At the beginning of last year, I read an article somewhere on whether we should or should not take into account the age of our customers, since it is not a significant marker. Worked up, I began to collect some data and after consulting with colleagues we summarized a bank-sector wide inner internet bank penetration (how many of the customers of the given age-group has internet bank access relative to the sum of the number of customers of the given age-group).

I had a revelation upon the results - which can be described as “internet bank tsunami”:

iBank penetration

Why is this important?

Given only the results, it’s not a big deal - we know, the youth uses the internet much more that the older onws - since they grew up on it. The problem emerges - from the banks’ point of view - when we conclude, these people don’t use any other channel. Nor call-center, nor the branch. Banks don’t have any personal feedbacks, since there aren’t any live contact. There’s no administrator to turn to, when entering the transactions (“Please don’t move your deposit to an other bank, we can figure out a better deal” - we’ve seen examples of desperate attempts to get back customers’ deposit literally on the street, at the rush of the introduction of the interest-tax).

For the youth, the concept of the “bank” is reduced to the concept of the “internet bank”. They are one-channel users: the product not existing on the internet bank does not exist at all. Only those products / services can be sold, which is accessible on the internet bank - the others are simply not usable for them. The MCM concept (multi-channel marketing) does not work with them.

The functionality enhancements, and their success rate measurement shows exactly this - some examples:

One important thing is lacking from all the Hungarian internet banks: personalized marketing. The basic role of the internet bank at every institute is to be able to initiate transactions, but there aren’t any plans to direct market the usage of the products / services. If the customer realizes what to use the service for he / she will be happy, if not, nothing happens - but our efforts go to waste.
In spite of this, the internet bank can only utilize it’s potential, if:

What should we recommend to our customers on the internet bank?

If we started off by measuring the age of our customers, let’s see a simplified sales-model:

We don’t really have bank related financial activities (as customers) up until 18 years - not mentioning the pocket money and the baby-bonds. After the 65 years, the banks usually don’t see us as valid customers (we are not loan-worthy). The banks have to make it sure, the in-between age group has access to the services.

What obstructs the process?

There aren’t any technical reasons for a customer to start a loan application on their internet banks, posting (or electronically sending) the required papers, having the bank accept the application by opening the credit and the customer getting notified on the event in an SMS message. The only thing obstructing the process is the Legal Division.

Unfortunately, Hungary has a deep-rooted tradition to handle every application on paper - stamped, signed by blood having to do with transactions / contracts. The law for allowing deals to make electronically is far away from technology and life - this is why it is so under-used - and there aren’t any changes on that from in sight.

Just one simple example: there isn’t a way to process a simple, 100.000 HUF personal loan application on the internet bank (after having identified myself by username / password / SMS token, and signing the transaction the same way) without having to go to the branch office, but 10.000.000 HUF can be easily transferred with the same method… Just doesn’t make sense.

How do we handle the problems?

It is clearly shown on the age-distribution, that as the demographics are slowly changing, but the case of internet penetration is a rather fast moving thing. The internet moves into everyone’s life quite quickly, and this is why it is important to think about the introduction of new products / services to the internet bank. As the saying goes: who doesn’t act (enhance the functionality) will be left out.