Kicking off its Web banking services in the fall of 1998 with balance inquiries, bill payments and funds transfers, KeyBank has continued to expand its online presence, offering a B2B exchange, a small business solutions center, e-mail alerts and insurance quotes. The Cleveland-based bank recently announced new online banking and investing capabilities for its PrivateBank clients and for customers of McDonald Investments, its brokerage subsidiary. Key is also testing wireless and will introduce account aggregation and LiveClips, a product from 724 Solutions that lets customers cut and paste from a variety of Web sites-stocks, weather, news, for example-onto their Key.com page, in the third quarter of this year.
Patrick J. Swanick, president and chief executive officer of Key Electronic Services, has been behind Key's Internet effort from the start. With the bank ever since it merged with Society Corp. seven years ago, Swanick oversaw call center and ATM operations, and presided over the consolidating and centralizing of 35 separate units spread across the country. Today he has responsibility for Key's Internet and e-commerce activities, payment services and ATM fleet. In a recent interview with BS&T associate editor Karin Halperin, Swanick talked about where Key.com had been and where it was headed.
BS&T: How have the challenges changed in the few years since you became head of Internet and e-commerce activities at Key?
SWANICK: In the early days, everyone rushed to the Internet to establish a Web site just to have a presence. We weren't sure what that presence meant or where it would really go. It was very content heavy. You were basically doing brochureware, putting your physical-world brochures and information about your products online just to have a billboard.
Then it quickly evolved into the notion that you could do transactions online, and we quickly moved into transaction capability to build out a bank on the Internet.
Halfway through this journey, one of the challenges we faced was whether we should pursue an Internet-only presence with Internet-only customers who wouldn't use our branches, call centers or ATMs. We went down that path internally three separate times, but we could never get any of the economics to work. So we declined to do that. During the time that we were doing that internal analysis, the likes of Wingspan and NetBank were making their presence known. And we were always asking, what do they know that we don't? What makes them think they're going to be so successful?
Of course, a few years later the sun has risen and we've seen the real value is in multichannel delivery and extending your current value through the Internet, not in an Internet-only play. I'd like to say it was our brilliance that led us down this bricks-and-clicks path, but it was a lot of analysis and I think some dumb luck.
BS&T: And now the Internet-only banks have introduced many physical trappings...
SWANICK: Yes, exactly. And that was never in their original plan.
BS&T: What challenges come purely from the technology?
SWANICK: In the early days, we weren't convinced that the technology was stable enough, secure enough, scalable enough to support a large number of customers doing monetary transactions. But that concern got overridden quickly as we came to see that the technology advanced rather rapidly. Now the concern is not about the technology but about how, where and when to deploy it. And the emphasis is on when.
Wireless is a good example. We have a wireless pilot going on now with our customers. We can put your account balance on your Palm Pilot or cell phone and transfer funds and do all these wonderful things. The technology works, but is there really a customer application here?
For the bank, is there really a business case around wireless? Is there a reason to do it other than the technology's cool.
BS&T: Do customers want wireless?
SWANICK: They're not clamoring for it. We have about 600 clients in our pilot right now. They're using the capability without any problems, but the early returns say they're viewing it more as a curiosity than as something they have to have.
BS&T: Is wireless mainly of interest to high net worth clients?
SWANICK: We're trying to determine that. We're looking to get about 1,000 signed up and run the pilot until May or June. We have not segmented the users yet. We are going to be doing a lot of surveying and analysis.
BS&T: How has the Internet changed your customer relationships?
SWANICK: It has made customers across the board more informed. They know more, they're better educated, they can make better decisions, they can challenge the providers of products and services more than they ever could before. That puts pressure on the institution to have people who are better trained because you don't want to be in a position where the customer knows more about the subject matter than you do. Oftentimes, we're seeing that that's the case.
BS&T: What are the most frequent transactions at Key.com?
SWANICK: At this point it's viewing account information. What you perhaps used to do by calling on the phone-getting your balance or checks cleared, seeing if a deposit was made. You're viewing that now online. And we're seeing a decrease in our telephone volume as the Internet increases in popularity and usage.
BS&T: Have you seen any cost savings from the Internet?
SWANICK:Per transaction, it is less expensive than any of the other delivery channels, whether it be branch or ATM or call center. None of us, even the larger players like Bank of America or Wells Fargo-although they may be close-have reached the critical mass of transactions necessary to really drive down the cost. I do think Bank of America and Wells are close because of their millions of customers. We're going to get there, and it's just a question of time. Our call center transactions are beginning to decline in favor of Internet transactions. We will begin to see some material effects within the next two to four years.
The biggest benefit at this point is customer retention. We had set out to have this as a competitive defensive mechanism, and certainly that's the way it's playing out. We could not be the bank we are today without an Internet presence. It would be like only having one leg.
BS&T: And do your online capabilities draw new customers?
SWANICK: Yes. About 9% of our Internet banking customers are new to the company. I'm not necessarily saying that was the reason why they came, but we are confident that if we didn't offer Internet banking they wouldn't sign up with us.
BS&T: You also offer services to small-business owners?
SWANICK: We have an online Small Business Solutions Center. We've partnered with a variety of providers across a number of disciplines-human resources assistance, marketing assistance, purchasing assistance and the like. Small businesses told us in surveys that if you could help me better market my products, if you could help me with my staffing and human resource needs, if you could help me with valuing my business...that would be valuable to me. So we went out and found providers that offer these services and brought them together.
BS&T: Do you see small business owners as an important group to tap?
SWANICK: Absolutely. The small business owner is looking for time-saving functions that will help them build their business.
BS&T: Do Web-enabled ATMs make sense to you?
SWANICK: That's another good example of a situation where the technology can make it happen, it works. You could Web-enable an ATM very easily, but is it practical? An ATM has been positioned as a transactional device for deposits and withdrawing cash and the like. Would you want to be the fifth person in line behind somebody surfing the Internet? If they're going to surf the Internet, it's unlikely they're just going to go to your bank's Web site and stand there looking at your stuff. You can Web-enable the ATM in such a way that the only thing customers can access is your Web site on that machine. That's a pretty limited application.
NCR came up with the idea that the door on your microwave oven could be turned into a PC screen. While you're cooking your dinner you could be surfing the Internet, looking up recipes or doing your banking. How many people are going to really do that?
BS&T: What about a home-banking device through satellite television?
SWANICK: That's another thing we've taken a look at. Two years ago, we thought there was more of a possibility it might take off. The logic went something like this: Everybody has TVs, so the device is already in the home. All they need is a set-top box to connect, and maybe they'll use their clicker to do online banking or purchasing.
That quickly faded when it became apparent that people were buying more PCs and that access to a PC was not really the issue. We're not really interested in that at this point.