December 28, 2001

?Buy! Buy! Huh? Then, sell! SELL!?--Rodney Dangerfield on the phone, Caddyshack.

Twenty years ago, when the vulgar but lovable capitalist played by Mr. Dangerfield changed his mind and his assets in an instant, the scene was played for laughs. Today, such transactions are normal, no longer the exclusive domain of the wild and rich.

With eFinance, customers up and down the income ladder pay their bills, apply for loans, check their balances, and get insurance rates with a swift double-click. Financial service providers (FSPs) offer detailed information and diverse services online, luring customers with light-speed access by Web or wireless, allowing them to logon, transact, and logoff in a few seconds. Like the magnate in Caddyshack, people conduct business between rounds of golf, while stuck in traffic or waiting for a restaurant table, the speed of eFinance letting them capitalize on fresh information and act quickly, freeing them to enjoy their lives in ever more leisurely, luxurious ways.

This is the consumer promise of eFinance. As in all things digital, speed is of the essence. Access must be anywhere-anytime. Customers demand immediate satisfaction, and forward-looking FSPs respond with creative, client-friendly self-service channels through which customers reach their desired sites.

The consumer benefits are clear--faster information, greater convenience--but how does this technology benefit the FSP? The ease of eFinance may attract customers to one FSP or another, but once they have been procured, how does the FSP profit from its own ?eFinanciers??

As some FSPs have learned, charging customers fees for minor transactions like paying utility bills has yielded little income. Others have found it difficult to differentiate their online services from those of other FSPs--a significant problem when trying to build a customer base and increase loyalty. Most have offered eFinance only as a value-added service, a supplement to the brick-and-mortar site that doesn't fundamentally change the customer relationship. Existing services are accelerated--that's all.

But as more and more customers use the eFinance option, and with the interaction time between FSP and customer shrinking with every digital innovation, something does change: the FSP's role as trusted caretaker of the customer's assets diminishes. As FSPs create e-services parallel to services provided on the phone or at the branch, they remain competitive and new, cutting-edge and time-sensitive. But in ?e-Financing? themselves, that is, in doubling existing services through electronic applications, FSPs push customers into increasingly self-service behavior. They forfeit person-to-person contact, and the opportunities that go with it. The relationship becomes one-sided, ?C2B? (customer-to-business), with the FSP merely reacting to customer inquiries and requests.

What this means is that speed of access and delivery, so heralded in other venues, actually impairs the financial services industry. The customer logs on, pays a bill, and leaves; checks a balance, and leaves; notes an interest rate, and logs off. The FSP misses the chance to discuss mortgage options, account transfers, bill payments. Wealth management is entirely in the hands of the customer. The situation calls for a different goal: not to speed up service, but to slow down interaction; not to encourage logon-logoff habits, but to lengthen time online. The more customers remain online, the more the FSP can learn about them, attract their business, foster exchanges from which the FSP can profit. But of course, the FSP can't just slow down service. Why would customers remain online any longer than they have to?

eFinance must change--qualitatively. FSPs must devise ways of enticing customers to log on and stay there. Currently, FSPs focus on speed of delivery and ease of transaction, two obvious attractions. But to strengthen the relationship and exploit the customer's assets, FSPs must make the portal more informative, more tactical, more personal to the user. The only way to lead customers to regard eFinance as not just a convenience is to make it interesting and advantageous, to present it as a rich, opportunistic environment in which customers can do more complicated things than retrieve information and pay bills.

This is the next level of eFinance, the Wealth Management phase, already in development at companies like S1 and NetDecide. New technologies and business models are converting eFinance applications into an integrated medium of investment, transaction, and financial planning tailored to the customer. Through consolidation and integration programs like S1 Enterprise eFinance, FSPs can draw together on a single platform its multiple applications and the customer's assets. The next-step portal provides generic services and information, but it also displays the user's complete financial profile: accounts, mortgages, insurance premiums, stock holdings, pension plans, payments due. The FSP constructs a portal customized to individual users, stocked with their complete, up-to-the-minute, secure financial data. With more personal information to deal with, the customer sticks to the site. Instead of using eFinance merely to make a quick transaction, customers treat it as a personal accountant, a financial desktop constantly monitoring the user's portfolio.

As customers implement eFinance as a strategic resource, they will come to rely on FSPs to supply them necessary information and to perform their transactions. The fullness and individuality of the portal will provoke more input from the customer, which will raise the demand for information from and, most importantly, for consultation with the FSP. Greater interaction means data will flow in both directions. Customers will impart more of their own information to FSPs, and FSPs will respond with their own information--not just answers to questions or compliance with requests, but also specific suggestions for wealth management. For example, a customer may inquire about auto loans, and the FSP can answer not only by listing its interest rates and payment plans, but by fashioning a unique loan offer that has already taken into account the customer's income, debts, estimated auto insurance premiums, and personal preferences (an SUV, a convertible?). If the customer clicks on a ?Buy a Home? application, the FSP can provide a chain of services and products to help (lists of realtors, maps of property values, mortgage programs, homeowner's insurance data, movers, etc.), and even assume an advisory role in the search.

In summation, as the relationship deepens, FSPs regain their role as financial guide and eFinance becomes a daily medium of wealth management.

Here lies the income potential of eFinance. As long as eFinance remains a self-service operation, a C2B-only format, FSPs can only offer it as a value-added function and act through it in a reflex fashion. But if eFinance becomes a full-service operation, both C2B and B2C, consumers and advisors collaborate and share information. An integrated application that provides a consistent and informative online experience tabulates customers' assets, and also exposes their needs and interests. The FSP replies instantly to basic requests, and combs its own resources and alliances for products and services that match this and that customer's wants. A new piece of information from a customer becomes an occasion for cross-selling and up-selling. A new program developed by a financial partner can be passed on to the customer, who is already screened as likely to be attracted by it. Because the FSP is familiar with the customer's needs and has built up a sound relationship, B2C communications are accepted with trust, not as advertising. FSPs can segment customers, distributing customer data across different applications and returning to the customer messages in the form of new product offerings, alerts (e.g., a bill payment is late), hourly capital updates (e.g. of share prices), and financial news--each message accompanied by customized analyses and advice.

FSPs are ready for new customers unfamiliar with financial planning and for sophisticated customers in control of their finances and demanding state-of-the-art information. The field will have changed. eFinance will turn a profit.