Automate and Engage to Fulfill the True Potential of the Internet

Automate and Engage to Fulfill the True Potential of the Internet WHITE PAPER Sponsored by: Adobe www.financial-insights.com R ac he l H un t R ek ha Meno n Oc tober 200 6 FINANCIAL INSIGHTS OPINION Automation and creating an engaging, interactive customer experience are essential to ensuring future online sales for U.K. financial institutions. This is one of the key findings of a series of interviews F.508.988.6761 aimed at investigating the challenges in maximizing the return of the online channel and in particular the challenges of online product conversion for financial services institutions, conducted by Financial Insights on behalf of Adobe in August and September 2006. P.508.620.5533 With over 60% of the population online, the U.K. enjoys one of the highest Internet penetration rates worldwide today. However, the Financial Insights survey revealed that while the Internet is regarded as an important avenue to support consumer research for financial products and in the case of banks, a crucial medium to help existing Global Headquarters: 5 Speen Street Framingham, MA 01701 USA customers service their accounts, financial services institutions are not yet truly able to leverage the sales potential of the online channel. ● Over two-thirds of banks surveyed do not yet actively use the online channel to acquire new customers, with less than half allowing current accounts to be opened online. ● Despite rapid growth in online usage — Financial Insights research estimates that there are now over 12 million active online banking users in the U.K. — online conversion rates for product sales among the surveyed banks and financial institutions remain below 17%, significantly lower than the associated conversion rates achieved through phone and branch networks. ● Products for which the online application process includes an important offline component show the lowest conversion rates, with mortgages as low as 1%. ● Speed of online form completion is at an average of 7 to 10 minutes for most products, while mortgage applications can take over 30 minutes to fill online. ● Less than 10% of firms surveyed have invested in improving the online sales experience for complex but high-margin products, such as mortgages. October 2006, Financial Insights #CG40N ● Back-office processing remains a manual and inefficient process prone to errors as data often needs to be rekeyed, leading to slow decision response times. ● Multichannel integration remains a key issue among financial institutions in the U.K. Nearly 50% of financial institutions surveyed could not have their sales representatives at the call center or branch see in real time quotes received online. While aggressive marketing programs and attractive online rates result in increased Web site traffic and sales for nearly 50% of survey respondents, such increases are temporary and retention rates are much lower through this channel. Moreover, while marketing programs can get customers to the Web site, sales can only be fulfilled online if the Web site engages the customer. The survey results demonstrate a direct link between consumers' online purchase behavior and enhanced online experience. The few financial institutions that have invested in creating compelling online sales environments have seen a measurable and sustainable increase in online sales and conversion rates. Below are some examples of these best-practice initiatives, achieved in the U.K. from the results of our survey: ● Nearly all financial institutions surveyed have invested in improving the online application format. However, one bank saw real improvements in conversion rates when it reduced the loan application form from 16 to 6 steps. ● A financial institution that redesigned the mortgage application form specifically for the Internet saw the time required to fill in the form reduced to 20 minutes. Online applications for the institution account for up to 20% of total mortgage applications. As such, over 90% of firms surveyed have not focused on online sales of mortgages, categorizing them as a "complex product" that is difficult to sell online. ● A bank is investing in creating a straight-through-processing environment for loans and current accounts by instituting instant credit-checks and electronic signatures. This tier 2 bank, which significantly focused efforts towards the online space, now sees over 50% of its loan sales done through the online channel. Further, nearly 40% of current account sales are done online, 80% of which are to new customers. ● A tier 1 bank enabled STP for loan product sales to existing customers through the authenticated online banking section. The use of digital signatures and instant credit-check mechanisms has helped reduce the online application process to less than five minutes. Page 2 #CG40N ©2006 Financial Insights, an IDC Company The Internet attracts the urban educated retail customer with a higher average disposable income. These compelling demographics combined with the increasing online usage and the growing popularity of broadband connectivity have ensured that the Internet is a powerful tool in a financial institution's arsenal. Nevertheless, to unlock the full potential of the online channel, financial institutions need to invest in the following strategies: ● Automation: Financial institutions need to focus on end-to-end STP and document life cycle management, which can only be achieved through business process automation and greater integration of data and systems. Further, as has been demonstrated by the relative success of general insurance products where there are no wet signatures involved, institutions should try to lock-in customers early in the process using electronic signatures and tools that enable instant credit and identity checks. ● Engaging the customer: To create a compelling online experience, financial institutions need to further facilitate the process of filling in applications, through the capture and reuse of data throughout the transaction process so that data fields can be prepopulated and rekeying of data can be avoided. ● Achieving high-value sales: Financial institutions need to focus on simplifying and automating the online application process for complex products. Not only will this help generate greater sales volumes for these higher margin products, this strategy will pay off in the long term. The new generation of financial consumers will display a higher propensity to buy complex products online. ● Online customer acquisition: Tier 1 banks need to actively promote and use the online channel to acquire new customers. By mainly focusing their efforts to cross-sell to their captive customer base, tier 1 banks risk losing out to more nimble competitors, such as tier 2 banks and retailers that are using the Internet effectively not only to sell to their existing customer-base but also to aggressively acquire future high spending customers.