The Internet has created many opportunities for lenders to do more for their customers while spending less. But a recent study suggests visiting prospects might be more likely to become customers with an improved online experience.
The white paper, Branching Out: The Online Path to Greater Profitability and Customer Loyalty by LivePerson, a provider of hosted solutions for managing online customer interactions, said two-thirds of all U.S. households currently have access to the Internet.
Among all online activities, online banking has grown the fastest -- more than doubling to 44% from 17% over the past four years, according to the report. Additionally, the number of new personal finance and insurance customers who used the Web for product information in the past year was 20.5 million up 63% from 2003.
The report noted that the Web represents an "unprecedented opportunity for institutions to increase market penetration: shape customer satisfaction and loyalty: attract a higher share of wallet from existing customers; and reduce the cost of service."
"The online channel is no longer a competitive advantage; your value proposition lies in the ability to deliver an exceptional online experience," LivePerson said in the report.
It is crucial that financial service providers offer interactions that are personal, convenient, effective and consistent across all channels, from branches to call centers to the Web, the report said. "Those with a positive experience are four times as likely to use more products, three times as likely to recommend the bank to others, and far more likely to continue their relationship with the bank," Scott Forbes, managing partner at Accenture, said in the report.
Research has reportedly revealed that nearly 40 percent of consumers younger than 40 researched a banking product online and 65 percent of them visited multiple sites. "However, the need for help and security fears kept applications offline." Due to the need of human assistance to validate their decisions, only 30% of all online researchers apply online.
LivePerson suggested that lenders humanize the online experience, which at the same time can help proactively identify hot lead or abandonment behavior, by offering live online assistance to validate decisions and help with applications, forms and financial calculators.
The report also advised lenders to improve customer retention and extend the existing relationship, noting that the cost of acquiring customers is seven times more costly than retaining existing ones. The report said steps lenders can take to achieve such goals are delivering high-quality personalized service during each online interaction, converting customers to online bill payers, and offering additional products during the consumer's online visit.
While research has also reportedly shown that online bill payment customers are almost 20% more likely to purchase additional products and services from their bank and are 34% more likely to recommend the bank's Web site than online bankers who don't pay their bills on their bank's site, a survey of the world's top 300 retail banks found that 93% made no attempt to cross-sell or up-sell related banking products during the course of interaction.
The Internet, whether for usage of online payments or providing a venue to apply for a loan, not only significantly reduces operating costs, online banking customers prefer Web-based customer service almost 3-to-1 over more expensive telephone support, the report said.
According to the report, the difference between processing an online application and on offline application is a starting $21. It is estimated that the brokerage industry potentially spent $56 million in processing physical brokerage account applications.
With retail banks, an in-bank transaction costs between $1 to $4, while an online transaction averages less than a nickel, LivePerson reported.
"At most banks, only a small percentage of customers use online baking, Internet bill payment and other Web-based products," the report said. "However, this fast-growing customer segment tends to be the most educated, most affluent and most profitable-and they expect top-tier value and convenience from their online service. If these customers have a bad online experience, they'll defer to alternative, more expensive and less convenient channels, such as call centers or bank branches, which may erode satisfaction and cost more to your organization."