Using online banking to beat phishing

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Phishing and spear phishing attacks do more than increase fraud.
The fall-out of criminals impersonating sites that don’t belong to them to trick people into giving their personal information goes beyond fraud and identify theft statistics. Similar to terrorist attacks, it changes the processes and procedures that law abiding citizens go through to transact normal business. Basically, it changes our daily routines because the average Joe has to go through and think about extra stuff to be security conscious. One example is that consumer advocates and the media coach consumers not to open emails that ask for personal information or to update their account.

So how do you deliver messages to consumers that they can trust?
For banks, brokerages, and credit unions, this makes email a tough digital channel to deliver messaging because the content concerns an account or service from the bank or credit union with personal financial information. What’s the first thing you think when you get an email from your bank that says your monthly statement is ready for viewing? (Click here to open the statement)

The online banking inbox provides a nice alternative for a secure message area.
What makes phishing attacks so deceptive is the receiver doesn’t truly know the originating source.  But the online banking inbox is controlled by the owning financial institution.  It’s a place where the account holder trust the message contents. Now I realize that not everyone uses online banking and that consumers may have a relationship with a financial institution that doesn’t require online banking. So this isn’t and end-all solution, but it can be a piece of an overall communications strategy to consumers.

This idea promotes the use of online banking as a richer resource center.
Online banking areas are growing in service offerings. Financial institutions have filled it with a stack of valuable tools for consumers. Bill pay, funds transfer, financial management tools, tax software, and account opening, are a few examples.  They do this because online banking is sticky. The more services an account holder uses, the harder it is for them to leave the relationship.

Online banking messages do not require an email address to be delivered.
It’s known in the financial industry that banks and credit unions do not have accurate email lists for their account holders. So the online message center helps with delivery but also provides another touch-point to collect the email address from the customer. Financial institutions can ask their account holders to setup their email to be notified when a new message is placed in their online banking inbox. I know, this sounds like double messaging. But remember the idea is to find a place to put trusted messages about financial accounts and consumers may not log into online banking as frequently as they do with their email account.

So how do you want to receive secure messages?
What’s your preference for receiving sensitive messages that concern your financial accounts? Is there a way to beat the phishing and spear phishing attacks?

Customer loyalty for banks and credits unions

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Customer loyalty can’t be talk about enough in the market place.
I read an article on by Matt Gunn entitled 5 Things Everyone in Banking is Talking About. Matt discusses “Loyalty/Stickiness” as one of his five banking topics of the day. Reality is that customer loyalty is always a topic of concern for businesses despite their industry. But I think Matt’s point is about the urgency of loyalty at this time. New financial regulations are impacting fee income for financial institutions which is resulting in dramatic shifts in standard bank offerings.

Customer loyalty is made from customer focus.
The articled triggered a thought about an blog post that’s been on my “to write” list for some time. The big idea is that online banking integrations to financial services and products help create stickiness that promotes customer loyalty. But it’s done so in a way that creates value for the customer. A few weeks ago I wrote about how online banking integrations help customer focus efforts. Another effect of effective integrations is they make online banking the launch point to related financial services.

The importance of online banking as a financial portal is more important than ever.
If online banking is tied to other financial services such as bill pay, account opening, loan applications, credit monitoring, credit card transactions, etc. then it becomes a master portal for the customer. The financial institution’s brand is the primary brand within portal and the primary relationship that is linking all of the additional services. This creates stickiness and loyalty.

The opportunity for integrations is at hand.
Savvy financial institutions will have personnel in directly responsible for eBusiness integrations that customers use through the online banking experience. In effect, the online banking experience becomes a banking branch. It offers access to transaction based activities that can be completed by customers as self-service activity.

Expanding the use of online banking is not losing customer touch.
At first thought this may seem counter intuitive because pushing more transactions to the online banking application takes customers out of a branch where relationships are built and loyalty is formed. Reality is that mobile devices and the accessibility of broadband services have created a world where consumers try to bank from a variety of locations. Brett King, in his book Bank 2.0 : How Customer Behaviour And Technology Will Change The Future of Financial Services, discusses this concept of consumer choice. He says:

Customers choose the right channel at the right time for them, depending on a number of factors such as time constraints, always-on availability, complexity, and the likelihood of a ‘deal’.

My credit union gets it.
In the past couple of years,  my credit union has integrated with personal finance manager Finance Works (by Quicken), Turbo Tax, and a remote deposit service. I should note that I stopped using my local version of Microsoft Money and replaced it with Finance Works. This year, I didn’t purchase a local copy of Turbo Tax. Instead, I used the integrated version offered by my CU. It is becoming my financial portal for more and more activities. Combine that with no gotcha fees, above average deposit interest rates, and below average loan interest rates and customer loyalty doesn’t seem like such an elusive concept.

A case for customer focus in the midst of financial regulation

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Banks are reacting to loss of fee income by creating new fees and dropping services.

Financial institutions across the country are reacting to the impact of Regulation E changes and the Durbin Amendment to the Dodd-Frank Act. The Regulation E changes of 2010 prohibit financial institutions from charging consumers fees for overdrafts on ATM and debit card transactions unless the consumer consents to be charged a fee.  The Durbin Amendment states that interchange fees for debit card transactions must be “reasonable and proportionate” to the actual processing costs incurred by the issuer.  The proposed interchange fee cap is 12 cents per transaction, well below today’s average of 44 cents per transaction.

Many banks are reacting by making changes to fee structures, checking programs, and rewards programs. Chase,  Wells Fargo, and PNC have already announced that they will stop enrolling some customers in debit card reward programs.  Chase, PNC, and HSBC are among the banks experimenting with higher ATM fees and Bank of America is  testing revised fee structures for checking accounts in some markets.

The irony of “consumer protection legislation.”

So while the government is creating legislation with the banner to protect consumers, you have to ask yourself is it really working? What we are seeing is that banks are shifting fee structures in an effort to maintain that level of income.  It’s just forcing financial institutions to look elsewhere for profits. The banks after all are a business. They protect the interests of their stakeholders and employees by making a profit. So at the end of the day, the consumer is still paying fees and depending on how they structure their financial relationships and behaviors, they may pay more fees than before the recent regulation started.

With the newly developing  account fee structure, financial institutions will in-effect spread their fees  among more consumers. Maybe that was the idea in the first place. Instead of taking from the few to pay for the masses (free checking), banks will now take a little from everyone.

The hunt for the most profitable customers.

A side effect of the increased account fees is that many customers will close account that don’t meet the minimum requirements for no fees.  In the past, it didn’t cost the consumer anything to leave dormant accounts open. With new fee structures, consumers are likely to consolidate their accounts to one or two financial institutions.  So where is the most profitable customer? Is it the one that is prone to live outside the boundaries of the account programs such that they are paying regular monthly fees for service and overages?  Or is it with the customer that doesn’t pay any fees for account services but that may hold secondary accounts such as auto or home loans that pay interest? The financial institution surely values both types of account holders.

The real goal here should be to focus on value services not fees.

With all the attention and press on financial industry regulation and fees, have the banks lost site of what really drives profits in the first place? Is it possible that banks could replace lost fees by adding more value services rather than increasing existing or creating new fees? I have  to wonder.

An area that I think is ripe for this to happen is online banking. Many financial institutions have already started making the online banking control panel a portal to related financial services.  There’s money to be made in third-party integrations that provide value services to customers.  Financial institutions can create structures to keep part of the retail price paid by consumers for some services. Here are a few ideas:

  • Tax preparation software. I list this one because my credit union already provides an integration to Turbo Tax.  Launching Turbo Tax from within online baking, my name, address, and interest income are automatically transferred to the program.  The retail price to me is comparable to buying this product at a retail store.
  • Credit bureau services? Consumers can purchase credit reports, credit scores, and monitoring services directly from the credit bureaus. But it makes sense that your financial institution would facilitate this transaction as well.  When consumers think about their financial picture their financial provider ban be part of the equation.
  • Identity monitoring and protection services – These services are also offered directly by third parties.  But giving out personal information to a brand such as your financial institution is much easier for consumers to trust.
  • Personal to person payments – Today PayPal is the leader in this space.  I know there’s a huge push in the industry to define standards and leaders in mobile-to-mobile payments, but why not extend online bill pay to include more person-to-person payment options by integrating with a service such as PayPal?  The value to the customer is the ability to electronically send a payment to another person rather than having a check mailed from online bill pay.  It’s all about timing , ease of use, and faster accessibility to funds.  Consumers are already use to paying a fee for this service so financial institutions could leverage a part of the fee already in place as their part of being the “finder” for the transaction.

UPDATE: After I published this post, I found Serve from American Express. It’s another example of extending electronic payment options to consumers and a good candidate for online banking integrations.

    What’s your take? Can you think of other ways for financial institutions to increase income through value services and customer focus?