banking on web 2.0 and beyond

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Title

Company Name

www.financial-insights.com

Banking on Web 2.0 and beyond:The consumer is all powerful!

Edwin van Raalte

Senior Manager Business Development

Rabobank International

(c) 2009, Financial Insights, an IDC Company, All rights reserved.

Agenda

Introduction

Rabobank’s take on Direct Banking – Background on the Rabobank IDB business model

Direct Banking (Bank 2.0) putting theory into practice – The theory of Web 2.0/Bank 2.0…– Why Web 2.0/Bank 2.0 is so important…– The consumer’s perspective on Bank 2.0.– Practical examples from Rabobank…

Unlocking client advocacy in direct banking– Bank 2.0 assessment matrix

Conclusions and thoughts


Before we start let me first introduce RaboPlus…

Also available on: http://www.raboplus.co.nz/raboplus-tv-radio-ads/default.aspxand www.youtube.com under “RaboPlus”


Some of the key questions we will discuss Today… Innovation or …?

Why the RaboPlus model differs from its peers?

What is Web 2.0 / Bank 2.0?

Is Web 2.0 just another “buzz word” or a vital business tool?

Is Web 2.0 something that can be created or is it creating itself?

How can we use Web 2.0 in a affordable and not to time intensive way?

When will we meet the true virtual banker….?


PART 1: Rabobank’s take on Direct Banking


Rabobank’s take on Direct BankingKey drivers

Macro economic: Globalisation. Technological development.

Resulting in important changes in consumer behaviour.

The Rabobank group Capitalise on internet banking expertise of the group (leading internet bank in the Netherlands since 1995). Ongoing trend towards online banking. Create global economies of scale. Diversify funding base and lower funding cost. X-sell.


Rabobank’s take on Direct BankingBackground Rabobank: highest credit rating (AAA), awarded by Moody's and Standard & Poor's.

International Direct Banking (IDB) division operates two “virtual” banking concepts:– RaboPlus/RaboDirect – targeting the retail market– Bizner – targeting the SME market

IDB is using a low cost operating model based on full straight through processing, with a global centralised ICT backbone. This approach results in economies of scale and cost leadership compared to its competitors. As a result of the operational excellence approach IDB is able to run the local businesses with a total of only 15 staff each.


Rabobank’s take on Direct BankingBackground IDB focus is on offering a targeted package of simple financial products, in the most effective,

reliable and convenient way possible. IDB offers retail clients saving, term deposits and a range of managed funds and pension

products and services. Bank in a box concept: IDB, together with its strategic partners Callataÿ & Wouters and

Schuberg Philis have a proven track record to launch ‘greenfield’ direct banks with a 6 month time to market.

IDB has won a wide range of (online) marketing awards including 2 golden Effies, Marketing Team of the Year, Best Financial Website.


Rabobank’s take on Direct Banking

No fees

No minimum deposit

Security

Customer service

High interest Credible reputation

User friendly websiteRewards

Ideal

Online

Banking

Service

No fees

No minimum deposit

Security

Customer service

High interest Credible reputation

User friendly websiteRewards

Ideal

Online

Banking

Service

From the customer perspective


PART 2: “Bank 2.0” Putting theory into practice


“Bank 2.0” Putting theory into practiceFirst the theory….a question of definition… So what is Web 2.0? The term is a brainchild of publishing guru Tim O'Reilly (2004). Simply said: “Web 2.0 changes web sites from

static into dynamic and from company controlled into user controlled content with so called many-to-many communications.”

Or in the view of Sir Berner-Lee, Web 2.0 is simply doing what the web was invented for… sharing of information…so Web 2.0 is nothing more than a buzz word…

Web 1.0 could be considered as one way “messaging” whereas with Web 2.0 in the banking world, two-way communication is established and users are empowered to communicate with their bank as well as between peers. An excellent Web 2.0 example in the banking industry is www.kiva.org, a socially responsible peer to peer micro finance provider to the poor.

Outside the banking industry there are many successful examples of companies who use Web 2.0 as for example Wikipedia, Twitter, Facebook, Myspace.


“Bank 2.0” Putting theory into practice

Traditional communication versus Web 2.0 communication


“Bank 2.0” Putting theory into practiceAnd why is it so important… Mass one-way marketing as a communication strategy is becoming less effective and more expensive.

For example in the US mass marketing conversion rates have dropped to less than 1.5% and only 7% of consumers believe companies tell the truth in ads.

It is therefore of strategic importance for companies to find ways in which they can establish trust with their communication messages and use reference groups as a target platform to influence individual customers. This based on using the power of “word of mouth” as a key strategy.

So for an (online) bank there is merit to use for example social computing based on Web 2.0 as a strategy.


“Bank 2.0” Putting theory into practice

And why is it so important…(part2) In 2006 Time Magazine nominated “You" as the 2006

Person of the Year, which is testimony to the power and influence of this shift known as the "Web 2.0" wave (Baghai 2007).


“Bank 2.0” Putting theory into practiceSo what does this mean in practice…. If the consumer is using the web to ‘find answers’ to his questions, banks have to develop

strategies and invest in;– Search – Social Computing– Website optimization/integration– Optimisation of sales, cross sell and retention strategies– Measurement and analysis of (online) consumer behaviour

If the consumer is using the web to ‘socialise’ we need to develop strategies how ‘tap’ into it and how we can use the ‘wisdom of the crowd’;


“Bank 2.0” Putting theory into practiceSome examples from the Rabobank IDB world…..

1. Client feedback & rating reviews

2. …………. – including the good, bad and ugly…

3. Online competitions

4. Financial Podcast

5. Bank@rate, E- demo’s, E-zines & E-Calculators

6. Store (in MDB) and analyse consumer behaviour for smart targeting and segmentation


Webcast


`

Client reviews


Blogs


Demo’s

E-News

Podcasts


“Bank 2.0” Putting theory into practiceThe pro’s: Image building - as an internet savvy company. PR opportunities. Increase brand awareness. Provides real time marketing opportunities (i.e. online competitions, viral campaigns etc.) Differentiate RaboPlus from competitors. Creates open communication platform. Provides consumers insight. Educate customers through customers. Cross sell opportunity when customers recommending each other customers. Create “word of mouth” marketing.


“Bank 2.0” Putting theory into practiceSome of the risks/ issues:Obviously there are some important issues to look after, particular in the

legal area. Legal complications are likely a major cause why banks are so

slow in adopting Web2.0 tools.

Besides legal issues risks of using Web2.0 are for example: Manageability of forums and blogs (i.e. large volume of postings) Feedback/posts from unhappy customers Comments about better offers of other banks or new entrants Internal (outdated) IT policies Spam Regulatory issues around improper disclosures One dimensional thinking Artificial analysis / not defining a long term strategy Unclear positioning Lack of knowledge


PART 3: Unlocking client advocacy in direct banking


Web2.0 Opportunity assessment matrix

Source: http://www.visible-banking.com/

The Visible Banking Blog of Christophe Langlois is highly recommended for anyone interested in Bank2.0!


Unlocking client advocacy in direct banking

You can not control the web but you can affect it with a Web 2.0 and customer advocacy strategy.

Understand your clients needs and wants like in the old day’s pre-Web 2.0 world.

How: enable communication with customers through (executive) blogs and social community sites, use alert functions (i.e. Google alert) to read what people think about your company. Don’t underestimate the power of blogs. Respond on blogs both positive and negative in a timely manner.

NO product endorsement blogs!!! Use a mix of online research and focus groups to obtain qualitative data. Learn from your peers (successes and failures of other banks who use

Web 2.0) Based on the consumer insights, develop integrated (online and

offline) strategies on how to involve customers with your brand and with each other.


Unlocking client advocacy in direct banking

Continued… Review legal implications and framework. Define business and marketing functional and technical requirements for

Web 2.0 platform. Work out campaign features to attract traffic to Web 2.0 site. Prepare PR strategy around Web 2.0 campaign. Test, implement and execute the strategies and measure results and

consumer satisfaction. Optimise platform requirements based on user groups and usability

platforms. Ensure you empower the customer Examples: online competitions, viral Christmas card campaigns,

newsletters (not product but client centric), blogging strategies…


Conclusions and thoughts Why the RaboPlus model differs from its peers? True global centralised IT processing with an integrated

approach for the online and above line marketing strategy. Using Internet as the sole distribution channel.

What is Bank2.0 ? Bank + Web2.0 toolkit = Bank 2.0 Thus changing from product centric to customer centric and truly engaging with and empowering customers. As said by Ian Davis, “Web 2.0 is an attitude, not a technology…”

Web 2.0 Just another “buzz word” or a vital business tool? This depends obviously on the chosen positioning and the definition used for Web 2.0 , for a virtual bank as RaboPlus Web 2.0 is clearly of strategic importance. Moreover most of young customers are using social networking sites, 80% between 18-21 according to Forrester Research and an average of 30% of adults. If your customers are more and more using the web and social networking sites to find answers for their questions and share their experiences, should your bank not be out there?


Conclusions and thoughts Is Web 2.0 something that can be created or is it creating itself? Both, you

can obviously not control the web but can affect it with a web 2.0 and customer advocacy strategy.

How can we use Web 2.0 in a affordable and not to time intensive way? Blogs are the most common and cheap examples (but don’t underestimate the ongoing effort = $ to maintain content) of web 2.0 technologies but there is much more to explore, but be realistic on ROI. Obvious areas to explore are: Search, Social Computing, Website optimization/integration etc.


Beyond Web 2.0When will we meet the true virtual banker ?

With Web 3.0, a virtual banker is added as the third “participant” in the communication chain. Rather than the Web 2.0 enabling information sharing and communication, with Web 3.0 the virtual banker (or intelligent agent) is actually participating based on artificial intelligence. This ‘machine facilitated understanding of information” should add to the

user experience and increase satisfaction.

Still, there is a long way to go from a technological and consumer perspective and many banks have not even embraced Web 2.0 yet, so Web 3.0 seems far away…however only 15 years ago internet banking was almost non existent, Today over 50% of people use internet banking in many developed countries. Still there is a long way to go both from a technological as well as a consumer perspective, let alone the conservative nature of many banks…


Thank You and Financial Insights! Any Questions?

Edwin van RaalteSenior Manager Business DevelopmentRabobank International [email protected]

Or get connected through:www.linkedin.com/in/edwinvanraalte

Background reading…Or read my latest paper on “Banking on Web 2.0 and beyond” in the next issue of The Journal of Financial Services Technology (Financial Standard Australia).

Or check out our (English) IDB websites:www.rabodirect.ie www.raboplus.co.nzwww.raboplus.com.au and for the Rabobank group www.rabobank.com

banking on web 2.0 and beyond

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