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Channel Innovation: Building Online Relationships

Looking to connect with Gen Y and other hard-to-reach consumers, banks are getting more creative in reaching out to customers online, particularly with personal financial management tools and social media.

According to Jaidev Shergill, CEO of Bundle.com and a former Citi executive, it's a matter of trust. "What's really behind some of this can be summed up in one word: unbiased," he says. "When you think about the way banks dispensed information and advice two or three years ago, it typically ended up in a sales pitch for that bank's product. People started wondering if they were really getting the right recommendations. The quest for unbiased information has led to the creation and blooming of financial blogs and sites like creditcards.com that truly look out for the customer's interest." Consumers also want simpler, more clear advice, Shergill adds.

IN BANKS WE TRUST?

But Kevin Lynch, SVP of e-commerce at 1st Mariner Bank in Baltimore, argues that banks have a trust and security advantage over non-banks in the personal financial management arena. "There are people who wouldn't go to a Mint.com because it's not affiliated with a bank," he asserts.

The catch? A personal financial management tool that includes information from only one financial provider is of limited use, since most Americans have several credit cards and retirement accounts as well as checking and savings accounts, often from different institutions.

This is why PFM sites with account aggregation, such as Yodlee and Geezeo, are picking up business; they can give customers a true picture of their total finances. But most banks have shied away from tools that aggregate outside accounts, not wanting to encourage their customers to think beyond the bank's own products.

1st Mariner Bank ($1.4 billion in assets), however, recently became the first bank to sign up with Geezeo's white-labled online PFM. Offering personal financial management online "further enhances our ability to service our customers the way they want to be serviced," says Lynch. (By contrast, he notes, online banking is "a transactional place.")

"We recognize that we don't have all of our customers' accounts in our bank, yet they do need a place to manage those accounts," Lynch comments. "A PFM product like Geezeo is a good combination of budgeting tools, helping customers set goals and do some analysis of their spending."

Steve Kruskamp, e-commerce marketing manager at 1st Mariner -- Lynch refers to him as the bank's "primary social media activist" -- insists that the plethora of financial services available on the Web removes any need for consumers to maintain a single relationship with one financial institution. "PFM creates a tool that makes the relationship more sticky. If you go through the process of setting up all this account aggregation, and you start to use the tool and see its value, then you're more likely to look at that financial institution for other products and services before you start to look around to another financial institution," he says, admitting, "We don't have a lot of empirical evidence yet." (In fact, the Geezeo/1st Mariner site is still in beta; at press time, they hoped to take it live in April.)

According to Lynch, customers will access the Geezeo/1st Mariner site from the 1st Mariner homepage; 1st Mariner's online banking solution, provided by Fiserv, will not be embedded or part of the Geezeo PFM. But for the bank's online customers who sign up for Geezeo, its aggregator, Cashedge, will automatically pull their bank data into Geezeo's application as well as transactions related to their retirement accounts, credit cards, student loans, mortgages, car loans and other financial products from other institutions.

Geezeo tracks, tags and organizes transactional data to help users set budgets. It can even act as a customer's financial conscience: It will watch incoming bills and cash flow and warn customers when they might have trouble paying a bill.

Kruskamp says Geezeo has found that the sweet spot for PFM tools is Generation X -- people in their late 20s to early 40s. "Gen Yers are the ones we'll have to teach that this is a beneficial tool," he muses. "They're used to the helicopter parent mentality, where they look to their parents and elders to help them manage their money, give them advice and do it for them. But very quickly they're going to move into that age and role where they have their first job, and their parents won't be so involved."

But Lynch believes the PFM site will appeal to baby boomers and others in addition to Generations X and Y. "There are plenty of people who saw their 401(k)s and their retirement accounts get devastated over the last six months," he observes. "So their goals have changed. Once, people thought, 'I've got this nice 401(k), it's going to be there for me, so I'll continue to spend with my credit cards and eventually I'll pay them off.' A lot of people are starting to realize that that eventuality is now."

With so much sensitive data being handled, though, isn't Lynch concerned about security? "Always," he acknowledges. "You'd have your head in the sand if you didn't think about that stuff."

The bank is having Geezeo perform extra risk assessments and put in place additional safeguards, Lynch relates. The account data will be housed by Cashedge, which has been storing customer data for years, he points out. "We feel confident that they can support this service safely for our customers," he says.

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