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.