To accommodate changing customer behavior and leverage growing Internet capabilities, consumer banks need to shift from a customer service model to a customer engagement model.

1. • Cognizant 20-20 Insights
Consumer Internet Banking
Executive Summary Internet is now the preferred channel of commu-
nication for customers.
Internet banking has evolved over the last decade
from product brochureware, to a complete To accommodate changing customer behavior
financial marketplace for its online customers. and leverage growing Internet capabilities, banks
Banks see Internet banking as the key channel began embracing a model of tighter customer
for growth and customer retention. As such, the engagement. This translated into an expansion
online banking model has moved from tactical and of their online offerings to “advisory services,”
lower cost customer service, to a more strategic “engagement-based services” and “advanced
form of customer engagement. financial services.” This shift from a customer
service model to a customer engagement model
Many banks have adopted the latest technologies
brought about a radical change in consumer
and added new Internet banking functionalities
Internet banking.
and features to stay ahead of the competition.
However, when measured by key performance What follows is a brief description of how and why
indicators such as customer growth, revenue these models were adopted and the features that
growth, etc., the value delivered varies from banks provided within each of these models, over
bank to bank. While some banks achieve better the years.
customer response and retention from adding
new technology/feature bells and whistles, others Customer Service Model
have received moderate to poor acceptance, Initially, banks were viewed as the primary
which has undermined their return on investment. provider of financial services; hence, they focused
The challenge is to find the right approach and on providing the best service possible. The same
leverage the right mix of technology and features model was adopted by banks for their consumer
that keep customers happy and transacting over Internet channel, aimed at practices and
an extended period of time. procedures for serving customers most effective-
ly. With technological advancement, the quality of
Industry Trends
these services has improved dramatically.
When online banking was launched in the late
1990’s, the online business model of banks was Information-based services: These services
centered around customer service. Banks offered were introduced with the objective of dissemi-
online “information-based” and “transaction- nating product and service collateral to online
based” services, delivering product and services customers. From static pages, which displayed
collateral, account activity, money transfer, etc., rates, terms and conditions, bank Web sites have
thereby serving customers’ informational needs. become more interactive, offering features such
However, with changing usage patterns and as interactive product and services demos. This
the advancement of Web 2.0 technologies, the development served not only to promote trans-
cognizant 20-20 insights | september 2011

2. Changing Internet Banking Business Models
Customer Service Model Customer Engagement Model
Information- Transaction- Advisory Engagement- Advanced
based services based services services based services financial
(e.g., information (e.g., fund (e.g., online (e.g., using Web services
on bank’s products transfer, bill financial advisory 2.0 for customer (e.g., collateralized
and services) payment, loan services) engagement) financial platform
repayment, etc.) capability)
Figure 1
parency in bank offerings but also to educate cus- representing banking products and services,
tomers on the best ways to utilize banking prod- and two-way interaction between the customer
ucts and services. and customer service representatives.
Transaction-based services: The self-service • Advisory services: Banks are now moving
transactional capability was introduced to the up the value chain, from a focus on satisfying
online channel to enable enhanced service consumer financial needs, to creating and
efficiency, which included both value- and non-val- inspiring them. Advisory services were
ue-added transactions. Starting with basic trans- introduced with the objective of providing
action features such as internal funds transfer, expert insights into customer wealth
banks have expanded to include advanced trans- management, identifying and selecting the
action offerings like external utility payments, best investment avenues (e.g., provider and
securities trading, etc. Several banks now offer product comparison engines) and providing
straight-through processing (STP) capabilities to self-service capability, with complex product
90% to 95% of banking and non-banking transac- simulations and projected financial returns.
tions, which helps them achieve millions of dollars • Advanced financial services: With the range
of cost savings per year, increased customer sat- of banking and investment avenues available,
isfaction and greater transparency. banks needed to offer one-stop solutions
for all financial needs. This required a single
Customer Engagement Model
platform for customers to track and manage all
The services and features offered in customer financial products, with collateralized trading
service models are no longer the keys to success capability.
for online banking. Almost all banks provide
features on similar lines with no differentiation. With emerging technological innovations, cus-
This has resulted in a shift in focus from a service tomers can now access advanced financial ser-
to an engagement model to establish long-term vices on the go through mobile phones, using
customer relationships. These relationships not mobile apps or a WAP browser. Figure 2 (next
only create new revenue opportunities, but they page) offers a snapshot of the features in each
also turn customers into advocates who bring new of the segments.
customers to the bank through favorable word of
mouth voiced through social media channels. The Internet Banking Strategy: Evaluation,
objectives and features offered in this model are Analysis and Roadmap
as follows: Banks have come to realize that merely adopting
a stand-alone technology, providing best-in-class
• Interactive services (leveraging Web 2.0):
customer service or having innovative products in
The overload of information in static pages
created cluttered Web sites with prohibitively their portfolios is not a guarantee for the success
long response times. Banks needed to enlist a of their Internet-banking model, nor can these
new IT infrastructure to deliver a more dynamic approaches function as differentiators for long.
customer experience. Interactive features were The guarantee for a successful online banking
then introduced with the objective of faster model involves a blend of features that revolve
resolution of customer queries, better ways of around various strategic themes.
cognizant 20-20 insights 2

3. Feature Comparison: Customer Service vs. Engagement Model
Feature Description
Balance inquiry, statement, Customers can check out their previous transactions,
transaction history with real-time balance.
Information
Service
Customer Service Model
Single view of bank accounts Linking various accounts so customers can view their bank, credit card and
loan accounts (with the same bank) through a single-user ID.
Mailbox Customers can send e-mails directly to the bank, and the bank can also
maintain constant communication and promote its products and services.
Transfer funds online Customers can transfer funds to any account (irrespective of the bank to
which it belongs). The money sent is delivered to the receiver’s doorstep.
Transaction
Account-to-card fund transfer Customers can transfer money from their bank account to any other debit
Features
or credit card.
Pay utilities bill Customers can pay bills to providers of utility services like phone and
energy; recharge their pre-paid mobile cards; pay credit card bills of any
card provider; etc.
Online chat Live chat features that allow customers to interact with relationship man-
agers for all their financial queries.
Online TV services Some banks provide online TV services to share information about financial
and business events, so as to continuously engage with their customers.
Interactive Features
Online appointment reservation With the help of this service, customers can book their appointments at the
branch well in advance.
Personalization Using personalization and localization, customers can customize their
dashboard with graphics-rich features.
Online banking widgets Essential widgets like calendar and calculator are provided, with the option
of adding more interactive widgets based on customer preferences.
Social computing Leveraging social communities like Facebook, Orkut, Digg, etc., along with
micro-blogging sites like Twitter and social forums.
Customer Engagement Model
Financial calculators Interactive calculators to calculate monthly payments, debt consolidation,
card selectors, mortgage selector tools, wish list, unit fund selector, etc.
Simulation tools Budgeting tools for cash and money management, financial planning tools,
credit management tools to manage debt, simulated trading tools, etc.
Financial research tools Stock screening tools for basic screening information, advanced screening
Advisory
Services
tools (sector, industry, volume analysis tools, etc.) and comparative tools.
Research reports Research reports on exchange-traded stocks, S&P reports, educational
articles on mutual funds, mutual funds investing, etc.
Podcast and Webcast sessions Online broker sessions, sessions with experts for market and financial
information, etc.
Alerts and messaging services Daily, weekly, monthly alerts through e-mail and other messaging channels.
Bill presentation and payment Bill payment services to over 400 billers.
Investment services Online IPO application, structured products, Euro-dollar deposits, multi-
currency deposits, etc.
Advanced Financial
Mutual fund selection One-click trading access to mutual fund center through secured online
brokering.
Services
Trading services Online brokerage services with commission-free trading and reward points
covering a range of asset classes like equities, derivatives, futures, options,
bullion, commodities.
Wealth management services Features like managing funds under various asset classes, tracking portfolio
movement and mapping them with long-term and short-term goals.
Custodian services Providing low-cost services for online custodian services.
Figure 2
cognizant 20-20 insights 3

4. Figure 3 translates these needs into a features • Virtual Bank
and capabilities mix that banks should offer to
online customers. One caveat: When the overall
• Virtual Financial Market
online migration strategy is measured across Banks started with basic vanilla offerings of
certain key performance indicators, the results information and transaction services through
vary. Key performance indicators can have their online channel. Some banks still have basic
financial attributes (e.g., cost savings, revenue features on their Web sites, and their online
generated through online products and services, strategy is to leverage this channel to supplement
etc.) or be non-financial (e.g., new accounts the branches and contact centers. In order to
opened, percentage of online customers, achieve cost savings through the Internet —
percentage of online transaction volume, etc.). transferring control to customers and providing
They can also include other indicators (e.g., complete self-service — banks are pushing more
percentage of satisfied customers, number of and more banking and non-banking transactions
innovations delivered though online banking, online. They view the Internet as an alternate to
perception of bank’s Internet features, etc.). the branch channel.
Segmenting Consumer Banking Web Sites These banks have designed their Web sites with
Banks design their Web sites with features and rich interactive features, providing capabilities
capabilities to serve customer needs and provide to handle almost all banking and non-banking
the best possible online experience. However, the transactions online with 100% STP. Their online
breadth of functionality and the depth of informa- banking channels can be categorized as a virtual
tion/interactivity on their online banking channel bank.
depends on the bank’s overall strategic theme
(as enumerated in Figure 3). Based on service A virtual bank fits into the customer service
offerings, Web sites of banks can be classified model. However, with the changing business focus
into the following categories (see Figure 4, next from customer service to customer engagement,
page): virtual banks must offer interactive, advisory and
advanced financial services through their Internet
• Basic Internet Bank banking channel. Banking Web sites classified
• Virtual Advisory Bank
Key Strategic Themes in Consumer Internet Banking
Key Themes Key Initiatives
Banks are on an innovation drive to launch products and services catering to evolving consumer
lifestyles. Key initiatives include interactive Web sites for shopping, e-statements, targeted solution
Innovative products
campaigns, straight-through processing (STP), instant online card approval, any-bank credit card
and services
bill payment, innovative customer rewards, online financial health-check tools, alerting services,
immediate online transfers within accounts in other countries, etc.
Banks look to deliver enhanced customer experience to retain existing clientele by providing best-in-
Enhanced customer class customer service. This includes enhancements to online portals, micro-site links, educating and
experience engaging customers, online customer surveys, using social media, adopting analytics to understand
consumer behavior, online demos, etc.
Banks are offering a comprehensive, integrated online banking experience that looks to replicate
the offline channel in most functionalities. The top global banks have undertaken key initiatives,
Integrated online
such as integrating with the core banking platform, integrated multi-product views ,integrated online
banking Web site
financial centers and integration with other channels, such as the ability to register for Internet
banking through the ATM, debit or credit card or phone banking number, etc.
Banks are providing multiple secured features, such as strong encryption technology, virtual keyboard,
Secured and trusted two-/three- factor authentication with dynamic code generator and PKI-based smart cards, key loggers,
online banking secured online signatures, anti-phishing, anti-Trojan, etc. For fraud prevention and resolution, some
experience of the key features include multi-layered global fraud monitoring tools, real-time suspicious account
activity, regular ethical hacking test, Web action team, well-defined dispute resolution team, etc.
Banks have adopted the personalization route to attract customers. Key initiatives include per-
Personalization sonalized log-on page, pre-filled application forms, personalized banners, personalized alerts and
messaging, event reminders, online assistance, etc.
Figure 3
cognizant 20-20 insights 4

5. Segmenting Consumer Internet Banking
Virtual Bank Virtual Financial Market
• Consolidated view of accounts • Global view of accounts
• Access to wide range of banking • Collateralized trading programs for complete
Advanced Services
services through single sign-on financial products, such as equities,
Transaction / Value-Added Services
• Straight-through processing currencies, etc.
• One-stop payment banking • 3-D interactive experience for banking,
• Banking through innovative mediums financial, investment services, etc.
such as mobile devices, etc. • Personalized banking experience
• Innovative media for sharing financial • Comparative experience of third-party products
information, such as iPTV • Social financial blogging
• Online demos of bank’s products • Online financial forums and communities
and services (e-Kiosks)
Basic Internet Bank Virtual Advisory Bank
• Sharing information on banking • Financial advisory through online TV
Transaction Features
products and services • Online advisory services for mortgages,
• Online payment services portfolios, etc.
• Online account opening • Online financial product selector for
• Promotional and award points credit cards, mortgage products, etc.
• Alerting and mailing services • Financial health-check
• Anytime-anywhere banking • Investment profiler
• Branch and ATM locator • Wish-list tracking
• Interactive tools and calculators • Stock comparison tools
• Advanced advisory tools, such as sector reports,
analyst opinions, price performance tools, etc.
Information Features Advisory Features
Information / Interactive Features
Figure 4
under the virtual advisory bank category provide Implementation Approach
rich interactive features that leverage Web 2.0 After critically analyzing the key performance
features and advisory capabilities. However, they indicators of lower adoption rates, reduced online
do not provide online brokerage services. banking success in certain geographies and
current online banking challenges, the question
Transcending from “bank in a box” to “financial
that comes to mind is, “What is the right Internet
market in a box,” online customers can now
banking strategy?” or, “What is the right mix of
access all the banking and financial markets
features and services for the online channel?”
(investment management, trading, wealth
The answer is, “There is no panacea to all ills.” The
management services, etc.) using a single
correct response depends on customers. Banks
sign-on (SSO) capability across the bank’s lines
must contend with geography-specific issues and
of business. When banks provide such capabilities
account-focused needs; for instance, customers
to customers, they become the virtual financial
in some regions may have a high preference for
marketplace to serve their online customers’
a particular feature, while in other regions, this
complete financial needs.
feature may not be a high priority.
Implementation Approach
Define Current Evaluate Define
& Future Features Roadmap
Positioning
Figure 5
cognizant 20-20 insights 5

6. The approach for defining the right strategy for of the evaluation can be used to identify maturity
a better feature mix depends on careful analysis and feature mix gaps in the online offering. Finally,
of a number of factors, including the current- and the resultant prioritization roadmap, with the list
future-state vision of the bank’s Internet banking of features and implementation plan, should be
offering; the current customer base and their prepared for a phased implementation.
preferences; customer inclination for adopting
new technologies; and the competitive landscape. This is a continuous approach, wherein key per-
Once the current and future positioning segment formance indicators should be evaluated on a
is identified, a detailed evaluation of features periodic basis to re-prioritize the feature mix and
should be conducted to benchmark performance add midcourse corrections to stay ahead of the
vis-à-vis competitors on the Internet banking competition.
business impact and level of maturity. The result
About the Authors
Vipin Kumar and Sanjit Bose are Senior Consultants within Cognizant Business Consulting. They have
executed multiple projects for Top-10 players in the banking industry, spanning consulting, business
process optimization and IT project execution. They can be reached at Vipin.kumar2@cognizant.com
and Sanjit.Bose@cognizant.com, respectively.
About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-
sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in
Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry
and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50
delivery centers worldwide and approximately 118,000 employees as of June 30, 2011, Cognizant is a member of the
NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and
fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.
World Headquarters European Headquarters India Operations Headquarters
500 Frank W. Burr Blvd. 1 Kingdom Street #5/535, Old Mahabalipuram Road
Teaneck, NJ 07666 USA Paddington Central Okkiyam Pettai, Thoraipakkam
Phone: +1 201 801 0233 London W2 6BD Chennai, 600 096 India
Fax: +1 201 801 0243 Phone: +44 (0) 20 7297 7600 Phone: +91 (0) 44 4209 6000
Toll Free: +1 888 937 3277 Fax: +44 (0) 20 7121 0102 Fax: +91 (0) 44 4209 6060
Email: inquiry@cognizant.com Email: infouk@cognizant.com Email: inquiryindia@cognizant.com
© Copyright 2011, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any
means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is
subject to change without notice. All other trademarks mentioned herein are the property of their respective owners.