even more interesting is the fact that those with an excellent credit score are more likely to be concerned about a bank’s stability when compared to those with a less than stellar rating (46% to 35%) (Figure 2). Consumers with excellent credit built their rating with smart financial decisions and want to have relationships with firms that are built on solid ground.

The question for banking institutions is where to find these high quality consumers. The technology to be able to look at someone and immediately know their credit rating does not yet exist, right? In fact, this is something we are able to accomplish with Compete’s clickstream data. When looking at individuals that have opened a deposits account online by credit rating, we can determine sites that those with a higher rating are more likely to visit when compared to the average internet user. Below are a few examples of sites that deposits applicants with excellent credit are more apt to hit. For example, deposits applicants with a high credit rating are 97% more likely to visit latimes.com when compared to the average internet user.

Detailed information like this is very valuable when trying to target high quality consumers with messaging that fits the mold for what they seek in a financial institution. Consumers are looking for financially secure banks because of our economic environment. It is up to these institutions to put themselves at the forefront of these individuals’ web experience so the matchmaking can begin.

There is no denying the fact that the social networking site Twitter has exploded into popular culture this year. Unique visitors to this popular domain has grown over 225% since January (19,443,286 unique visitors in April 2009). While wading through the different applications for this type of information sharing, one offering in particular really caught my eye, StockTwits. StockTwits is an open community of investors that share advice and information about real time trends in the market. Many members of the community go so far as to give details on trades they are executing as they happen. At this point, it is good to point out that I dabble a bit in the investment arena so you can imagine why this would be so intriguing. In the investment arena, information is a valuable commodity so getting free advice from professionals synchronized with market conditions is an attractive proposition.

This sort of information sharing service seems a perfect fit for the Twitter model as both thrive on real-time data distributed on a massive scale. From the graph below it is apparent that StockTwits is still in its infancy stage but even through a short amount of time has experienced tremendous growth.

As StockTwits grows it will be interesting to see if other companies within the investment community try to capitalize on its success. Through Twitter, StockTwits already has over 70,000 followers, a number that is likely to increase quickly in the coming months. A site like this that fosters a large community of active investors would be difficult to ignore. Looking at the destination data for April 2009 it looks as though one investment firm, Scottrade, is already gaining traction from the success of this emerging social media site. Even though the volume may seem low, it is still very early in the game for StockTwits and there are plenty of opportunities for a company to target this growing community.

The level of growth StockTwits is experiencing is not surprising given the fact that people are always looking for advice on how to grow their money. Therefore, a service that provides up to the second market information for free is most appealing. The one caveat is that this information can be given by virtually anyone so the value of the data can be called into question. One way StockTwits alleviates this concern is through its Recommended List which highlights key contributors with a track record of success. For those serious about getting the best advice, StockTwits allows members to upgrade their service to include exclusive feeds for a monthly or yearly membership charge. By catering to both the savvy investor and casual traders (myself included) StockTwits has set itself up for continued growth and success using the Twitter platform.

Online banking is an effective way for banking institutions to deliver multiple services in a low cost channel. By increasing online banking usage and moving customers to use bill pay and paperless statements, banks not only reduce servicing expenses, but also increase the switching costs for customers to another bank. Just think, once someone sets up account alerts and their online bill payments, it’s not an exercise they are going to be eager to start from scratch. It is not surprising that over the past year, many institutions have been focused on increasing usage of the online channel. Over the last year (Feb 08’ to Feb 09’), monthly enrollment in online banking grew 27% across the competitive set*.

*Competitive set = Bank of America, Chase, Citibank, ING Direct, National City, SunTrust,
US Bank, Washington Mutual, Wachovia, Wells Fargo

While banks are increasingly trying to grow enrollment, another important aspect to consider when discussing online banking is the quality of the relationship. The better an institution is at engaging with its customer base, the less likely the customer is to defect and seek a new financial provider. Examples of engagement include setting up alerts as well as online bill pay. These types of services encourage customers to log in to the online banking platform on a regular basis which in turn strengthens the overall relationship. One way to measure the level of customer engagement is looking at “quality” online bankers. A quality online banker is defined as someone that has logged in to their bank’s site two or more times in the past two months. This subset of the online banking population makes using the platform part of their routine which further fortifies a relationship with their bank.

Bank of America is one of the industry leaders when it comes to the number of quality online bankers averaging 17+ million per month over the past year. One key to this success is the way Bank of America continues to provide innovative offers and incentives to customers who use the online banking service. The most recent offering from the bank is a program called Add It Up. This program allows Bank of America online bankers to earn cash back when they shop at select retailers online. Purchasing at these select retailers can earn customers up to 20% of their purchase in cash, depending on the merchant. This program not only engages those that currently use the online banking service, but also gives a major incentive for those on the fence about enrollment.

Interest in the Add it Up program has been tremendous as nearly half a million unique visitors hit the Add it Up section of the Bank of America website (additup.bankofamerica.com) in March. This collaboration is an example of a venture that is mutually beneficial to all three parties involved (customers, retailers, and Bank of America). It is these types of efforts that have kept Bank of America at the forefront when it comes to engaging with its online bankers. It will be interesting to see what they come up with next.

Are you one of the millions of Americans checking the status of your retirement funds more often than you check the time these past few weeks? Planning for retirement probably seems like a more daunting task than ever, so many financial services companies have developed online tools to help investors of all ages determine how to reach individual retirement savings goals. The benefits are twofold – investors receive quick retirement planning insights while financial services companies can use their various tools to help promote specific financial products.

Fidelity myPlan Snapshot: Fidelity’s myPlan Snapshot combines simplicity and speed. It can be completed in less than a minute with information that most individuals know off hand (e.g. age, annual income, monthly savings). Once an individual reaches the summary page (below) they are able to see where their current savings and investment track will likely put them financially once they reach retirement age, even taking into account possible future market conditions. Using the interactive slider bars, an individual can easily run through hypothetical scenarios to see how increased monthly savings or a change in investment strategy will impact future returns.

TD Ameritrade’s Wealth Ruler:TD Ameritrade’s Wealth Ruler is a similar retirement tool to MyPlan Snapshot but with a more in-depth and detailed setup. With a similar output as MyPlan (see below), it also allows for measured adjustments based on savings, retirement age, and investing style. However, while myPlan asks five basic questions, users of Wealth Ruler are asked to input each investment product they own as well as input expenses that will likely be incurred over the long haul. While these features likely make it a more precise representation of future savings, it is definitely not as simple as Fidelity’s myPlan Snapshot.

Vanguard: Instead of constructing a stand alone tool such as Fidelity’s or TD Ameritrade’s, companies like Vanguard have created tools that are integrated within information-focused pages. There is very little information required to use this tool, but the tradeoff is receiving little information in return. Tools like this also do not allow for contingencies such as a change in retirement age or projections based on certain market conditions. It seems clear that companies that provide calculators of this variety are not using them as tools to drive conversion. They are more likely viewed as additional research provided to current and potential customers.

With the varied tool offerings, the question remains – Are the tools an effective way to drive business? And the answer is a resounding Yes; IRA shoppers that used an online retirement tool between January and June 2008 were 50% more likely to start an application than those who did not use a tool.

Stand alone tools such as Fidelity’s tend to be more successful at engaging shoppers than those tools used simply as another information source. In the future, it would be even more impactful if companies were to provide more comparative measures to help benchmark their products against the competition. Implementing the use of similar tools could make a powerful statement and gain a competitive advantage for the financial services company in a time when they likely need any edge they can get.

As this country’s Boomer generation enters into their 60’s many are looking forward to retirement. In turn, investment firms are looking to attract the attention and dollars of these individuals as they try to solidify their financial situation before leaving the workforce. It is no surprise that Fidelity, one of the nation’s leading institutions, has gone to innovative lengths to attract those individuals approaching retirement.

One such campaign is the Fidelity-sponsored “Focus on Retirement” series of articles running on Yahoo! Finance since late last year. Located center mast on this financial portal’s home page is a featured article that Fidelity makes very apparent that it sponsors (with both a link to its site and a line of text). These articles cover a wide assortment of retirement-related issues ranging from healthcare/financial decisions to popular retirement vacation spots.

The “Focus on Retirement” articles have been getting substantial readership throughout the year. Average traffic to the articles in the first half of 2008 was approximately 523,000 unique visitors/month. While readership is all well and good, driving traffic to Fidelity’s own site from these articles is essential for the success of the campaign. There has been consistent overlap between readers of the articles and visitors to fidelity.com. On average approximately 65,000 article readers per month click through to fidelity.com.

This equates to around 13% of readers each month making their way to Fidelity’s site. Of particular interest is the fact that the trend holds pretty constant even as readership of the articles declined starting in February. From an efficiency standpoint the past few months have been the most effective at driving traffic from article readers.

This campaign is a good example of a marketing effort that is mutually beneficial to both the consumer and company. Far too often we see straight advertising that does not provide the viewer with usable and relevant information. With the “Focus on Retirement” series Fidelity is raising the bar by sponsoring quality content designed to assist consumers in planning for an important life event such as retirement.

Compete is hosting a webinar on Wednesday, September 24th at 2pm EST that will provide an overview of the online consumer trends of near retirees and which companies are currently winning the battle for their market share. For more information and to register for this event, click here.