How Well Connected Are You and Your Bank?
High tech checking…with a latte while you wait
By Lisa Baker

Whether you want warm and fuzzy or simple, paperless efficiency, your bank wants to be there for you.

On a dime…
Gone are the days, if there ever were such days, when you had to choose between “touchy feely” banks and those that cared little for customer comfort but delivered needed reports in perfect order and in perfect time.

Thanks to a dual trend in online technology and branch development, banks have discovered they can be all things to all people. If you’ve got Internet capability on your cell phone, your bank can now nestle in the palm of your hand. When once you were pleased if the teller gave your child a lollypop or your pooch a milkbone at the drive- through, you can stand amazed at the hot latte they now have for you at your branch, once remembered fondly as a place to line up and admire the exhibit of ficus trees.

Ever been courted by your bank?
In the past, bankers could be assured of the forever fidelity of their customers, but times—and people—have changed, and banks have had to weather an increasing tide of fickle customers dashing off to new institutions as soon as their imprinted checks run out.

Banks are discovering a little enticement in the right place means retention. And so, bank customer, brace for some fantastic perks online and face-to face.

At Umpqua Bank, branch banking is far from passé. In fact, Umpqua officials say, branch strategy has borrowed from the Starbucks model, offering bags of fresh coffee beans (Umpqua’s own brand), free wireless computer access, and, new this month, music.

Like Starbucks, listening stations with headphones are set up at branches for visitors, who can customize their own CD composed of music from local artists. Just choose the tunes you want and a CD arrives at your home in three days. Those opening an account at the bank get the CD for free. Later, account holders will be able to download songs each month from Umpqua as an account perk.

The music link, rolled out initially at Umpqua’s Pearl District branch in Portland, comes courtesy of the bank’s new partnership with Rumblefish, a Portland-based music licensing company.

But the branches aren’t just about products; they’re also a touchstone for the community, says Umpqua’s Executive Vice President Lani Hayward. “These stores are literally neighborhood stores, and they are a spot for gatherings. People hold meetings there; managers host events after hours. Activities could be anything from watching movies to ‘stitch and bitch’ classes. At Christmas time, we’ll wrap a present for free,” she says. “It’s become a place where people hang out…and the coffee’s free, pump all you want.”

Why all this investment in bricks and mortar in the Internet age?

Because, Hayward says, it draws potential customers into the bank where they might, just might, make that impulse decision to open an account. “We believe banks are in the retail business. People may have a non-financial reason to come into the bank, but while they’re here, they can try on one of our products.”

Umpqua is not alone in its back-home emphasis: New branch construction has hit an all- time high over the past two years.

Jim Bruene, editor of Online Banking Report and Financial Marketing Weekly, says customers still like to see a physical presence even though, intellectually, they know their money isn’t actually there at the bank building. Aside from the comfort of a brick-and- mortar presence, Bruene says there’s a practical reason for branches to continue, not as a best-practices place to supply services but as a marketing tool that reinforces the brand.

While more expensive than a billboard, Bruene says branch building “still pencils out…I think branches will decline in a few years, but they won’t go away for a long time.

“In terms of customer service, online is better than the typical branch,” he says. “I may walk into a branch and the teller may know my face, but he doesn’t necessarily know me (financially). But online, the bank identifies me from my login and cookies—it can answer my questions more quickly than people in a branch.”

Beam me to the bank
A branch building can be an effective bridge to online services.

For instance, visitors to an Umpqua branch can get hands-on help setting up their online account and bill pay service in the branch’s computer café.

And online matters.

Of all the major Internet activities tracked since March 2000, online banking has grown the fastest, according to the Pew Internet and American Life Project. By late 2004, a quarter of all adults, and nearly half of all Internet users, reported using online banking resources. It was a 47 percent increase from just two years before.

It’s a blistering pace considering it took decades to win customers over to the ATM, Bruene says. “It took 25 years to get the first half of the population to use an ATM. In 1995, ATM penetration was barely over 50 percent; even now it’s in the 60s and 70s.”

Online customers might also be the gift that keeps on giving: they are 40 percent more likely to purchase additional products and services from their banks, according to Pew. In fact, of all banking services, online bill pay, where the bank sends payments to your creditors for you each month, is becoming a top retention tool for banks. Customers simply don’t want the hassle of having to reset their bill pay system at a new bank. The efficiency of online banking may not seem “warm and fuzzy,” Bruene says, “and it probably can’t match up with a dog biscuit. But there are some things you’d rather have online. For privacy issues, for example. Who wants the teller to say, as you’re standing there in line, ‘Hey, Mr. Bruene, your account’s about to go to zero!’?” It’s the kind of red alert that Wells Fargo offers in the privacy of your home. Tom Unger, spokesman for Wells Fargo in Oregon, says customers can now set email alerts for various crucial warnings: one that sends an email when the account gets down to, say, $100; one that sends an alert when it’s time to fund an IRA. An alert notification system can even tell you if someone attempted to access your account.

How about some financial records?
An online spending report categorizes your purchases for you so that you can keep a monthly accounting of how money was spent—how much on restaurants, how much on gas. Transfers from checking accounts to credit or loan accounts can be done while viewing all accounts on one screen, Unger says. “Credit cards, mortgages, checking and savings—you can access all on the same page. It’s an instant snapshot of your financial picture. You can transfer funds back and forth in a seamless way and look at the big picture instead of digging through all the statements and making phone calls.” Unger says online bill pay popularity is through the roof at Wells Fargo, up 41 percent in one year even while worries about online security are on the rise everywhere. “The biggest source of fraud is your mailbox—putting checks in the mail that get stolen. An e-mail inbox is safer, and online, you can monitor your account daily if you want instead of waiting for a statement to arrive,” Unger says.

Another benefit: Your own personal advocate.

If the bank is assigned to pay your bills and a creditor claims not to have received the cash, the bank argues for you. No more sitting on hold listening to obnoxious music. No more dealing with “customer service” reps. The bank does it for you. And if the bank loses, it pays the fees. All of them, Unger says. “It’s like having an ombudsman built into your computer.”

Wells Fargo is so into the online world that it’s sending a bus—think the Wienermobile without the giant hot dog—from city to city to promote virtual banking. A stop in Portland in January as part of its financial literacy program brought kids from Sabin Elementary into the bus, which is loaded with flat panel computers, for a look at how to open a checking account or save for a car online. While Wells Fargo is going online in a big way, it believes in branch banking, too. “What we found is that people want the freedom to choose,” Unger says. “Companies whose total business model was online went out of business. It turned out that customers [were distrustful] of flash-in-the-pan Internet banks.”

At Lake Oswego-based West Coast Bank online customers need not head to the bank or the ATM to make a deposit. A small scanner, provided free by the bank, makes an image of the check, which is then transmitted to the Federal Reserve to be cleared. “It’s a small, high speed scanner, very slick, and it works fast,” says Robert Sznewajs, the bank’s president and chief executive officer. “You can literally deposit items into the bank seven days a week.”

The “iDeposit” service is limited to businesses for now, but in the future will be available to other consumers. Other banks, such as Umpqua, are looking at offering a similar service.

They are the result of the passage of legislation called “Check 21,” short for Checking for the 21st Century Act. It allows computer images of checks to be substituted for paper checks. It speeds processing of deposits while also making it possible for account holders to call up two-sided images of checks they’ve written to see if they were properly received by their creditors.

Sznewajs says that while Oregonians are more tech-savvy than other places, he believes acceptance of computer banking is not so much a geographic issue as it is a demographic one. “If you’re talking about my mother and dad—they’re 85 and 86—it isn’t going to happen. They’ve done it this way forever and they don’t have to change if they don’t want to.”

For the younger set, those resistant to the new technology are finding their excuses evaporating with every advance. “At one time people didn’t want to use the debit card because they didn’t want to give up the float that checks gave them,” Sznewajs says. “But now, the float is gone. Local checks are clearing the same day anyway.”

Customers between the ages of 30 and 50 are most likely to adopt online accounts. Top users of online banking, according to the Pew study, are in their 30s and generally have a higher income and education level than those who do not. Susannah Fox, researcher with Pew Internet, says those in their 30s are in the “just get it done” mode and are starting to have enough financial capital to benefit from the kind of account access they can get online.

Addressing security fears is one way to remove obstacles to online banking for those who are worried about phishing and other online villainy. (Phishing is when customers are deceived into giving confidential information to crooks online.) It’s a reason Bank of America has introduced its SiteKey system, an added layer of security that prevents online customers from being duped into revealing critical information to a website posing as the bank. Bank officials say it’s like getting a safe deposit box that requires two keys to open. Before the customer and the bank agree to open the box together, they confirm each other’s identity.

Betty Riess, spokeswoman for Bank of America, says customers choose a photo from among thousands, and then type a phrase that will identify them as customers on a Bank of America secure site. Then, it’s onto the traditional pass code/login system.

“It gives them peace of mind when they see their chosen picture and phrase that they’re at the real Bank of America,” Reiss says.

For those who are resistant to change, bank officials promise not to rush, harangue, or push you into it. You want to do all cash? Fine, they say. They’ll be there for you.

Then again, that’s what they said about 8-track tapes.

BrainstormNW - March 2006

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