Surprising, but true: Internet-based activity is not exclusive to the young generation of “digital natives.” A 2008 survey says that Generation X (those born between 1965 and 1976) use Internet banking significantly more than any other demographic segment, with two-thirds of Internet users in this age group banking online.

Generation X users have also expressed a preference for applications such as Facebook, to share, connect and be part of a larger community.

There is some irony in this, since online banking as we know it today offers minimal interactivity. Unlike a branch, where the convenience of two-way interaction makes it easy to consume a variety of transactions, the one-way path of electronic banking has only succeeded in enabling the most routine tasks, such as checking balances or transferring funds.

It’s not hard to put two and two together. There is a clear opportunity for banks that can transform the current passive internet banking offering into one that provides a richer and more interactive customer experience.

Therefore, it is imperative that banks transform their online offering to match new customer expectations. In addition, Internet banking must travel to popular online customer hangouts, rather than waiting for customers to come.

There are clear indications that the shift to a “next generation” online banking environment is already underway. It’s only a matter of time before these trends become the norm.

Use of Social Networks

Forward-thinking banks are leveraging existing social networks on external sites to increase their visibility among stakeholders. They are also implementing social software technology on their own sites to engage the same communities in two-way discussions. Therefore, your Internet banking has taken on a more pervasive persona: customers interact with the bank, along with its products and services, even when they are not actually transacting online.

In addition to increased visibility, banks can gain great customer insight from such informal, unstructured interactions. For example, a discussion about the uncertain financial future among an 18-25 age group could be a signal for banks to offer long-term investment products to a segment that was not previously considered a target. Going one step further, a positive buzz around a newly launched service can create valuable word-of-mouth publicity for the company.

Collaborating through Web 2.0

The collaborative aspect of Web 2.0 applications has allowed banks to bring more customers into their fold than ever before. Traditional methods, such as focus group discussions or market research, have the disadvantages of high cost, limited scope, and the possibility of introducing bias. The feedback forms serve simply as an autopsy. By contrast, Web 2.0 has the ability to attract a large audience early on and continue to do so perpetually. Thus, an interested community of prospects and customers participates in the joint creation of products and services that can meet their expectations.

The pervasiveness of Web 2.0 enables the delivery of electronic banking services through multiple online locations and web-based devices such as Yahoo! Widgets, Windows Live or the iPhone. This means that next-generation online banking customers will enjoy greater access and convenience.

A New York-based analyst firm found that 15% of the 70 banks tracked by them had adopted Web 2.0, and several of them had done so in the last 12 months.

Standard Chartered Bank employees connect with their colleagues through Facebook and use the platform to share knowledge, answer questions and participate in discussions about the company’s ongoing activities.

Bank of America, Wachovia Bank and Commonwealth Credit Union have built a presence within interactive media to raise awareness and maintain a dialogue with concerned communities. They have employed a variety of methods, ranging from creating YouTube communities to launching campaigns on Current TV, a channel where viewers determine the content.

Online Banking Personalization

Vanilla e-banking divides customers into very large and heterogeneous groups, usually corporate, retail or SME, with a type of internet banking page for each. That is in stark contradiction to how banking organizations would like to view their clientele. Banks are moving towards customer specificity, almost viewing each customer as a “segment of one”, through other channels, and online banking is poised to do the same. For example, a dedicated home page for home loan clients and another for private banking clients could well be a possibility in the future.

Interestingly, the National Bank of Kuwait had the foresight to do this several years ago: They allowed customers to determine what products they would view and access, and were rewarded with a dramatic increase in online transactions.

Yes Bank’s Money Monitor allows customers to choose their home page; for example, they can set “all transactions”, “net worth” or “portfolio” as their default view. Other features include the ability to categorize transactions based on customer convenience and custom report printing.

online empowerment

Internet banking has undoubtedly created a more informed and empowered class of customers. This is set to go to the next level once customers are allowed to proactively participate in many more transaction-related processes. The Internet has already made it possible for customers to compare product loan offers, simulate financial scenarios, and design personalized retirement portfolios. In the future, they could consume related transactions, meaning that after comparing interest rates, they could originate a loan online, and once secured, they could start paying it off online as well.

porting

The advent of Web 2.0 technology, coupled with banks’ desire to make their electronic banking as personal as possible, is likely to result in a “portalization” of Internet banking. The idea that bank customers can create their own online spaces, filled with everything that is relevant to them, is not so far-fetched. Customers can customize their Internet banking page to reflect multiple account positions at different banks; they could include their credit card information, subscribe to their favorite financial news, consolidate their position in physical assets, share their experiences with a group, and do more, all from one “place.”

Money Monitor allows customers to add multiple “accounts” (from a selection of 9,000) to their page. The accounts can be savings or loan accounts with major Indian banks, or those with utility providers, credit card companies, brokerage firms, and even frequent flyer programs. Users can customize their pages as described above.

As banks look to develop their vision of Internet banking for the future, in parallel, they will also need to address key security and “due defence” issues. While it is every marketer’s dream to have clients serve as ambassadors, proper precautions must be taken to prevent the proliferation of malvertising or spurious advertising. Therefore, before a person is allowed to participate in a networking forum, he must have built up a favorable track record with the bank. The individual must be a recognized customer of the bank, having used a minimum number of products over a reasonable period of time. Qualitative information about the person’s interaction with the bank’s support staff (for example, the frequency and type of calls made to your call center, the outcome of that interaction, etc.) can be very valuable in profiling the type of “right” client who can be recruited as a potential lawyer.

Collaborative Web 2.0 applications may require the opening of bank websites to external technology and exchange of information with third-party sites, increasing the spectrum of data and infrastructure security. A robust checks and balances mechanism must be built to ensure that third-party sites are secure, properly certified, and do not pose a threat to local bank sites. Similarly, before a third-party widget is allowed onto a site, it must have gone through a strict security check.

Due diligence should be exercised before allowing users to link to another site to guard against the possibility of inadvertent downloads of malicious software, which could, in the worst case, even result in phishing originating from the sites of the users. banks.

It is equally important for a bank to protect its customers against invasion of privacy, theft or misuse of data. The concept of portalization contemplates the deployment of technology to bring information from the websites of other banks or financial service providers to the site of the bank of origin. The originating bank must ensure that its customers’ personal or transaction-related information, which may be shared with other providers, is not susceptible to leakage or misuse.

Banks will do well to partner with an Internet banking solutions provider that not only has the experience to translate their vision into a cutting-edge online banking experience for the user, but also the foresight to define the boundaries of security. With security concerns properly addressed, next-generation Internet banking is full of exciting possibilities. Banks that seize the opportunity may find that Internet banking can become a means to differentiate themselves from the competition, rather than merely a cost reduction tool. Clearly, providing a more powerful and interactive online banking experience is the way to go.