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Personalizing the Remote Channels
BY LAURI GEISEN
To get the most out of personalized
marketing, banks will need to utilize customer information online and at the
ATM.
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SYNOPSIS | Banks have been working
for a decade or more now on customer relationship management (CRM) systems and
have been largely successful at delivering actionable customer information to
their teller lines. But efforts to deliver this data to remote online and ATM
channels have been stymied by technological complexities and data systems
integration failures. The continuing migration of customers to remote channels
will give banks more incentive to overcome these roadblocks and new systems
coming on the market should help as well.
Banks that have invested heavily in developing customer
relationship management (CRM) systems to support their branches and call center
operations may need to ask themselves a simple question: Is that enough?
While branch and call center employees now have access to
substantial information about customers' profitability, banking habits and
financial services needs, customers are increasingly using self-service channels
when they bank. Thus far, few institutions have been able to utilize customer
information for personalized marketing purposes in their ATM and online
channels.
“How can banks build customer loyalty when they rarely see their
customers?” asks Susan Hawkins, senior vice president of eBanking for
Milwaukee-based Metavante Corp.
Many banks do indeed market financial products to customers
through ATMs, for example, but typically the same product is offered to all ATM
users, regardless of their customer profiles. As a result, credit cards are
being promoted to customers who already have credit cards, as well as to
customers who are not creditworthy. And the situation on the Internet is even
worse, experts say.
While most banks aggressively promote their products at their
home and product Web pages, few product promotions are made to customers once
they have logged on to conduct online banking and bill payment transactions. And
these are prime targets - typically loyal customers who visit their bank Web
site multiple times a week and who have already authenticated their identity.
“The goal for financial institutions is to offer a consistent
experience across all channels,” says Madhavi Mantha, an analyst with
Boston-based Celent LLC. “But most banks are just beginning or still planning to
create an infrastructure where all the delivery channels have access to central
customer information files.”
Where the Customers Are
One reason that banks need to look more closely at integrating customer
information files with self-service channels is because, quite simply, that’s
where the customers are. A recent study by Needham, Mass-based
TowerGroup Inc. projected that banks will see an average of 10% annual growth in transactions between 2006 and 2010 with the majority of that occurring in remote channels (see chart “Remote Channels Lead Transaction Growth”).
While 22% of customer interactions came via the Internet in 2006, according to TowerGroup, that percentage is expected to grow to 40% by 2010. ATM use will continue to grow slightly, but as a percentage of total interactions is projected to decline from 27% to 19%. Still, 59% of customer interactions will come via ATM and online channels combined in 2010, up from 49% in 2006, TowerGroup said
(see chart ”Remote Channels: Where the Customers Are“).
What that means is that if banks continue to use their CRM data primarily with call centers and branches, they will miss the opportunity to utilize valuable customer information with nearly 60% of their customer transactions. Jerry Silva, TowerGroup’s research director of delivery channels, notes that while a number of banks are beginning to make efforts with ATMs, most are really missing the boat when it comes to the Internet.
“Online banks have a dual personality. They have lots of promotions and pop-up ads on their home and product pages,” he says. “But the second a customer logs in to conduct banking or bill payment transactions, they are met with cold, sterile transactional pages. Banks need to do more to bring customer information behind the firewalls.”
Ultimately, what banks want to do at both ATMs and the Internet is to identify customers and send them targeted promotions. But such efforts have been stymied in the past because of the complexity and high cost of integrating customer databases with the ATMs and online bank offerings. ATM operating systems, for example, often differ from the banks' back-end systems, causing communication problems. Online banking programs are often run by third parties who lack access to back-end data retained by the bank or a different outside party.
But technological progress in recent years gives banks new hope. Among the key developments is the movement by ATM manufacturers to open architecture by utilizing Windows-based operating systems
(see chart “Hello Windows, Bye Bye OS/2”). As opposed to the proprietary ATM-specific software that operated on the IBM OS/2 machines, Windows-based systems are much easier to connect to bank back-end systems and require less customized and expensive integration software. Additionally, some Internet banking and ATM processors, as well as technology vendors, are beginning to come up with more off-the-shelf integration products that require less customization from the bank staff.
Targeted Marketing
For the most part, banks are just starting to look at integrating their self-service delivery channels with their customer databases. And they generally are doing it in three stages: personalized service at the ATM, limited targeted marketing at the ATMs and Internet and full-blown targeted marketing programs that are fully integrated with marketing efforts through the entire bank organization
(see sidebar “Three Stages of Personalized Marketing”).
Most banks are still working on the first step, but a few have graduated to the second. Fifth Third Bancorp, Cincinnati, and Minneapolis-based U.S. Bancorp, for example, have begun targeted marketing efforts at both ATMs and online banking channels. Fifth Third began by enabling customers to set preferences and customizing the display at ATMs earlier this year and by mid-year had 100,000 customers who had registered their preferences.
And Fifth Third has expanded the options available to customers. "We want to give the ATM the face of the Internet so that customers can specify what balances they want displayed on the ATM - if they just want checking and savings or if they want their credit card balances displayed as well," says Paul Moore, vice president of alternative delivery for Fifth Third.
The bank began a pilot in August at five machines to provide targeted marketing messages to ATM users. The bank intends to roll out the offering so that more than half the bank's 2,100 ATMs will offer targeted marketing by the end of this year. "We want to offer customers the right product at the right time when they are using the ATM," Moore says.
Late last year, Fifth Third began offering targeted marketing messages to online customers after they log on to the bank’s Web site. “We have some heavy Internet banking users and we find they are among the most responsive to promotions,” Moore says.
The system is tied into product offerings at other delivery channels so that customers do not continue to receive product promotions after they have declined an offer, Moore adds. Ultimately, Fifth Third hopes to identify which channel individual customers prefer to receive promotions from and then push more pro-motions through that channel, he says.
U.S. Bancorp, meanwhile, has begun sending targeted e-mails to customers behind the company’s log-on wall. Once customers log on to online banking or bill pay, they are notified that messages are waiting for them at the message center. There, the customers can view product promotions that were chosen for them based on their profile.
Currently, the messages are in the standard text format commonly found in e-mails and do not contain flashy graphics typically found in other product promotions, although that could change, says Vice President of Corporate Marketing Richard Meszaros. “We’re continuing to add tools so that we can present our messages in different formats. Some people seem to prefer more of a straight-forward text message while others prefer their messages conveyed in a more graphical format,” he says.
U.S. Bank declines to reveal response rates from the online targeted marketing program, although Meszaros terms them “encouraging so far.”
On the ATM front, U.S. Bank two years ago rolled out its ”Prodigy” platform, which enables customer personalization. One-to-one marketing commenced off the platform earlier this year, according to Brian Koehler, vice president of emerging products and ATM product management.
With this program, product and marketing managers from the bank prioritize which products the bank wants to promote and match those products against the customer profiles. Promotions are then prioritized for each customer. When customers visit the ATM, the top product on their list is promoted while they wait for their cash.
“We use the ATM in a subtle way. We never interrupt the transactions. We stage the graphics of the promotion so that it can be integrated into the screen flow,” Koehler says.
Making It Easier
Both Fifth Third and U.S. Bancorp have had to utilize extensive internal resources to overcome technological obstacles. “We had to build a lot of bridges to make it work,” says Hollis Schuler, Fifth Third vice president of IT for retail ebusiness.
But other banks may find the task easier as more off-the-shelf offerings become available from technology companies. One historical obstacle to channel integration — proprietary ATM operating systems — has already been reduced. In recent years, a number of banks have replaced older ATMs utilizing proprietary OS/2 operating systems with newer ones that use Windows.
“The migration to Windows has really spurred the interest by banks to conduct personalization and target promotions at the ATMs,” says Mary Knitch, product manager of ATMs for Greenwood, Colo.-based First Data Corp. “With the OS/2 terminals, it required a lot of expensive customization work. With Windows, we can make additional services available at a lot lower cost.”
That alone could spur greater interest in ATM personalization and targeted marketing. “Even one to two years ago, there were not enough Windows-based ATMs for banks to consider these programs, but today there are,” Knitch says. U.S. Bancorp, for example, offers targeted marketing only on its Windows-based ATMs, which account for about 20% to 25% of the bank’s ATMs. Koehler expects that number will rise substantially in the next few years as the bank replaces older OS/2-based ATMs with Windows-based ones.
And other banks are moving ahead with targeted marketing now that they have compatible ATMs. A new service from First Data enables banks to decide which products they want to promote on their ATMs. First Data’s software connects to the bank’s CRM database to determine which customers qualify for and are likely to want a particular product. Only those customers receive the product promotion when they visit the ATM. The bank calibrates how many times it wants the message to appear to each customer, to avoid overexposure and irritated customers, after which the promotion expires.
The service has been piloted with just a couple of the banks for which First Data drives ATMs, but the company intends to make it available to all its customers late this year or early next. “We’ve had a lot of interest in this product from banks,” Knitch says. She adds that she expects to see a small rollout of the technology beginning in 2008, with the activity picking up momentum so that a large number of institutions are using the service by mid-2009.
Another vendor developing access to customer profile information at multiple delivery channels is Atlanta-based Postilion, a division of S1 Corp. that is targeting the small and mid-sized bank market. Currently, Postilion offers its customer banks the ability to personalize their ATM service and is working on the technology for them to add targeted marketing campaigns in the near future. The company also plans to add its Internet banking offering in early 2008. Because Postilion has a unit that drives ATMs and another unit that offers online banking services, it can leverage existing links to facilitate communication between the various channels, according to Baron Unbehagen, vice president of marketing and alliances.
“Banks will take baby steps by starting with making sure the customer experience is the same at every channel and then moving toward personalization and, finally, targeted marketing,” Unbehagen says. “But it has to be done with a clear integration plan in mind. A patchwork approach is costly and not as effective.”
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