They're Electrified, Not Ancient

New York  August 14, 2001  Andersen's Business Consulting practice ("Andersen") has just released "Today's eBusiness Mandate: Enhance Profitability Across the Enterprise," a study that evaluates the financial services industry's e-business effectiveness.

Andersen surveyed some 150 asset management, banking, brokerage, insurance and lending firms between April and May 2001 to identify leading e-business practices and opportunities in the financial services industry. Andersen assessed each firm's e-business capabilities in four areas: sales and marketing, application taking, transaction processing and fulfillment, and ongoing customer service.

The survey produced five main findings:

1. Companies in nearly every financial services sector have made dramatic leaps in their general e-business effectiveness since Andersen's April 2000 study entitled "Measuring eBusiness effectiveness in the financial services industry." Banking and insurance improved by approximately 15 percent each, brokerage by approximately 17 percent, and lending by approximately 14 percent. Asset management showed marginal improvement.

In just one year, many companies in "laggard" sectors of the financial services industry, such as life insurance, have built a basic Internet presence and "first-mover" companies have moved beyond the basics by adding a substantial depth and breadth of products and services to their Web sites. Thus, the bar has been raised significantly in terms of how e-business effectiveness is now defined in the industry.

For the 2001 study, Andersen revised its metrics accordingly. For example, account aggregation and wireless account access are two metrics that were not measured in the 2000 study but were included this year. Given the more difficult grading scale, the improved scores of most financial services segments this year are all the more impressive.

2. The combination of "bricks" (a physical presence) and "clicks" (a Web site) provides the most effective strategy by leveraging traditional brand names and the Internet to provide multi-channel sales and service. Financial services consumers want a proven brand and/or local presence in addition to the low cost, convenience, and speed of online sales and service.

Companies that have only a Web-based presence lack the necessary market breadth and most will continue to struggle. Wingspanbank.com, Compubank and others have been merged or closed. Thus, many virtual firms have recently added "bricks" to their "clicks." E*Trade, for example, has aligned with an ATM network, and CSFB Direct has opened a series of investment centers. At the same time, many financial services companies are acquiring virtual firms to increase the depth and breadth of their own online product offerings.

3. Now that Web sites and e-business are no longer novelties, consumer expectations about Web site offerings have risen considerably. Basic transactional capabilities may be enough to enter the e-business arena, but they are not enough to sustain a firm's long-term competitive edge. Financial services companies must continually upgrade and enhance their Internet presence with new value-added services and products to attract and retain customers.

In their efforts to meet the rising consumer demand for faster, more flexible and more multi-faceted customer service, firms are scrambling to move beyond speedy online self-service and provide online customers with greater choice and flexibility in servicing their accounts through e-mail, call centers, online chat and wireless devices. Insurance company Web sites, for example, now provide online claims initiation and tracking. Opportunities for online service growth include planning and advisory tools and personalized solutions based on major consumer goals (like college education) and life events (such as retirement).

4. Many large financial services organizations are adopting a one-stop-shop strategy to increase customer retention and profits. By partnering with multiple best-of-breed firms, companies can stock their Web sites with attractive product offerings that keep customers coming back. These partnerships allow financial services companies to reduce the time and expense required to build or acquire new services while at the same time strengthening their service quality, customer satisfaction, brand value and Web site traffic.

The one-stop-shop strategy, however, is not appropriate for all financial services firms. Progressive Insurance, for example, has succeeded on the strength of its cutting-edge technology, depth of self-service transactions and account access flexibility.

5. Customer demand for instant product delivery and transaction execution remains largely unfulfilled by the majority of financial services companies. Although their Web sites have improved in terms of attractiveness, sales ability and customer service, processing remains a critical issue. The majority of financial services Web sites still leverage off-line activities for at least a portion of new account processing and fulfillment requests.

Online consumers have become accustomed to the speed and simplicity of routinely purchasing books, electronics and other retail products during a single Web site visit. Thus, it is not unusual for financial services customers to become so frustrated when they encounter delays or cumbersome follow-up requirements necessitated by archaic processing procedures hidden behind a slick front-end that they shift their allegiance and their business to another firm.

Based on this survey's findings, Andersen provides the following recommendations for financial services companies:

• Make e-business an integrated part of a multi-channel delivery strategy. Online capabilities should complement other channels without sacrificing speed and simplicity. As customers interact with the organization across channels, they should be presented with a consistent customer experience.


• Provide the same level of service  or better  that is offered through traditional channels by providing timely responses to online inquiries, a choice of service options that includes both online and offline channels, and online self-service capabilities leveraging new technologies such as wireless account access and electronic statement delivery.


• Go beyond the basics to differentiate overall product offerings. For instance, consider providing "best-of-breed" product offerings to meet a broader range of customer needs and offering value-added services and tailored solutions. Employ process and policy changes, workflow automation, and systems integration to meet customer demand for instant product delivery.