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Monetization Of Modern E-Banking Systems

photo-AKulikov

Alexey Kulikov

Qulix Russia CEO

During the last decade, banks applied IT solutions to a broad range of back and front office tasks in addition to a huge number of new products. Digital banking systems do not only enhance performance of bank branches and cut down customer service costs, but also improve the quality and level of customer service and assist in business development. But since the development and implementation of remote banking systems requires considerable investment, the question of monetization is highly relevant. However, before we talk of how banks can profit from e-banking, let’s look at the evolution of remote banking systems.

For the purposes of this article, we will divide the evolution of e-banking into three not strictly sequential stages:

  • Implementation of standard solutions. Such solutions have a practically identical user interface and share the majority of features. They are quick to implement but difficult to customize. Adding new non-standard features is also potentially problematic.
  • Emphasis on individuality and the quality of service. At this stage many banks start to develop their own remote banking systems using flexible software platforms, and introduce mobile banking apps and other new services (e.g. personal finance managers). Much attention is paid to usability and design. Banks start to use remote banking for lead generation and loyalty programmes.
  • Expansion of the role of remote banking in customer service. This stage is characterized by the emerge of virtual banks (i.e. branchless businesses offering remote banking services). Remote banking systems play a vital role for such branchless banking businesses.

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The expanding role of remote customer services and the consecutive increase of investment in e-banking projects forces banks to think about ways to monetize remote banking systems. It is obvious that in addition to all other functions, a remote banking system should bring profit!

Let’s look at the most common ways to monetize remote banking:

  • Paid service, i.e. any type of payment structure in which customers pay for using remote service channels.

Today, most e-banking services are free of charge because it’s a benefit for banks. Yet some banks want customers to pay for using online banking or mobile apps. This may be a wrong way to go, but now banks can just decide for themselves whether or not to market e-banking as an additional service. Whichever option is chosen, there are two things that should not be overlooked – firstly, not a few customers prefer digital channels over traditional banking, and secondly, the competitive market offers plenty of free alternatives.

  • Payment fees and remittance fees

This approach is tempting for banks with a large and loyal customer base because it can provide a stable source of income. Virtually each new market report outlines the extent of integration of digital banking in our lives, and how managing money on the go will become ever quicker and more efficient. However, the negative point of this approach is that the competition in the mobile payments market is high, the average amount of payment is low, and customers are always looking for better service and cheaper price. Moreover, the market already offers free digital wallets which you can use to store all your credit and debit cards, gift and loyalty cards, and more and which allow you to shop in stores, buy online, and send money without commission. This conscious rejection of transactional revenue suggests that the main monetization source for such services is not in payments. Absence of fees is more of a way to attract clients. In my opinion, this is an alarming sign for banks. Technically, these services do not steal your clients but you actually lose them because they stop using your digital banking services (they are now making payments elsewhere), and consequently you lose contact with them.

  • Cross-selling

It’s no secret that banks are interested in effective selling of their own products and services and partner offers. Every time you go to a bank, you are informed of special benefits, bonus programmes and partner deals. Digital banking channels lag behind in securing targeted marketing sales. The reason for it is that the primary focus of digital banking lay on routine transactions rather than close interaction with the customer. For example, I regularly receive commercial text messages, letters (e-mails and paper mails), and telephone calls in which banks offer mortgages, savings and loan services. But I seldom get such offers via online/mobile banking apps, even though I use them nearly every day. In my opinion, it is a serious blunder. When I log in to e-banking I am ready for communication. And it’s the other way round with calls which annoy me and come when I am busy. I believe that as consumers demand ever greater integration of digital banking services into daily life, the necessity to extend cross selling practices via e-banking channels will grow. We at Qulix have taken this fact into consideration while developing the StandFore FS solution.

Our integrated front-end platform includes a rich set of functional modules and tools (internet banking, mobile banking, personal finance manager, etc.). In response to the above mentioned role of e-banking, we have developed StandFore DMS, a special digital marketing module that combines essential marketing tools into one simple solution.

For the sake of clarity, we have expressed the StandFore DMS marketing model in the answers to these simple questions:

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Since StandFore DMS is all about the marketing activities, the construction of the customer profile is at the heart of the solution. The customer profile is built based on the static information (age, gender, etc.), context (current location, device, browser), customer’s financial goals (e.g., I am saving for a car or a holiday), and behaviour analysis (frequently visited pages).

Customers are broken into segments or groups that share unique characteristics. Each segment/group has its own wants and must be treated differently. Segments (e.g. men aged 35-45, yearly income from £30,000.00, saving for real property) can be created in the system or imported from the bank’s CRM system.

Ad banners, personal messages and news are used for product promotion. They can be used separately or combined into one massive advertising campaign. All tools used in one campaign have the same validity period and can be configured to track general promotion statistics. News is posted in the specified sections of the banking app or portal. Messages can be posted in the user’s personal area or sent as text messages, e-mails or push notifications that appear on the screen when a user logs in (see example below).

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Banners are placed into specified containers (see example below).

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It goes without saying that a successful promotional campaign is impossible without the assessment of its effectiveness. The StandFore DMS module contains a number of predefined user-friendly reports that can be freely modified and used. To assess the effectiveness of their promotional campaigns, banks can monitor overall product sales, effectiveness of promotion tools, click-through rates, etc. (see example below).

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