July 11, 2007

Q: Are banks currently implementing Web 2.0 technologies?

Watson, Wells Fargo:Wells Fargo's Internet services group has an internal wiki where engineers, marketing people, product managers and operations teams all submit ideas and comment on each others' ideas on how we can innovate our products and services to benefit our customers. This creates an open, inclusive environment where diverse points of view are shared, evaluated and further developed across our group.

These wiki and blog initiatives have resulted in the development of next generations of online financial management products and tools, such as Wells Fargo's My Spending Report. They have also created active communities within Internet services. We are also using RSS feeds to deliver news feeds that team members can customize to see the business news that matters most to them.

Robin Bloor, Hurwitz & Associates: I've seen no pioneering of Web 2.0 from banks at all. Banks have used collaborative technologies — such as those from IBM (Armonk, N.Y.), Lotus (an IBM subsidiary) and Microsoft — for quite a while, and they can be deployed in a Web 2.0 manner. But I've seen no evidence of it. I haven't seen any activity in the area of customer relations, where the potential rewards should be the greatest.

Kealey, Adobe: Financial institutions are working to improve how they engage customers online during the product research and selection phase. There are numerous examples of Web applications that provide retirement calculators, product selectors and guided advice that are helping institutions differentiate themselves online. We're also seeing a number of firms using rich Internet applications as the front end to automating key customer-centric processes, such as account opening and loan origination. These front ends are available to be used by employees as well as by customers, and help to guide the users through the process in a step-by-step manner, helping to eliminate confusion and reduce errors.

Q: Why aren't banks embracing Web 2.0 technologies more?

Nelson, TowerGroup:The general problem is that this is new technology, which people currently equate to the consumer realm. When you think of Web 2.0 business opportunity, you probably think of ad and search revenues, not better user-interface design, improved site usability, collaboration, etc. But these are the more relevant business impacts.

The biggest downside is that it's new, and some people fear change. IT departments are eager to use these tools and develop and deploy new software, but business isn't yet driving the projects. With regards to internal Web 2.0 tools (e.g., blogs and wikis) there are major adoption challenges. A good portion of the intellectual property of a firm resides in the older, more senior staff that is often hesitant to pick up and use new technology.

Bloor, Hurwitz & Associates: The reticence is cultural with banks. Nevertheless, if you want to sell to the younger age ranges you have to meet them in their chosen contexts, which can include places like Facebook, MySpace and Second Life. Banks have a particular interest in attracting such customers.

However, it may simply be a matter of where to invest. A Web 2.0 project is very difficult to define in terms of specific business objectives. You are, in effect, opening a communications channel and it may or may not pay big dividends There are no obvious corporate successes to imitate and no easy way to calculate payback. So any foray into a Web 2.0 project is going to be speculative. If you are the first to open a bank in Second Life, though, you'll get a bundle of free publicity. That on its own could pay for the cost of the project, even if it doesn't generate a heap of business.