For years, core home banking capability has remained relatively unchanged. While new innovation has occurred through add-on technologies, very limited product differentiation (in terms of core member capability) realistically exists from one home banking provider to another. However, many believe that 2008 will mark the time when the personalization and financial management movements first got started in the home banking sector.
If it can be done in a branch...
For the past decade, transactions have been the focus shared by most financial institutions and vendor solutions. This focus evolved naturally out of necessity and member demand -- enabling members to accomplish basic banking in a convenient and self-service environment while the credit union also recognized increased efficiencies and online accessibility to the institution's core product offerings. The result today, is that that approximately 90% of credit unions greater than $25 million in assets now offer Internet Home Banking (source: Callahan's 2007 Technology Survey).
A 2006 TowerGroup study estimated that current online channel transactions are now roughly equivalent to the transaction numbers being conducted through other channels (branch, call center, and ATM). Some credit unions like Stanford FCU ($801 million in Palo Alto, CA) are already reporting "remote and electronic" member transactions in excess of 95% of total transactions, with 84% of loan applications handled through their website in 2006.
So what now? A shift in purpose
For years now, software-based personal financial management (PFM) solutions such as Microsoft's Money or Intuit's Quicken have been used by many consumers to keep track and manage their personal finances, track and pay bills, and categorize transactions on a single PC. While these tools are unquestionably powerful and empowering to the consumer, the challenge has been the detailed initial set-up and input routines required for the tools to become very meaningful in managing their finances in a sustained manner. As a result of the work required by the user, the number of credit union members who actively use PFM tools are likely to be a fairly small percentage of total active members.
Major home banking vendors and new technology start-up vendors believe that an opportunity now exists to deploy PFM capabilities directly into the home banking platform. This could dramatically simplify the PFM user experience given the member data the host financial institution already possesses and, it is hoped, enable a larger group of members to benefit automatically from a broader understanding their finances and options. These capabilities may include:
The credit union stands to benefit if they can be viewed more as a partner with the member in their financial management versus just a transaction service provider. In addition, the credit union's home banking application becomes more of a sticky application, akin to bill pay, since the configurations made over time by the member in the system would take time to replicate on another provider's home banking platform. Enhanced analysis algorithms also promise more intelligent online product and service offerings based on the member’s situation.
All of this is ramping up very quickly as leading vendors are already working with focus groups and beta deployments to evaluate final release versions. One thing is certain, online PFM is shaping up to be a key focus for Internet strategists in 2008. While the purpose of PFM seems compatible with the credit union ethos of empowering members, some key questions remain:
- What is the full range of online PFM capabilities available anticipated?
- What are the key capabilities that members will likely use?
- What have been the experiences of initial adopting credit unions & banks?
- What will the new member home banking experience be?
- How can small member businesses leverage PFM?
- What are the ROI models justifying this new technology deployment?
Still, after years of relatively minor improvements, it is somewhat refreshing to see a renewed interest in significant innovation within the home banking platform itself. Who knows what the next decade will bring!