Optimizing Your Internet Channel
Ron BergamescaEVP and General Manager
Community Bank & Credit Union Services
2© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Agenda
Consumer Update
Internet Channel Profitability
Where is the Revenue?
Integration—A Path to Optimization
4© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Consumer Update: Adoption Trends
Source: Javelin Strategy & Research
Adoption of Online Banking and Bill Pay Continues to Grow
Rate of Transaction Adoption is Unchanged
5© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Consumer Update: Adoption Trends
Quarter Users (M) Sequential Growth
1Q07 45.4 3.7%
2Q07 47.3 4.4%
3Q07 46.9 -0.9%
4Q07 47.3 0.9%
1Q08 48.2 1.8%
2Q08 48.6 0.9%
3Q08 50.9 4.8%
4Q08 51.4 0.9%
Source: comScore
Adoption at Top 10 Banks Continues to Grow
6© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
SegmentIncome/Savings Attributes
% of OLPop.
Savvy Explorers
$75k/
$150k
Early AdoptersLow LoyaltyBest of Breed Shoppers
15%
Consolidators$60k/
$100k
Early AdoptersAverage LoyaltyMotivated by Convenience
8%
Time-Seekers$80k/
$175k
Multi-Channel UserResearches on InternetUses Traditional Online Services
12%
Inert Traditionalists
$60k/
$100k
ContentUnlikely to Research/Purchase OnlineRelatively Active Online Banking & Bill Pay
14%
Security Wary$60k/
$130k
Rarely Pay Bills, Shop, Research OnlineTrust Builds with Human ContactPerception is Reality
20%
Consumer Update: Segmentation is Maturing
Source: McKinsey & Company
Mobile
PFM
7x24 Member Care
Check Metaphor
Risk-Based BP Trans
7© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Implications
One Size Fits All is Becoming a Liability
“Cohortization” of:
Information—Home Page is Key
Navigation—Quick Links Facilitate
Transactions: Simple or Complete—Give Choice
Increased Marketing Opportunities—Consumers are Self Segmenting
Consumer Update: Segmentation is Maturing
8© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Immediacy – when you want it
Personalization – what works for you
Interpretation – meaning making - relevance
Authenticity – real deal or knockoff?
Accessibility – easily stored and found
Embodiment – real experiences
Findability – navigation help
Source: Kevin Kelly, The Technium: What technology wants from us. Compliments of Pew Internet and American Life Project
Consumer Update: Attributes of an Optimal Experience
10© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Source: Bank of America 2002 time series analysis compared offline customers with online customers. Groups matched with 40 ‘pre-online’ characteristics (e.g. age, income, account balance, transaction activity, VRU/CSR usage). Analysis spanned 31 months and included over 300,000 customers
0%
5%
10%
15%
20%
25%
30%
35%
After 9 months After 19 months After 31 months
Cost-to-serve reduction
Retention increase
Relationship deepening
Internet Channel Profitability: Bill Payers Are More Profitable
Profitability Increased 31%
11© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Source: Bank of America 2002 time series analysis compared offline customers with online customers. Groups matched with 40 ‘pre-online’ characteristics (e.g. age, income, account balance, transaction activity, VRU/CSR usage). Analysis spanned 31 months and included over 300,000 customers
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Loan balance Number of loans Depositbalances
Number ofdeposit
accounts
After 9 months
After 19 months
After 31 months
Internet Channel Profitability: Bill Payers Are More Profitable
Profitability Increased 31%
12© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
0
20
40
60
80
100
120
140
160
Base p
rofita
bility
12 m
onth
s later
Pre-o
nline
acti
vatio
n
12 m
onth
s later
Pre-b
ill pa
y acti
vatio
n
12 m
onth
s later
Ann
ual h
ouse
hold
pro
fitab
ility
(in
dex)
100 102 101
121
103
143
+2%
+20%
+40%
Offline Active Online Active Bill Pay
Source: Boston Consulting Group, 2003
Internet Channel Profitability: Bill Payers Are More Profitable
Profitability
Increased 40%
13© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Source: Aspen Analytics classified all customers of a Top 10 Financial Institution as of 11/30/07, and then measured their subsequent churn probability and profitability over the subsequent 6 months.
0 20 40 60 80 100 120
Households inupper 1/3 of bill
pay volume
Bill pay
Online households(no bill pay)
All households
Customer Churn Index
Internet Channel Profitability: Lower Churn/Higher Profits
Churn Index
0 50 100 150 200 250 300 350 400
Households inupper 1/3 of bill
pay volume
Bill pay
Online households(no bill pay)
All households
Customer Profitability Index
Profitability Index
15© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Where Is the Revenue: Acquiring New Accounts
What is Your Cost of Acquisition?
Source: Forrester Research, February 2008
16© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Where Is the Revenue: Acquiring New Accounts
What is Your Cost of Acquisition?
Source: Forrester Research, February 2008
17© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Need To Be High Value
Expedited Payments
Next Day Transfers
Enhanced Mobile Experience (Downloaded Application)??
Security Tokens??
Quid Pro Quo Rewards—Twist on Relationship Pricing
High Yield Interest, if you pay 5 bills online
Three Next Day transfers, if you have 10 debit trans
And so on…
Where Is the Revenue: Fee Income Opportunities
18© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Where Is the Revenue: Leveraging The Data
Type of Data Indicator Of… Action
Online Activity Overall Relationship
Aggregated Data Full Financial View
Transaction Data Lifestyle Attributes
19© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Where Is the Revenue: Leveraging The Data
Type of Data Indicator Of… Action
Online Activity Overall Relationship
IncreaseMovement toward PFIChannel Preference
Initiate Member Contact
Cross-sell/Upsell Opportunity
DecreasePotential AttritionDisappointment
Initiate Member Contact
Aggregated Data Full Financial View
Transaction Data Lifestyle Attributes
20© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Where Is the Revenue: Leveraging The Data
Type of Data Indicator Of… Action
Online Activity Overall Relationship
IncreaseMovement toward PFIChannel Preference
Initiate Member Contact
Cross-sell/Upsell Opportunity
DecreasePotential AttritionDisappointment
Initiate Member Contact
Aggregated Data Full Financial View
Foreign Accounts Wallet Share
Targeted Cross-sell/Upsell Bill Presentment
Foreign LoansCredit Card Balances
Transaction Data Lifestyle Attributes
21© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Where Is the Revenue: Leveraging The Data
Type of Data Indicator Of… Action
Online Activity Overall Relationship
IncreaseMovement toward PFIChannel Preference
Initiate Member Contact
Cross-sell/Upsell Opportunity
DecreasePotential AttritionDisappointment
Initiate Member Contact
Aggregated Data Full Financial View
Foreign Accounts Wallet Share
Targeted Cross-sell/Upsell Bill Presentment
Foreign LoansCredit Card Balances
Transaction Data Lifestyle Attributes
Bill PaymentPurchase BehaviorForeign Loans Targeted Cross-sell/Upsell
3rd Party ProductsStatement Purchase Behavior
22© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Where Is the Revenue: Leveraging The Data
React To Bill Payments—Both Online and Offline
23© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Where Is the Revenue: Leveraging The Data
$ave
One Individual Line of Statement Has Value
25© Copyright 2009 Online Resources Corporation – Proprietary & Confidential25 |
ServiceAcquire Retain
Integration: The Channel Has Gotten Complex
26© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Integration: From The Member’s Perspective
Integrated Services A Much Richer (and Logical) Member Experience
Account Opening ►
Internet BankingImmediate Access to Accounts and Bill Pay
Internet Banking ►
Bill Payment
Robust Home PageScheduled Payments on Home PageQuick Links to Bill Payment Functionality
Seamless Navigation
Internet Banking ►
Account Opening
Pre-filled FieldsSmart Account List
Internet Banking ►
Online Lending
Pre-fill FieldsSmart Loan List
Account Opening►
Online Lending
Pre-filled FieldsCross-sell Loan to New Account
Mobile Banking ►
Bill Payment
One Payee ListComplete View of Transactions
27© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Integration: From The Member’s Perspective
28© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Integration: From Your Prospective
Aspect Benefits To Credit Union
Administration
Reduce/Simplify Number of ToolsReduce Redundant ProcessesConsistent CommunicationThe More You Have, The More You Influence
Security
One SAS 70Consistent Security Practices/SystemsAvoid Handoffs
Vendor Management
Co-terminus ContractsSimplify Contract ProcessLower Management CostsBetter SLAs
Technical Integration Somebody Has To Do It
RiskLimit Exposure to Financial StabilityReduce Risk of Conflicting Technologies
CostCredit Union Gains LeverageVendor Can Package and Bundle
29© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Integration: Key Purchase Decision Factors
Type Of Provider Benefits Drawbacks
Point SolutionBest list of features
Nimble
You Need to Integrate with Other Services
Internet SuiteFull Channel Focus
Integration Skills
Not as Nimble as Point Provider
Core Processor Ultimate One Stop Shop Can’t Be Good at Everything
Balance Vendors’ Value Proposition vs. Your Needs
30© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Integration: Key Purchase Decision Factors
Scale and Flexibility
Scale Drives Costs
Flexibility Drives Responsiveness and Innovation
Integration as a Skill Set
This Will Become Increasingly Important Because No Provider Can Do It All
Focus
Where Does the Vendor Invest Its R&D Dollars
Is the Vendor Too Broad/Narrow
Relationship with Your Core Processor
What You Need To Look For In Your Vendors
31© Copyright 2009 Online Resources Corporation – Proprietary & Confidential
Summary
Consumer Adoption Continues at a Good Clip
Consumer Segmentation is Maturing
Causal Effect of Online Bill Pay on Profitability is Proven (again)
Leverage Your Online Activity and Transaction Data
Understand the Importance of Integration from
Your Members’ Perspective—Richer and More Seamless Experience
Your Perspective—Increased Control and Lower Costs