Why Banks Still Can't Figure Out How to Make Money Online
Book: Bank 3.0: Why Banking Is No Longer Somewhere You Go But Something You Do Author: Brett King ISBN: 978-1-118-58963-2 Publisher: Wiley (2013)
Chapter 5 of Bank 3.0 asks a question that still feels relevant: if the internet is the most popular banking channel, why are branches still making all the money?
Brett King had been working with retail banks for over 15 years at the time of writing. And he says the answer is simple. Banks just don’t sell well online. It’s not that customers refuse to buy financial products on the web. It’s that banks refuse to make it easy.
People Buy Everything Else Online
By 2013, e-commerce in the US was already about 10% of total retail sales. Amazon had taken over 50% of North American book sales. iTunes was eating the music industry alive. Cyber Monday sales had more than doubled between 2006 and 2011, going from $610 million to $1.25 billion.
People were literally walking into physical stores, scanning barcodes with their phones, then buying the product online for a cheaper price. The question of whether people would buy things online had been settled years earlier.
But banking? Still lagging behind.
King makes a point that hit me pretty hard. A mortgage, a credit card, a savings account. These are not physical products. They’re already virtual. From a distribution standpoint, they’re more like buying a book or downloading an album than buying a TV or a pair of shoes. There is nothing about a credit card application that requires you to be physically present. And yet banks built their entire sales process around making you show up.
The Compliance Excuse
Here’s where King gets sharp. Banks hide behind “complexity” as the reason they can’t sell online. But the complexity isn’t in the products themselves. A checking account is simple. A credit card is simple. Even a mortgage, at its core, is a fairly straightforward product.
The complexity is in the process banks built around these products. The application forms. The identity verification. The “bring three months of bank statements to the branch” requirements. Banks created this friction, and then pointed at it as proof that online sales couldn’t work.
Meanwhile, Square showed up and took one-fourth of the merchant onboarding market in two years. How? By stripping out the complexity. PayPal did the same thing. Apple did it with iTunes. The pattern is always the same. Incumbents add friction to protect their existing business. Then someone new comes along, removes the friction, and takes the market.
King draws a comparison to the music industry that still makes me think. Record labels spent hundreds of millions trying to stop illegal downloads. But they never offered a good legal alternative. People wanted digital music so badly they were willing to break the law to get it. Then iTunes came along, attacked the pricing and distribution friction, and won where an entire industry had failed.
The lesson for banks: you can’t force customers to use the branch. If you try, they’ll just find someone else who doesn’t.
What Actually Sells Online
King breaks down online buying behavior into three simple drivers. Convenience is number one, with 75-96% of users saying time-saving is their main reason for going online. Price comes second. And complexity is the killer. If a customer spends 45 minutes filling in forms only to have the application fail because they don’t have the right document on hand, they’re gone.
He divides the customer journey into three phases: pre-purchase (research), purchase (the actual buy), and post-purchase (maintaining the account). Banks were doing okay at the post-purchase part. Checking balances, transferring money, paying bills. That stuff worked fine online. But the actual selling? Terrible.
The book points out that 88% of internet users were already starting their mortgage research online. Even if they ended up in a branch to sign the paperwork, the web was where the real selling happened. Banks just weren’t getting credit for it because they didn’t track the customer journey properly.
The 90% Secret
This is probably the best insight in the whole chapter. King asks you to look at a typical bank homepage and guess where 90% of daily visitors click.
Is it the flashy marketing banner? The special offer? The promotional sidebar?
Nope. It’s the login button for internet banking. Over 90% of traffic goes straight to the secure portal.
And what are banks doing with that traffic? Almost nothing. The internet banking portal is treated as a functional platform. Check your balance, move some money, pay a bill. It’s run by the IT team.
King argues that banks should be spending at least 80% of their web marketing budget on offers and campaigns inside the internet banking portal. Not on the public website that barely anyone sticks around on. Not on banner ads across third-party sites. Inside the portal, where your existing customers already are, every single day.
And the best part? Selling to existing customers behind the login is way easier from a compliance standpoint. You already have all their information. No new forms. No identity verification. Just a relevant offer and a click.
But the offer has to be relevant. Don’t pitch a Gold card to someone who already has Platinum. Don’t show retirement plans to a student. This requires basic business intelligence, which King notes most banks weren’t doing.
Findability and Usability
Two more things killing bank websites: search and usability.
Google had trained everyone to expect instant results from typing a keyword. But most bank websites had terrible search functionality. If a customer couldn’t find what they needed in three clicks, they left.
King also calls out a practice that I can’t believe was still happening in 2013: asking customers to download a PDF application form, print it, and bring it to a branch. If the customer came online for convenience, you just destroyed the entire value proposition. He says it would be better to not have the form online at all.
The usability problems went deeper. IT teams designed sites without talking to customers. Compliance teams loaded up forms with unnecessary requirements. Web pages were based on physical branch processes. Nobody asked actual users what they wanted until the testing phase, by which point it was too late to change anything fundamental.
King recommends low-fidelity prototyping. Paper sketches. Pen and pencil testing with real customers before any code gets written. Simple, cheap, and it actually works.
Screen First
The chapter ends with a push toward responsive design and mobile-first thinking. King drops a stat that 25% of mobile web users in the US were mobile-only. They rarely used a desktop at all. And by 2015, mobile device access to the internet was expected to overtake PC access.
His advice: stop thinking about your website as a desktop experience with a mobile version. Start thinking about screens. All screens. And make sure your site works on every one of them.
My Take
Reading this chapter now, the frustrating thing is how much of it still applies. Yes, banks have gotten better at online sales. But the core problem King identified hasn’t fully gone away. Banks still add friction where there doesn’t need to be any. They still treat their digital channels as secondary to the branch. And they still underinvest in the experience behind the login.
The comparison to Apple and iTunes is what sticks with me most. The incumbents always try to protect the old model. And they always lose to whoever makes things easier for the customer. That lesson applies to a lot more than banking.