Online Banking’s Looming Measurement Crisis

According to research done by Aite Group, generating sales is the most important business goal for banks’ online banking efforts. And an overwhelming majority of banks say that ROI is a critical measure for determining which features and functions they roll out on their sites. But nearly three-quarters of banks say that they can’t establish a correlation between profitability or performance and the introduction of many online services and tools.

Not sure what this tells you, but it tells me that online banking execs have a measurement problem. A problem that I think is only going to get worse over the next few years. Why?

1. The online channel is taking credit for sales influenced by other channels. There’s a big difference between “generating a sale” and “taking the order.” When I’ve mentioned that to online financial services marketers, the heads generally nod, but few firms seem to change measurement techniques or approaches to determine the difference.

2. Direct marketers are adopting net measurement techniques. Database marketers are increasingly trying to measure the incremental ROI of direct marketing investments.

3. Financial services marketers want to be integrated marketers. Research conducted last year by Epsilon found that more than 80% of financial services surveyed said that they have made a strategic decision to integrate their marketing efforts across channels.

What this adds up to is increased scrutiny of the sales performance of the online channel. As campaigns are increasingly executed centrally (to coordinate various channels) and the incremental performance of each channel is measured, then where the order is taken will become less important than which channel had the greatest influence on generating the sale.

Personally, I don’t think a lot of online banking groups are up to this measurement challenge. Sorry if this offends any Web analytics groups out there, but I find that many of them are focused solely on online data, and/or don’t have the statistical and testing skills needed to execute the kind of analysis that’s required here.

For some more thoughts on what online banking execs should do about this, and for some survey data on the priorities and performance criteria of online banking groups, please check out this research note on the Aite Group site.

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4 thoughts on “Online Banking’s Looming Measurement Crisis

  1. Glad to see the phrase “control groups” in the report, Ron. This area is where the next big leap in learning will take place, and holds some real suprises for onliners in particular.

    Personally, in banking, online looks like more of a retention device than anything else. Best / fastest / most flexible interfaces win for folks “into” online banking, and features like “send my balance to phone” attract some folks.

    If banks essentially offer parity product (and I know they don’t think they do, but…) a great online experience could cause someone to stick with the bank.

    But this retention idea just drives us back to the age-old discussion of what “retention” means in banking – is a customer with a balance “retained”?

    Or are they just passively agnostic and fear switching costs?

    In the online brokerage area, I see this push on “we will make the switch for you”, etc. I wonder what would happen if banks started making these “we’ll make the switch for you” offers?

    My guess: We’d probably find out what retention in banking really means.

  2. I find it interesting that banks are interested in the ROI from the functions available in this channel, yet still rarely seem to track ROI in any of their other delivery or marketing areas. I can almost “see” a conversation where online banking was brought up and the comment was made that it’s an additional expense and has to be justified with a measurable ROI rather than it being a necessary tool for service and retention, as Jim mentions. I wonder if that same discussion takes place when discussing whether there should be a teller line or ATM at the new branch that’s being planned.

  3. Couldn’t agree more, Ron. Unless an online measurement system can track someone all the way from marketing to response to prospect to advice to application to purchase to fulfillment, it’s just a guess as to which part of that sequence did the heavy lifting. Considering the integration required with multiple bank systems (some of them older than me) necessary to do that, I’d be surprised if any big bank does it accurately today.

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