Leveraging Web 2.0 in Financial Services

According to analysts, online banking in the US grew by 27% in 2005 and is expected to reach about 72 million US households by 2011. According to other sources, in the UK and Australia, about 18 million and eight million people respectively conduct transactions over the Internet. The growth in Internet banking adoption rates is projected to be the fastest in the age group 18-30. With a growing number of users, demand for better experience and information is growing too.

Web 2.0

Web 2.0 refers to the adoption of open technologies and architectural frameworks to facilitate participative computing. Web 2.0 relies heavily on creating and leveraging network effect by attracting a large number of participants and enabling interactions between them. The users communicate and collaborate using the online offering, while they contribute and participate using rich user experience tools. Web 2.0 is shaping the way users work and interact with information on the web by shifting the focus to the user of the information.

Mechanisms such as such as Wikis, RSS, Web services, blogs, podcasts, instant messaging etc. act as enablers towards this objective. The challenge for Web 1.0 (as we would like to call the earlier wave of Internet) has been to involve the end users in a collaborative seamless peer-to-peer fashion in an economical and reliable manner and at the same time ensuring rich user experience. Rich user experience is a critical aspect of Web 2.0 and plays an important role in encouraging collaborative information exchange.

Customer and partner facing processes using Web 2.0 has the potential to not only transform peer-to-peer collaboration, but also inter-entity collaborations and commerce by enabling various types and combinations of business-to-consumer (B2B), business-to-business (B2B), consumer-to-consumer (C2C), business-to-enterprise (B2E) business-to-government (B2G) etc. collaboration and commerce. Web 2.0 has the potential to not only enable rich peer-to-peer interactions but also enable collaborative value creation across business partners.

Web 2.0 Adoption in Online Banks

We conducted research and analysis of the Web 2.0 adoption trends in enterprises in the financial services space. The research method employed primary data collection based on website analysis. The research design incorporated qualitative content analysis for collection and analysis of data. Towards this, we analyzed the websites of the top 155 financial service providers based on three broad Web 2.0 parameters such as Content, Collaboration and Commerce. Figure 1 given below gives details of the geographical distribution of financial service providers whose websites were analyzed.

Figure 1: Geographical Distribution of Financial Service Providers Whose Websites Were Analysed

We classified the various Web 2.0 parameters under three broad categories: Content, Collaboration and Commerce. Table 1 lists the various parameters which could be grouped under these categories. The websites were analyzed on each of these parameters and were given scores on a scale of 0 – 2. (0: The Functionality does not exist, 1: Rudimentary Functionality exists, 2: Advanced Functionality exists). Let us illustrate the scoring pattern for understanding the data collection and categorization process by taking RSS feeds as an example. The website of a financial service provider not having any RSS feed subscription feature (under Content parameter) would be given a score of 0 (Functionality does not exist). A Financial service provider having RSS feeds for company news or corporate announcements (financial results, analyst calls etc.) would be given a score of 1. A player offering RSS feeds on their product offerings details (new branch openings, product/service promotions etc.) will score 2.

The results are targeted at the online channel managers of financial service providers to benchmark their Web 2.0 initiatives among the best in the industry and thereby identify areas to improve end customer experience. The results would also enable these managers to benchmark themselves against the leading financial service providers of the world.

Content

• Unique user experiences (RIA driven) – Rich user experiences should ease the online experience of customers as well as sharing, accessing and consuming information using browser based applications with a behavior similar to desktop applications with drag and drop, online edit and others; leveraging enabling technologies such as Ajax, Flash etc. We found that enterprises have been slow in adoption of RIA based interfaces. Among the early adopters include American Express, HSBC Bank, PNC Banking Corporation and Wells Fargo.
• Dynamic user help (peer-to-peer or central) – Dynamic user help goes beyond static FAQs and contains customer query drill downs to a very granular level. A number of players have this feature at a rudimentary level, mainly in the form of static FAQs. Players such as Fidelity and Bank of Montreal have fairly advanced dynamic user help.
• Data Feeds (RSS/ATOM/XML/JS) – Data feeds such as RSS (Really Simple Syndication), Atom etc. contain a link to the original page source and takes the customer to the page once he clicks on it. Once the customer chooses to receive data feeds, then the feed reader will automatically fetches content from the source to ensure that always the latest content is provided. The Data Feeds can have wide ranging implications for financial service providers as they provide an effective channel for to communicate key information with the end consumers like product/service launches, promotions, and financial results. Adoption of data feed mechanisms such as RSS has been limited among financial service providers. Some players which have advanced RSS feeds include American Express, Bank of America, Wells Fargo, Bank of New York, BNP Paribas, Dresdner Bank, Fidelity, UFJ Financial Group, Charles Schwab Scotiabank and HSBC Bank.
• Podcasts/ Vodcasts – (Knowledge sharing, financial advices,and experiences)- Podcasts as well as video casts are effective means of communicating important knowledge like product features or financial advice to the customers. Podcasts as well as Video casts would enhance the customer’s online experience. Financial service providers such as Bank of New York, Scotiabank, Bank of Montreal, Dresdner Bank, USAA, Fidelity, HSBC and Charles Schwab have extensive podcasts and video casts.
• Aggregation Mechanisms (Mashups ) – Mashups are new services created with content from multiple sources (exposed using APIS, Web Feeds, Web Services etc) to create a new service. The data sources could the enterprise’s proprietary data combined with third party data using a public interface. Websites such as Flickr Google, Ebay, and Amazon have been publishing API (Application Programming Interfaces) that give access to their services. Examples of some easy to create mashups, include store locator (data sources could be store location data and Google maps). Frost Bank has a mashup available on their site.

Collaboration

• Customer peer-to-peer network (Blogs, Wikis, Discussion forums, Second Life) – End customer peer-to-peer networks has become easy to form given the high degree of ease for new user participation and users can share data across the web using a variety of applications such as Blogs, Wikis, Podcasts, Reviews. Discussion forums allow customers to chat with others as well as with the service representatives. The ideas discussed in such forums, could be leveraged by enterprises while designing new products/services, or such information could be passed to their partners for more effective planning and forecasting. Notable players in this space include American Express, WellsFargo, USAA, EuroHypo, ABN Amro (presence in Second Life), ING (presence in Second Life), Saxo Bank (presence in Second Life), BNP Paribas (presence in Second Life) etc.
• Collective Intelligence (User Reviews, Tagging) – Collective intelligence is realized by user created, modified, updated content which are tagged using key words. User reviews, and tags help peer groups to access content easily as effective tagging improves search engine results. Our research did not reveal any financial services player having this feature.
• Collaborative product customizations – These are product customization forums involving multiple end customers. Such forums will be able to leverage the collective intelligence of the peer group. One enterprise which has taken initiatives in this direction includes Banco Monte Dei Paschi Di Siena, which has initiated the project titled Consumer Lab, which collaborates with the various consumer groups in Italy.

Commerce

• Comparison shopping – Comparison shopping could be across products/services belonging to the same product category, supported by user reviews and feedback. Adoption of this feature is yet to take off.
• Contextual help (Live agent chat) – Live agent chat is a very effective functionality to have particularly if the customer is making an involved decision as is usually the case of medium to high value transactions. The live agent would help clear the doubts of the customer as well as answer his questions thereby easing the transaction experience. Players such as LaSalle Bank and Fidelity offer a live agent chat in their websites.
• VoIP – VoIP based support is taking the live agent chat to the next level with voice support. This is usually powered by an application such as Skype. Harris Bank provides such a service.

Conclusion

The trend is shifting to a scenario where the collaboration (between the customers and enterprises, between end customers, between internal stake holders) is attaining paramount importance. This is prominent in the Internet space with the traction towards Web 2.0. Players in the financial service space need to adopt some of the best practices in Web 2.0 based on their specific needs to create and sustain competitive advantage in the face of increasing competition from conventional competitors such as traditional firms as well as new business models such as community based lending as seen in Zopa, Prosper etc. We feel that the financial services industry is faring low on adoption of Web 2.0. Few players such as American Express, Wells Fargo, HSBC and USAA have taken a lead in pioneering the adoption of Web 2.0 principles and technologies.