Monday, April 22, 2013

Essential Online Channel Metrics For Financial Marketers

With evolving technologies and platforms, financial marketers need a clear and comprehensive set of metrics to determine the effectiveness of their online channel. 

Instead of drowning in data and not being able to connect the dots in a meaningful way, here are four metrics that rise to the top and provide the clearest picture as to the selling power of a bank or credit union website.

By Melanie Friedrichs, Analyst for Andera, Inc.

In the Wild Wild West atmosphere of the early internet era, companies raced to slap websites online without thinking too hard about what purpose their website should ultimately serve.  Consumer retail companies found their ROI in online shopping, and their websites gradually evolved to draw visitors in and drive them to checkout.  In contrast, financial institutions focused on expanding eServices, until their websites became little more than portals to online banking. 

In the last few years, we’ve seen institutions start to wise up to a second, essential function of the online channel.  As Joe Swatek from ACTON Marketing said, “Your website has an important SALES function.”  Technology has made it possible for financial institutions to acquire new customers and members and grow relationships completely digitally, and like consumer retail websites aim to sell consumer products, financial institution websites should aim to open new deposit accounts and originate loans.  When thinking about the account opening and lending through the online channel, there are four essential metrics that financial institutions should consider:

1)      Conversion Rate

The single most important metric for a financial institution website is its conversion rate, or the percentage of qualified  unique visitors that begin applications for deposit or loan products.

Before the introduction of online account opening and lending, financial institutions focused primarily on making online banking login as easy as possible, and on providing key corporate information.  The rest of the website really didn’t matter that much, so webmasters cluttered pages with news items and product advertisements from different departments.  Over time, most financial institution websites began to resemble ill-managed community bulletin boards.

Unfortunately, bulletin boards don’t convert particularly well.  For one, the paradox of choice applies: when there are hundreds of calls to action, and no one call to action is emphasized over the others, most site visitors won’t answer any call to action at all.   This principle has been proved again and again in consumer retail.  What’s more, most financial institutions do a surprisingly poor job of emphasizing product benefits, and many hide or leave out essential rate information. For more resources on website optimization for conversion see here, here and here.

Not surprisingly, online-only banks tend to have conversion-focus websites. Three great examples are MovenGoBank, and Perkstreet Financial. All three have simple, almost spare websites that emphasize benefits and that drive visitors toward their application button.

Some institutions have ironically invested the time and money to optimize their website, but they don’t allow site visitors to sign up online, and direct them instead to a paper application, ask them to visit a branch, or ask them to phone into a call center.  Certainly, some consumers like to compare rates and products on the internet but ultimately want to open their new accounts by talking to a human directly, but in today’s online-centric world, institutions that don’t let consumers complete the process online are leaving money on the table.

2)      Abandonment Rate

The second most important metric that financial institutions should track is their abandonment rate, or the percentage of started applications that are never submitted because the applicant abandoned the process

Checkout abandonment is a much studied topic in consumer retail, and generally the experts agree on one thing: a shorter process is better.  Amazon, at the extreme, features one click purchases. Unfortunately applying for financial products requires many steps to satisfy Know Your Customer (KYC) regulations and comply with disclosure and fair practice requirements.  You will likely never be able to apply for a checking account with one click. Clients on Andera’s legacy platform on average saw between 70-80% of applicants drop-off from start to submit, compared to an average of 60-70% in consumer retail checkout.  In addition, around 10-30% of submitted, approved applicants never open accounts because they fail to complete the final few steps.  Institutions should look at both numbers.  The chart below shows application drop-off by page from start to submit, aggregated across 26 clients on the Andera Legacy online account opening platform.

That said, there is a lot that financial institutions (or their vendors) can do to make account and loan applications a faster and easier process. When it comes to workflow design, a good user experience designer is worth his/her weight in gold. Things like page order, help text syntax, and field groupings and labels can make the difference between a completed application and a frustrated, confused, abandoner.  PNC created a winning application for their virtual wallet product in 2010 by teaming up with IDEO’s expert designers and Andera.  Our next generation platform, oFlows, is helping us make that type of experience available for all institutions.

Online account opening and lending can also create what I like to think of as ‘break downs.” Imagine that you’re test driving a luxury vehicle; the seats are roomy and comfortable, the steering is smooth, and the suspension is fantastic, so even though the road is bumpy, you don’t feel a thing. Then suddenly, the car breaks down, and you have to wait for three hours for a mechanic to come and fix it. Would you buy the car?

There are three main ways a deposit account or loan application can break down to spike abandonment rates:

  • Identity Verification Failure: Data-based identity verification systems often can’t find matches for applicants with thin credit files, and around 10-20% of matched applicants fail the out-of-wallet questions required to confirm they are who they say they are. The best systems will use alternative data to reduce IDV failures, and for those who do fail, they will make it easy to upload a photo ID for manual review. Ally’s otherwise first-class ride broke down in this way.
  • Challenge Deposit Wait Time: Financial institutions who allow funding via ACH often require applicants to verify their bank account with challenge or trial deposits. Unfortunately, challenge deposits don’t appear in the applicants bank account right away, and even if they did, verifying them would still require the applicant to navigate away from the application, login to a different system, locate the appropriate information, and return. 
  • Signature Card Mail or Fax Requirement: e-Signatures were legalized back in 2000, but many financial institutions still require applicants to fill out and mail in a “signature card” so they’ll have a copy of a physical signature on hand to compare to later checks. This is not a necessary step (many of our clients don’t require signature cards), and the cost (abandonment) is becoming less and less justifiable as check use continues to decline.  Read more here.

The three causes of “break down” and high abandonment rates are not easy to eliminate. Solving the IDV problem usually requires additional investment from the institution, either in alternative data integration or a solution that easily allows photo upload. ACH funding is cheaper for institutions than credit/debit funding, and less vulnerable to certain types of fraud. As noted, physical signatures can also help reduce the risk of fraud.  We believe that in all three cases, the incremental risk or investment isn’t worth losing applicants to abandonment.

It’s difficult to compare abandonment rates across institutions, because every institution attracts slightly different applicants and every institution has slightly different products. But abandonment is definitely something that financial institutions need to pay attention to. A small decrease in abandonment can mean hundreds of new customers or members a year. For more on abandonment, check out Andera’s report on the “7 Reasons Applicants Quit.” 

3) Cross-Sell Rate

The third important metric is the cross-sell rate.

Online account opening and lending has made it easier for banks and credit unions to acquire new customers and members, but it also has made it easier to lose them. Open a checking account for a consumer, and they don’t have much incentive to stick around. Annoy a savvy online shopper once, and he or she can switch institutions in about half an hour from their dining room table.  Open a checking account and a seven-year CD for a consumer,and bam, that relationship just got a whole lot stickier.

A good online application will incorporate an automated cross-sell step that presents applicants with pre-approved offers for deposit and loan products, and allow applicants to apply for all products they select using a single application.  Andera’s oFlows platform makes cross-sell offers as early as possible, to increase the likelihood that applicants will consider and accept the offer (towards the end of the process applicants have less patience, and may misunderstand the offer, thinking that it will require them to start a new application).

The paradox of choice also applies to cross-sell offers. Applicants usually aren’t looking to take out a new auto loan, refinance their mortgage, and open five different types of savings accounts the first time they apply, and presenting offers for all of those products might overwhelm them. (Bank of America is an offender on this point).   Our clients have found great success with targeted offers for one or two products, usually a savings account and/or a credit card. 

4) User Experience

The fourth metric is not a concrete metric like conversion, abandonment, and cross-sell.  It’s not something that you can calculate and report on monthly for your executive board. But of the four, it’s probably the most important.

For customers and members acquired through the online channel, your website and application are the first impression of your financial institution.  It doesn’t matter how friendly, concerned, and helpful your staff are, or how accessible and comfortable your branches are, or even how great your rates are; if new customers/members have a terrible user experience opening an account, they’ll start off with a terrible opinion of your bank.

Innovative new institutions that offer “neo-checking” accounts, as Ron Shevlin calls them, can’t compete with established institutions on product variety, branch network, or raw manpower.  But because of careful attention to the details and an emphasis on user-centric design, they’ve created thousands of brand advocates who spread their praise through established media, through blogs, twitter and facebook, and through good old-fashioned word of mouth.
Listen to what your customers and members are saying about your institution. Survey them on their experiences online to learn what you can do better. Make sure someone at your institution owns the user experience, and invest in new personnel if necessary. Banking is changing, and at the end of the day, user experience will matter most.  


Bank and credit union marketing has come a long way in the last few years, but we still see too many institutions who are stuck in 3-6-3 thinking and expect new customers to just walk in the door. To succeed in an increasingly competitive environment, banks and credit unions need to become savvy online marketers, and focus on the metrics that matter.  In this post I have focused on the subset of the funnel from site visit to submit, and not on activities further up, including institution brand awareness and total website traffic, or further down, including application approval rate. 

For more tips on optimizing the online channel, check out Andera's free webinars and whitepapers as well as additional posts on The Andera Blog.

About the Author

Melanie Friedrichs is an analyst for Andera, Inc, is the leading provider of online account opening and lending solutions for banks and credit unions in the US. Melanie is a 2012 Venture for America fellow and a graduate of Brown University. She writes about innovation and marketing in retail banking for The Andera Blog, and contributes posts to Bank Innovation and BankNXT.  Melanie is based in Providence, Rhode Island.

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  1. I love articles like this. You can expand your knowledge or get confirmation that the metrics and data you are tracking are being done by others. The other aspect I like about posts like this are debating points you do not agree with.

    I do not agree with metric number one. I can have 1,000,000 unique visitors come to my lending landing page and all of them start my application for a 100% conversion. If I sell zero loans what do I have? An expense with no compensating revenue. That is not good. What is good is that I have three other metrics to help me gain some insight as to why I have zero funded loans.

    Another example. My advertising for my brick and mortar bank generates 1,000,000 unique page views to my checking landing page. They all start the application. Then amazingly they all make it through the process and fund their accounts. Awesome news right? Maybe. All the accounts are single product households with balances ranging from $100 to $500. I better check my profitability on these accounts as I just may have done massive damage to the balance sheet.

    Melanie has made some great points in her article and I like 3 of her 4 metrics. There is so much more we need to measure when it comes to online account opening. A major component is a longitudinal profitability analysis. Oh and a top notch onboarding program after the initial sales are made. This is just the tip of the iceberg so we could get a real good debate going.


    1. David, you make some great points and I don't think I could have made them any better. A few thoughts back:

      Although Melanie defined the application rate as the percentage of unique qualified visitors that START the online application, you're right that downstream metrics matter even more. For example, I've known institutions who evaluate checking account campaigns based on the cost per new, active customer (where "active" was defined by the institution as a minimum set of activities that separate low from high value customers).

      The challenge, of course, is that it takes institutions three months or more to get a sense for whether a new checking account customer will turn into a profitable one. It takes time to switch a direct deposit, switch your bills, begin using your debit card, incurring fees, etc. For that reason, it is pretty important to have an earlier metric (like cost per application started or cost per approved application, etc.) so campaigns can be optimized in a timely way.

  2. I appreciate your input and especially the view that none of the metrics discussed by Melanie can exist in a vacuum without other metrics and definitely a profitability measure. What the post also brings to light is the vast difference between the 'new' player sites and those of traditional banks who continue to try to put everything on the front page of their site as if people don't know what they are looking for when they get there.

    As I travel across the country and watch websites change over time, I am also still amazed how many sites don't have a simple process of opening accounts online. Javelin Strategy and Research did a study 3 years ago on new account application abandonment that I bet still applies today. As always, thanks for the follow and support.

  3. As I reviewed several bank websites recently, there seems to be a loss of importance of their web properties. Today's consumers expect to have their experience guided by your website. Many of the sites of community banks have obviously been designed a decade or more ago, and seem to consider it a "completed" task rather than an ongoing process.

    Measuring and gathering metrics and seeing what users do on your website is the first aspect of involvement, and banks need to realize that their website is increasingly the first impression that they give potential customers, profitable and not - and most experiences are just terrible.

    If a bank wants to continue to compete in the new frontier, they had better wake up and realize that the importance of face to face interactions at the branch is dwindling, and that their top sales tool will be their website. Not to mention that gathering this data and testing interactions can be done for little or no costs other than manpower.

    Whether you take applications online, ask for a subscription to your newsletter, or ask them to like you on Facebook, banks need to start revisiting their website today. Ask yourself based on other sites you frequent "would I do business with me?". Otherwise the next call your customers may receive is one notifying them that your bank has been closed.

  4. Love your comments Mike. Unfortunately, your thoughts don't just apply to community banks but to larger banks as well. As you point out, we need to move beyond using the web site to publish brochures digitally. When a prospect or customer is coming to your site, they are usually coming for a reason (check rates, open a checking account, take out a loan, etc.).

    The web site is most likely not where they started their shopping, but it is where they landed. From that point, how many steps do they need to take to accomplish what they want. Worse yet, is it even possible to accomplish what they want online?

    Let's face it, banking is boring for the most part. How can banks make their landing sites engaging and worth visiting? How can they move up the ranks of banks when a person is shopping for a home loan in Cleveland? Why not add a quick video showing the benefits of a loan from your bank with a direct link to start the process? The video will move you up the Google search rankings and will reduce abandonment.

    Instead of being a dumping zone for everything the bank does, maybe banks should look at who sells each individual service the best online and replicate the process. Follow Quicken for mortgages, Chase for checking, etc.

    Banks need to remember that their digital brand is becoming the front door to your bank. If a bank doesn't grab the attention of the customer or prospect through their web or online presence, you may never see them again.

    Oh yeah, an additional benefit to fixing the online properties is that every area you fix becomes a great landing page for email, direct mail and digital communication.

  5. Great article and great comments. I would like to offer another thought to spur more discussion on this important topic. David made a point about a campaign that successfully brings in checking accounts by the conversion metric may not be successful when measured by its profitability.

    That gets to the heart of what I have been telling credit unions for some time. Namely, figure out what highly targeted market you want to serve, then figure out what highly targeted products and services you want to offer them, then work on offering them better than anyone else (both in terms of sign up, delivery, service and efficiency). Credit unions and banks can't afford to have "loss leader" products any more. The new players mentioned by Melanie are doing what we should all be doing...delivering a unique offering to a specific market. And while many of them don't know if they will be profitable yet, but if their business model is "let's get people signed up for this and then make our money by cross-selling another service to them" they will fail unless the cross-sold service relates directly to the solution they just got the consumer to sign up for.

    Am I advocating we all become profit-hungry mono-product providers? No. Just that we need to think more like these new players in the market. They have found pain-points that traditional FIs are not addressing well and offering services that do some cases (like Square and Paypal) in disruptive ways. Stop trying to be all things to all people and focus on a few key products or services. I would love to see a credit union or community bank disrupt the industry by becoming better at one thing than anyone else...traditional or untraditional.

  6. David brings up a good point, but its not what he thinks. Melanie's right that conversion rate is the single most important metric you can measure, but she's measuring it incorrectly. The true conversion rate should be measured "further down the funnel", at the funded account point, not at app submission, as she describes.

    Digital marketing is an integrated system. If its not orchestrated correctly, you tend to get the problems that David is describing... metrics that don't match P&L, unproductive advertising investment and lots of undesirable new customers. If your digital marketing strategy is driving undesirable traffic, that's a problem with your ad campaign: poor targeting and ad placement. Not the conversion metric itself, which I'd argue worked perfectly since it told you where these customers came from. That's kind of like turning on the light when you walk into a messy room and then blaming the light for the mess.

    Luckily, this can be easily corrected with modern campaign management software, which was invented to solve the problem of DM campaigns driving lots of new low-profit customers. Properly targeting DM campaigns are highly effective at driving high-potential traffic to your site, especially once you start deploying re-targeting and more modern techniques.

    The rest of the system Melanie describes is spot-on. You absolutely need to track funded account conversion (the true bottom of the funnel, not app submission), and then manage to that number by continually tuning the targeting of your campaign.

  7. This is all great dialogue on the amazingly important subject of developing websites and online properties that sell as opposed to simply answer questions (assuming you can find the answers). In many cases, banks need to tear down the walls and start over from the perspective of what the customer is looking for as opposed to what we want to promote (sounds familiar from even 30 years ago).

    The problem now is that we need to do more with an audience that 1) has less time, 2) will be looking for answers using multiple devices (do we really want to answer the questions the same way if they are viewed on a computer, tablet or phone) and as Jim and others have suggested, 3) will be specific in their needs.

    Taking this discussion one step further as Jim has done, what will your website or online jump page look like if you are properly retargeting in the digital world to those that have visited and not taken action? Will the place you take them be able to fulfill their needs or will it just be words? In addition, with the potential to reach out to specific households or neighborhoods digitally, will your landing area be seamless and easy to interact with?

    As Melanie said, visit Moven, GoBank, Simple, ING, etc. and see how easy it is to interact and buy. Two years ago, I opened a Virtual Wallet account from PNC in less than 4 minutes. How many banks can do that today digitally or in person? Banks need to make it SIMPLE.

    Research shows that the majority of customers prefer to open their accounts in a branch. Is part of this because we have made it so damn hard to do so electronically?

  8. Awesome comments everybody.

    JM your brought up a good point "Research shows that the majority of customers prefer to open their accounts in a branch. Is part of this because we have made it so damn hard to do so electronically?" My gut tells me yes. I wonder what others think.


  9. A very good point, but even if they choose to do so at a branch, they are carrying with them the experience that they had with the bank's website. Was it helpful, did it inspire confidence, make banking with you seem easy and safe?

    There is also the flip-side of the coin, the overly paranoid senior manager that freaks out anytime you mention online account opening spouting compliance issues, profitability, technical projects or whatever is necessary to prevent online account openings.

    Too often its just not done, reviewed or even championed in Senior Management, because no one wants the responsibility or risk of a failure in this area. To DG's point, electronic account opening is wayyy to difficult (thanks CIP & Patriot Act), the abandonment rate has to be astronomical, who has their brothers shoe size and blood type while surfing the net? The point being, if they do abandon the process, what is your follow up call to action? Have you collected the email or mobile phone first for a follow up? Is it tracked by your CRM or a dedicated team member?

    Taking a lackadaisical approach to online interactions IS COSTING YOUR BANK MONEY - plain and simple, you cannot let a potential customer start something, and then adopt an "oh well" approach when they don't follow through. The next interaction is up to you, or they WILL make a connection with another bank.

    I guess the point of my little ramble is, review, study and learn from other banks (yes even the big boys), look at their web offerings - risk rate them!! Find the mix that best suits your bank, get the right consultants on board regarding UI design, SEO, app development, metrics, etc. Plan the work then work the plan.
    --Note if you don't know the above acronyms, you had better get to googling

  10. MK,

    you make a great point, "Taking a lackadaisical approach to online interactions IS COSTING YOUR BANK MONEY."

    Your other great point is "review, study and learn from other banks (yes even the big boys)." I look. I look at other banks sites of all sizes, Credit Unions too. It is a great way to not only learn what works but more often, what does not work.

  11. A friend of mine pointed me to this article. A lot of great points have already been made, but I've made a couple of observations over the last 90 days as I did some additional research. What makes it so difficult to open an account online? If you look at Melanie's chart on application abandonment, there are 8 steps that a customer is supposed to complete. More often than not, the expectations are not set at the beginning of the process and the customers lose interest as they get into the application. From the consumers' perspective, opening an account in the branch is one step, sit with the branch manager, sign some papers and you are on your way. I'm not reading the disclosures, I get a nice packet to take home that, more often than not, I never read. So what can we do from the online perspective? How do we bring that human interaction online, how do we make it look and feel like something consumers would want to do? I'm not sure I have all the answers. Some have already been discussed here, but here are a couple of things to think about: 1) Language – It feels like all OAO content is driven by legal and compliance departments instead of marketing and product teams. We need to change the language used to ensure it reads in English instead of Lawyerish. 2) Eliminating unnecessary steps and fields required – There is information we need to collect due to the Patriot Act, but anything that is not necessary, cut it out. There is no other place where KISS really comes to mind and will make a difference in consumer perception. 3) User experience really matters (Melanie mentioned it as well) – Guiding consumers through the OAO funnel is a big UX challenge — clear indicators of where you are in the process, field-level validation, good and clear labels are just a few of the things to start with.

    I believe that until we can humanize the OAO process to the point where it feels natural to the consumer from start to finish, it will be cumbersome and results will be lagging. Instead of focusing on converting the consumers that are in the funnel already, we will start resorting to filling the top of the funnel, probably increasing the raw number of conversions and further increasing our abandonment rate. As one of the participants in a recent usability study of the OAO process said, "Why do I feel like I'm doing you a favor by doing all this online? If I was in the branch, you would be doing this for me." So it's no wonder a lot of applications start online and finish in the branch, but we all know that's not a formula for long-term success; customers are in control, regulation is not going away but branches are. We need to make this better if we want to grow the business and establish long-term, profitable relationships with our customers.

  12. The key to identifying and tracking the most important metrics is to understand your own business model.
    Web analytics reporting tools track and report an increasing number of metrics. In fact, some services will give you a choice of dozens or even hundreds of different reports.The danger here is that you can become overwhelmed by the sheer volume of data.Worse still, one can base decisions on data that is not a true indicator of how well you are achieving your core objectives.