Clicking Forward: Why Embracing Change May Be the Best Financial Advice for Every Bank in America

To simplify the management of day-to-day financial tasks, make no doubt about it, millions of consumers have clicked into the online banking trend!

As in a fast-moving game of tennis, we are acting and reacting to every invisible, wireless message, every bit of digital information that flows through the world of today. We are, in every sense of the expression, technologically linked to the goods and the services that we need to survive in a round-the-clock society.  In the new click economy, banks never close. They operate 24-7, day in and day out, fully prepared to meet the spontaneous needs of a customer who decides when, where and how to perform the online transactions that sustain his life. We have become a cyber-civilization of hyperactive, interactive conduits who explore the universe at a supersonic pace, instantly absorbing the critical information that immediately impacts how we live and what we purchase.

According to Harris Interactive, approximately 750 million people have access to the Internet today, and more than 2 million new users come online each month. Consumers in the U.S. and Canada represent approximately 36% of users worldwide. Many use the Internet to find greater value and convenience in attending to their day-to-day needs in communicating, shopping and researching—and in managing their financial services.

Financial industry observers agree that Internet use, and the migration to online financial services, will continue to grow at an unprecedented rate. According to TowerGroup, the world’s leading research and consulting firm focused on the global financial industry, 80 million consumers are expected to turn to online financial services companies for greater value during 2008, up significantly from 27 million in 2001. Online mortgage originations are expected to account for 20% of total loans in 2007, up from just 3% in 2001. It is estimated that in 2007, more than 60 million U.S. consumers will have paid their bills online, up from 32 million in 2001. 

Realizing that the way people communicate today is vastly different from the way they have ever communicated before, banks are formulating their own Web 2.0 strategies for easing the lives of baby boomers, enhancing relationships with the Gen Xers, and attracting the 78 million technologically-driven Millennials—the coming-of-age banking customers of tomorrow, who may not have much money today, but who are key to the future sustenance of all financial institutions.

According to www.crmtrends.com, a Web site devoted to reporting on consumer demographic trends, “Gen Y and the Millennials (also collectively known as the Digital Generation) will be very interconnected. Anything goes; everything is available and nothing is private. They will place a high level of importance on individualism, self-fulfillment and personal involvement in the creation process. To prosper with these folks, companies and organizations will need to provide this generation with the tools needed to create and co-create—all the while tapping into their in control, indulgent and individualized psyche; summed under the credo of ‘why not?’”

Emerging technologies (including hand-held mobile devices) are enabling banks to reach customers and potential customers where they work, where they go to school, where they play and where they live.  Through blogs, social networks, podcasts, online forums and virtual worlds, banks are able to facilitate peer-to-peer conversations that speak to the distinct and authentic money concerns and solutions, as well as the financial challenges and needs, of an ever-swelling sea of customer segments—in a way that resonates with each of them.

As stated by Tony Wormington, President of Jack Henry & Associates, a Monett, Missouri based provider of core information processing solutions for community banks, “Mobile banking is the next logical financial service, when you consider approximately 70 million Americans own cell phones, and the advancing functionality these phones provide has elevated them from communication tools to personal management devices. Mobile banking is a natural extension.”

Banks must embrace change if they are to continue to meet growing consumer demand for new and emerging products and methods of delivery. Today’s banks need to optimize all of the available customer channels and strike a balance between electronic banking and in-person service. To remain at the top of their game, banks will have to develop new asset-generation channels, and then find simple yet convincing ways to explain them to the customer.

Take a look at Mint (www.mint.com), for example. It’s a personal finance, online banking upstart offering the 41.9 million, financially challenged under-30 crowd, a free, easy-to-use, Web-based solution to their many money woes. Budgeting, handling credit-card accounts, tracking spending, monitoring student loan accounts—all kinds of activities that help younger Americans manage their finances can be done on one integrated, automated site that links the user to more than 3,500 financial institutions including banks, credit unions and credit card companies. Launched in September 2007, the company already has a slew of competitors, such as Geezeo, Spendview, and Wesabe.

2008 banking trends will surely be affected by the anticipated surge in residential mortgage foreclosures. Mark Zandi, chief economist at Moody’s Economy.com predicts a tough year, as have other housing and mortgage market analysts.

While no one knows the effect the damage in the housing sector will have on the rest of the economy, one thing is certain—in today’s highly commoditized banking industry, it is becoming increasingly more difficult for a bank to establish and distinguish its value proposition.