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Investing in Customers’ Futures?

Banks have failed to heed customer demands for online financial planning capabilities.

Most banks fail to use their Web sites to tap a rich market opportunity: customers who want to actively plan their financial futures, according to research from Boston-based business and IT consultancy Keane. "Banks are missing a major opportunity by not using their Web sites to properly appeal to this important group of customers," says Imran Sayeed, vice president of financial services at Keane.

George Tubin, senior analyst, TowerGroup (Needham, Mass.), agrees. "There's been a disconnect between what banks thought they were providing in terms of financial planning and what customers want," he says.

There are a few large financial institutions, however, that are providing some financial planning capabilities for their customers, Tubin says. San Francisco-based Wells Fargo ($492 billion in assets) launched its Business Spending Report application for small businesses in February, a year after its debut of a personal spending report application, My Spending Report. [For more on Wells Fargo's efforts in the small-business space, see related article, page 14.]

The spending reports help customers track their spending in much the same way as personal financial management programs such as Microsoft (Redmond, Wash.) Money and Intuit's (Mountain View, Calif.) Quicken, according to Tubin. "This enables Wells Fargo to provide more of an advisory role for their end users," he says. According to the bank, 3 million of its 7.6 million active online customers used the My Spending Report application in the first year.

According to Susan Cournoyer, research vice president for Gartner (Stamford, Conn.), the move by Wells Fargo, along with similar expanded online functionality and financial planning capabilities from Bank of America (Charlotte, N.C.; $1.2 trillion in assets) and Citibank (New York; more than $1 trillion), is part of a trend of banks moving away from the simpler aspects of online account management to more-advanced offerings, including cross-sales of financial planning services and other products.

Planning Ahead

Indeed, Wells Fargo has seen the cross-sale of products, including payment cards, go up (the bank declines to say by how much) since launching its small-business spending reports, relates Jim Smith, executive vice president, consumer Internet channel. "Over the last eight to nine years, the Internet channel has been more about traditional banking capabilities," he says. "But in talking to our customers a few years ago, it became apparent that they wanted a better notion of where they were going in terms of their spending, how to improve where they were."

To capitalize on the trend, financial institutions that have yet to add some online financial planning capabilities should watch and learn from Wells Fargo and other large financial institutions, recommends TowerGroup's Tubin. "When I was at Bay Bank [now part of Bank of America], we had a reputation as a technology leader, but what we were was fast followers," he says. Such a strategy enables other banks to work out the kinks in any offering, saving the fast followers headaches and expenses, Tubin explains.

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