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.

Compete recently held a webinar in which we analyzed the role that search plays in consumers’ online research for credit cards. Using the credit card market as an example, we are able to see how search has become a significant aspect of many consumers’ path to purchase across a variety of products and services. Some of the key findings from this study include:

• Search activity is frequent
  • 35% of shoppers that go on to submit an online credit card application do 5 or more search queries while they are shopping

• Search frequency and online credit card conversion are positively correlated
  • Consumers who search 5 or more times are significantly more likely to convert

• Most consumers stick with one type of search path: branded or non-branded
  • Consumers who ultimately submit an online credit card application are split approximately 50/50 in their use of branded vs. non-branded keywords and tend to utilize that same path throughout their entire shopping process

• Non-branded search terms convert at nearly twice the rate as branded terms
  • Non-branded paid terms had the highest overall conversion

• Search is used throughout the consumer shopping cycle
  • 60% of search referrals occur outside of the conversion session, thus indicating that consumers leverage search at the very early stages of their shopping process when they might not yet be ready to transact

In sum, it is clear that search plays a very significant role in consumers’ online research for credit cards. Credit card shoppers use search frequently and at multiple stages of their research process. Additionally, there apparently is a cumulative effect to the value of search, as conversion trends upward with the more one searches.

As we continue to spend more time online and leverage the web for a greater number of reasons, search is likely to play an increasingly important role in our everyday lives. It will be interesting to monitor both the growth and impact of search over time.

Please note that a replay of this webinar can be viewed here.

It is undeniable that social media is an increasingly pervasive medium for interacting with friends and family; evidenced by the fact that Facebook and MySpace are the eighth and tenth most visited sites on the entire web. What is less clear, however, is how effective social media is as a marketing channel. Can brands successfully drive business value from these sites or will they be viewed as artificially entering into conversations in which they don’t belong? In my view it is still too early to definitively conclude whether social media should be used as a marketing platform for most companies; however, there are success stories emerging.

American Express Open Forum is an online community in which business owners can interact with one another and access a variety of helpful resources. The site is increasing in popularity, as unique visitors grew from <20K in January 2008 to ~160K in December 2008.

American Express clearly wants users to find value in Open Forum and ultimately develop an affinity for the AMEX brand. One way that Open Forum provides value is by having a blog written by Guy Kawasaki – a well known entrepreneur and author. What I found most interesting here is that Guy appears to be leveraging Twitter, the social media site that enables one to post short status messages, to drive consumers directly to Open Forum. In January 2009, Twitter drove more traffic to Open Forum than any other site except Google. Through Twitter American Express is able to reach the >60,000 people who currently follow Guy on that platform. The chart below illustrates the percentage of Open Forum’s total referral volume that comes from Twitter for each of the past five months.

As I mentioned earlier, marketing within social media is clearly still in its infancy. This example, however, illustrates the power of the networking effect of social media and how it can drive measurable business value for marketers. It certainly will be interesting to see how more marketers choose to leverage social media in the future.

On a side note, if any of you are going to be at the Net.Finance conference on April 20th in Las Vegas come by and check out the panel moderated by Compete about trends in online consumer behavior. It should be an interesting session.

With financial and credit markets in turmoil and consumers feeling pinched, it is more important than ever to understand how consumers are thinking about credit cards and managing their debt.

Google and Compete, Inc. partnered on a study to analyze consumers’ credit-card related shopping and application behavior, with an emphasis on the role of search.

Among other financial troubles, the completed online applications on a whole are down over the past year. The webinar will look to see how consumers use search in this process and what works best in getting conversions.

The study incorporates fresh data – as recent as December 2008 – that demonstrates how consumer behavior is changing in response to economic conditions. Thanks to those who attended the webinar today, and for those who couldn’t make it the replay will be available next week, so please check back here. For a copy of the slides used today, please email Kristen Renda.

According to the 2007 Online Banking Report, approximately one in three US adult consumers monitors or checks their credit score in some form or another. A search on Google shows a competitive landscape with dozens of affiliates offering virtually the same product. Each site has “FREE” in bold letters, but upon closer inspection the score is usually only free if you enroll in a credit monitoring service. In this margin-rich industry with more and more competitors, it’s not surprising to see the big players lose market share.

FreeCreditReport.com and TrueCredit.com, the consumer direct sites of Experian and TransUnion, respectively, all show monthly declines. (Equifax, the third major credit bureau, doesn’t run a separate site.)

(Combined: Down 24% Y/Y; Down 9% M/M)

That’s were a little known start-up, Credit Karma steps in. Unlike the big players, Creditkarma.com provides free credit scores based on advertising rather than a subscription model. They generate revenues from advertisers who can target users based on their credit profile. So far the model looks like it’s working to drive traffic. Compete numbers show month over month growth in the 30-40% range.

In addition to the free credit score and monitoring, the site is loaded with statistics and content to help consumers understand and manage their credit. Credit Karma also boasts many web2.0 elements like user comments and voting. Many of the features and tools are interesting if you want to get under the hood of how credit scores work.

At this point, it’s too early to judge whether Credit Karma will succeed, or whether the advertising revenue will be there to support them. But today in a tightening credit market where consumer credit is closely scrutinized, firms like this may be well-positioned for growth.

It is undeniable that consumers are increasingly living their lives online. From buying a book, to viewing a photo, to posting a tweet through the use of Twitter, individuals are turning to the internet for a myriad of reasons. Financial services is certainly not immune to this digital migration. While it is clear that online banking usage and adoption is growing, it is less obvious how consumers view their current experience. Are consumers really satisfied with online banking functionality? We surveyed existing online bankers to find out.

The chart below illustrates consumers satisfaction with their current online banking experience across a variety of areas. The most apparent conclusion from this data is that consumers, in general, are very satisfied with most banking functionality offered online. For instance, fewer than one in ten consumers who currently use online bill pay are either indifferent towards or dissatisfied with the experience. The immediate inhibitor to continued growth in adoption of online banking functionality is thus not the usability of these site features, but rather convincing consumers to try them out in the first place.

The data below shows the percentage of existing online bankers that currently use particular types of online banking features. While in the above chart 92% of respondents that use bill pay are happy with the experience, only 54% of online bankers choose to utilize this feature in the first place. Banks need to do a better job of driving initial trial for online banking functionality, for once consumers engage with these offerings they typically are satisfied with their experience.

Traditional marketing efforts promoting features and functionality across multiple distribution channels are clearly one way to drive trial. However, perhaps an additional way in which banks can drive trial of online banking functionality is to more aggressively leverage the high satisfaction levels of existing consumers by letting individuals speak to each other in an online community. It is not unprecedented for banks to create an online community around a particular topic area. Bank of America, for instance, created a compelling online community for small business owners. Letting consumers learn from the experiences of others is likely to drive increased trust in the bank and thus impact trial. It will be interesting to monitor the adoption of specific online banking features over time and what banks specifically do to drive trial.