The Better Banking Blog

ING DIRECT has launched a user-generated content campaign that stands apart from the many failed industry efforts that have come before it.

The “My Dream Is” promotion offers a first prize of $10,000 for the customer that best encapsulates their savings dream with a photo and 40-word caption.

A recent Forrester report authored by Australian social media expert Steven Noble found more than one quarter (26 per cent) of Australian adults are “creators”, meaning they regularly create photos, audio, videos or other content that they upload to the Internet. This puts Australians top of the list of global content creators, and above American online adults, of which 21 per cent are creators.

Although three quarters of Australian online adults use social technologies, nearly two thirds remain spectators, meaning they read blogs and reviews, listen to podcasts and consume other social content, but choose not to create such content.

Despite creators representing a minority, Forrester research reveals creators are more likely to purchase products and services online - 58 per cent versus 48 per cent for all online adults. They are also more likely to purchase credit cards online (28 per cent versus 20 per cent), making them an attractive target for financial institutions.

Earlier this year Community First Credit Union sought to target creators with a video-based user-generated content campaign designed to raise awareness of its sponsorship of the Mariners Football Club and co-branded credit card. Unfortunately the campaign fell flat with a lower than expected number of submissions. The credit union put the lacklustre results down to the difficulty customers experienced in uploading video to the site.

It is not alone in making the assumption that creators are all interested in and capable of creating video content. American credit union Mazuma also found it challenging when it pitched a video contest at the youth market, only to find not many of its youth we’re interested.

It’s a mistake to assume all members of the Generation Y demographic are creators. Forrester’s research shows it’s actually closer to 35 per cent. It also doesn’t pay to be too open-ended with what it is you want to encourage customers to create.

ING DIRECT’s campaign is simple, with a low barrier to entry and clear message to customers. The voting capability makes it viral without overtly pushing customers to recruit their peers.

It links nicely with the institution’s savings products and offers an attractive pool of prizemoney – a $23,000 investment in customer engagement that would be cheap at twice the price.

Spanish bank, La Caixa has embedded Google Maps into its large screen display ATMs. La Caixa has placed the Google Maps within the help section of their ATM service. The maps show the location of the closest branches or service centres to the ATM.

La Caixa has taken the initiative and recognised that the ATM may not service the needs of every customer. The inclusion of Google Maps provides the customer with a familiar mapping service to provide an additional level of customer service.

By using Google Maps, La Caixa provides a familiar yet new customer experience in a familiar device. This mix of familiar technology and services is a simple demonstration of innovation that benefits both the customer and the brand.

The popularity and thus familiarity of Google Maps is a global phenomenon. The blog GoogleMapsMania follows the amazing and innovative inclusions of Google maps around the world.

It has been widely reported that Sensis has admitted defeat and joined the Google Maps party rather than persisting with its own. However, in reality Sensis has partnered with Google to provide Yellow Pages business listings to all users of Google Maps; an innovative solutions for both Google and Sensis customers. Sensis is taking their listings to Google customers; in return businesses listing in the Yellow Pages will get a Google Map of their location for free.

In the US, Bank-Anywhere.com uses Google Maps to provide the details of all bank branches in a given geographic location. Unfortunately it does not appear to have been updated since the October collapses and buyouts of US banking giants.

Many Australian banks are offering SMS services to locate their nearest ATM or branch including St George and Bank of Queensland. While ATMs can perform a vast majority of transactional needs they do have limitations. Beside some ATMs signage is placed indicating where the closest branch is located.

The Commonwealth Bank offers similar SMS services and has attempted to include ATM locations on Google Maps into its offering. However, once arriving at Google Maps the ATM search yields no results, worse yet you are displayed the default US satellite map. The same search for Branches intriguingly returns only a branch in New York City.

The inclusion of Google Maps into ATMs signals the changing function of these machines to customers. Just as Google has changed the way we read screens, the impact of Google Maps on ATMs may indeed see these terminals transform into multi functional devices. Mobile phones transformed with the inclusion of cameras, MP3 functionality and internet connectivity. Are ATMs headed the down the same innovative and transformational path?

The Commonwealth Bank is preparing to launch mobile banking, joining ANZ, Bank of Queensland, NAB and Suncorp in embracing device-based banking for retail customers.

Revealed in an internal memo released to bank staff, the service (already available at http://mobile.netbank.com.au/) will be officially launched next week, offering mobile-friendly access to account balance and recent transaction data, as well as a GPS-enabled ATM and branch locator. It also includes a direct link to CommSec's existing iPhone application.

Full transfer capability is expected by March next year.

The m-banking application has been built to work with most mobile devices, including the Apple iPhone.

Existing bank customers using the next generation version of NetBank and registered for SMS or token-based security will be able to access the service immediately. Others will have to register for NetBank and SMS security to gain access.

The deployment of the second generation of mobile banking has been slow in Australia, with many banks, including NAB, dipping a toe in the water with text based banking or alerts.

After becoming the first Australian bank to launch m-banking in February, ANZ recently enhanced its offering to work better with the Apple iPhone. The bank has heavily marketed the service and Brian Clark, ANZ general manager of technology for the Asia Pacific region, has said the iPhone’s popularity helped the bank boost uptake of mobile banking.

Alongside this demo of its enhanced mobile banking offering, ANZ includes a direct link to its switching service.

A 2007 survey by mobile messaging firm Sybase 365 found almost one-quarter of consumers surveyed said they would consider switching banks if they were offered mobile banking services.

With the launch of mobile banking by a bank with more than 1.5 million Internet banking users, ANZ’s first mover advantage comes to an end. Westpac remains conspicuously absent from the game, despite moves to optimise its Internet banking service to work with the iPhone’s Safari browser.

It's likely the next first-mover advantage will go to the institution or start-up that builds useful money management applications for mobile devices.

Australia’s payments industry is looking tired and second-class. It’s something we’ve written about many times, and an issue not lost on the Reserve Bank of Australia, which has done little to hide its concern over the industry’s lack of recent innovation.

Now it appears another payments alternative is about to meet a slow death, with a spokesperson for BPAY today confirming its MAMBO project has been stalled.

“Following a 12 month assessment of project MAMBO, the major banks have recently asked BPAY to end its current round of development work on this industry initiative.“However, the banks have asked the BPAY board to revisit the project mid next year.”

The proposal would see individuals register for their own BPAY code which could be used to facilitate payments. Consumers could then port their number from bank to bank without the need to re-establish direct debits or credits, and use it to enable online payments.

MAMBO was one way for the banks to protect their market share in a payments industry rapidly being challenged by non-banks such as PayPal.

A recent study from Javelin Strategy & Research in the US has found consumers are rapidly turning away from credit cards for online purchases. Javelin is predicting nearly one-third of retail transactions will be made using alternative payment methods by 2013, many of which bypass banks and traditional card schemes.

A Cisco poll in the US has also found alternative payments are growing in popularity, with over 35 per cent of those surveyed citing “frequent” or “very frequent” use of payment options including PayPal, Bill Me Later, Amazon Checkout and Google Checkout.

Combine alternative payment methods with the trend for card schemes to work directly with transport companies to offer prepaid cards, and you can see the very real threat to bank revenue.

In Australia, scheme debit continues to be adopted at rapid rates, but credit card interest rates are under scrutiny and PayPal continues to grow its market share.

Centricom-owned alternative payment option POLi has been largely ignored by local banks, but is making inroads in the UK and has received the endorsement of New Zealand’s TSB Bank.

Chief executive officer Simon Warner says: “We actually consider ourselves bank-friendly.” So friendly, in fact, Centricom even offers a solution where banks receiving funds via POLi could clip the ticket and earn revenue from the service.

Warner says the credit crunch is forcing banks in the UK to innovate in order to survive. “In the UK they have to have five different payment options. We’re just not seeing that happen here – it’s really credit card or nothing.

“There’s quite a lot of evidence that consumers want choice when it comes to making online payments.”

The question is will the credit crunch and declining use of credit cards drive Australian banks to innovate or stall?

In the UK and US, car insurance is the most frequently purchased online financial services product. In Australia, it remains credit cards. Uptake of online car insurance is attributed to the price war that resulted from the proliferation of insurance aggregators in both overseas markets.

Australia has not seen the rise of major aggregators although RateCity is in the game, the large insurers – NRMA, Suncorp, GIO, AAMI, QBE, Allianz – are in a position where they have not needed to join such a model to drive new business. Indeed Suncorp owns so many brands after the merger with Promina that they are in a unique position to offer services at all levels of the market. However it is new market entrants that are offering some unique online features, services and pricing models that may cause upset to the entrenched market players.

Budget Direct and its green brand, IBuyEco have made serious in roads into the Australia market with their simple message that they don’t insure bad drivers, thus it costs you less. Real Insurance offers it Pay As You Drive offering online. Pay as you drive policies has proven to be successful in the UK. Real Insurance is renowned for its 10 per cent cash back offer for no claims.

Suncorp owned online only brand Bingle has an interesting interface: all green and very large, simple fonts. Originally launched under-the radar, Bingle now promotes that it is underwritten by AAMI on the homepage, no doubt to instill customer confidence in the new brand.

New player in the market is Youi, the self described ‘Insurance 2.0’ player. Youi is underwritten by FirstRand STI International, part of the FirstRand Limited Group of companies. FirstRand is one of South Africa’s largest integrated financial services providers and operates in Africa, the US, the UK, South America as well as Australia and New Zealand.

Youi has launched with advertising demonstrating that Youi ask the questions where other insurers assume the answer; namely around where and how your car is parked. The campaign has started to be discussed on Twitter so it is indeed reaching the web 2.0 audience.

Like Bingle, Youi is an online brand operated by a large player in the market. It is these new, online brands that are agile and quick to embrace the opportunities that online can offer.

Take a casual stroll back through time to 1999 and re-read The Cluetrain Manifesto; where web 2.0 was just a theory. Of the 95 theses presented, the second point hits home with Youi:

"Markets consist of human beings, not demographic sectors."

Youi has managed to embody this thesis into its advertising, product structure and online offering. To reinforce this they have cleverly used information provided in the quoting process to personalise messages to the customer.

Some insurance providers are embracing web 2.0 technologies to engage with their customers. Youi has not adopted these technologies but it has still managed to make its approach to the online channel a clear point of differentiation.

Their quoting process, while longer than Bingle, is well designed and provides a customer experience that is unique thanks to its personalised messages. While from a customer experience perspective minimum questions may appear better, for accuracy of the quote and ultimately the premium paid, more precise questions yield a better result.

Youi appears to have found that balance between not asking too many questions and still getting enough information; all without compromising customer experience.

It is the nimble, online players like Youi that will be giving the larger, dominant insurers something to contemplate.

In the midst of the volumes of coverage of the credit crunch, the announcement that Zopa will close its US operations after less than a year in the market received little attention.

Its closure is indeed linked to the current market conditions despite the company stating that its credit union partners in the US made more loans via Zopa in September than the previous month. All current US Zopa customers will be transferred to the credit unions while Zopa will focus on its true peer-to-peer operations in the UK, Italy and Japan.

Earlier this year, Gartner estimated that peer-to-peer lending would control an estimated 10 percent of the global market for retail lending within the next 2 years. The social-lending platforms were seen to be the epitome of current trends in green banking, social entrepreneurship and peer-to-peer (P2P) interactions.

Gartner also stated that the leading P2P providers of Zopa, Prosper and Lending Club were providing an innovative choice to customers seeking an alternative to traditional banking services.

Zopa UK has found that the credit crunch increased its business. As banks were forced to tighten lending criteria, customers actively sought alternative solutions to their credit needs, and Zopa came up trumps. In the July quarter, Zopa UK had an average of 3,700 borrowers join per month, compared to 2,500 per month in the previous quarter.

As traditional UK lenders turn away more prospective customers due to liquidity problems, Zopa has been able to offer a viable alternative. Zopa lenders are also increasing as there is now more demand for funds, and lenders are able to increase their rates. It appears that compared to the wider market, Zopa exists in a financial services microcosm.

With both the US and UK credit markets being toxic, P2P is an innovation that may indeed be a shining light of hope in the market. Zopa US had a different model, using credit unions to underwrite their loans, compared to the UK market which operates in the truest peer-to-peer environment.

Loanio, another P2P lender that targets customers with poor credit records launched in the US at the start of the month. Lending Club has ensured its business is registered with US Federal regulators and Prosper has suspended new loans while it does the same. While both companies are legally compliant with existing laws, ensuring customers trust the business is essential in the current market.

The SEC regulations may lead to the website of any lender being viewed as a prospectus. This regulation may prove to be a maintenance challenge for P2P lenders. Thus P2P lenders may need to evolve their offering and strategy in order to provide a service and meet regulatory demands.

If necessity is the father of innovation, then now is the time that the next big thing will be born. It is interesting to think that while the markets are in flux and banks with a century of history are being swallowed, that someone is out there with an idea, an innovation that will emerge as something we all wish we had thought of.

How P2P lending evolves in the current climate may provide insights into what the next innovation will be.

As discussed earlier this week, SmartyPig launches in Australia this weekend.

"Australia" was the answer to the SmartyPig US Twitter competition today. To see how SmartyPig uses social media to reach its target audience, check out today’s prize draw.