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New Tech to Influence Future of Banking

The swiss army knife that is online banking is getting the equal of that tiny pair of tweezers that has so many uses. Customers will be able to deposit checks through the automated clearing house (ACH) system into their bank accounts. Checkfree.com looks to be pairing with other institutions to enable this feature in the coming future.

Clearing checks will get easier because it can be done by email. Heavy and moderate users will have their entire account activity archived through their email provider. Look for ISPs and banks to start offering encryption as an additional service for email and mobile technologies.

Attention Economy's Affects on Banking Relationships

Forms of entertainment and other distractions are going to keep increasing. Radio isn't going anywhere, TV is staying, email will continue to grow, and the internet is going to invade every nook and cranny there is. Because of this, your attention is constantly engaged. There is only a finite amount of your attention, so the things you choose to spend your time on with either captive or voluntary attention become more valuable.

Your attention gains value, currency you can spend.

This is an opportunity for banks. For example, look at the web 2.0 world. The path to profitability looks something like this:

1. Create a service people want and need to visit often
2. Reach a critical mass of users and gather info about them
3. Advertise in an unobtrusive way, leveraging the intense community and info gathered to sell more expensive targeted ad space

When it comes to banks, steps 1 & 2 are already done; the user base is there and they visit their accounts often on-line. But how do you change the banking paradigm to the point where consumers will not be put off by getting ads tailored to their income level and checking account history?

The untapped resource that is the consumer checking account warrants investigation. That level of access will have advertisers salivating. Ads would be improved because they would be more relevant and targeted, reducing the potential agitation on the customer's part. A few ideas to package the selling of the customers own info are:

1. Third party offering: Someone else is offering the service in exchange for a benefit. Sites like clearcheckbook.com and mint.com already exist with this premise. Closer integration would be beneficial and widely accepted.
2. Partnership: Bank inks deal with telecom to sell advertising over cell phones, offering greater access. Text messaged balances and mobile banking already exist but do not offer any real upgrade to the banking expeirence. More advanced cell phones (GPS, WIde Screens, increased bandwidth) will be able to offer more advanced and relevant ads.
3. Freebies: Offering reduced fees or small credit lines will entice many to join up. Will be offset by ad revenue.

Targeting Customers can Help Improve Advertising

I hate seeing boner pill commercials. First of all, its not relevant to me so it's money wasted on the end of the erection distributor. Secondly, on a subconscious level, I do not want to be reminded that some day... well you get the point.

On top of that, half the population can't even use the product directly; women aren't interested either. But a company needs to get their message out regardless.

Advertisers need to use microdemographics. Think of your 20 gallon jug of collected change from over the years.

The change as a whole has collective needs. The coins want a good place to stay, away from the path of falling sticky substances that could bind them together for ever.

But they also have needs within their specific denominations that can be targeted. The copper industry might want to target pennies. The quarters may want to know about the latest arcade craze.

Throwing money at a 30 second spot for (insert TwentySomethingProduct here) during a show that has a large share of twenty-somethings watching just seems wasteful. If the smarter route is taken through web advertising, you're still limited to adwords or already established sites with better, but still limited information about their users.

If the banks could reach an agreement with their customers about the sharing of their personal checking account information, it could go a long way towards filling the current information gap; adding another revenue stream for banks and better services for their customers. Specific targeted ads aimed at microdemographics stay effective because they are relevant and personal.

Reboot

This needs to be more organized. Nature abhors a vacuum, and I have sucked.

Banking is or will be affected by three major trends. These are themes I intend to explore.

Technology: The everywhere internet and web 2.0 pervasiveness are driving the industry to become more open. Consumers are getting used to constant, clarion access. The current meager online banking options will eventually be replaced. Look out for new services, like this from chase, to get more popular.

Evolution into Service Provider: Online banking, check cards, and id protection can be thought of in terms of service because they are provided to you for use of the bank. With a service provider mentality, they will feel entitled to make money in different ways and help lower the cost of service for more access. Some future offers might be:

• No or discounted overdraft fees in exchange for being able to sell your shopping info to advertisers.
• Enhanced online banking abilities in exchange for ads relevant to recent purchases aired inside your online banking account
• Specially outfitted cell phones with temporary card number generation in exchange for GPS triggered local ads beamed straight to your phone

Advertising needs a new partner: Twenty-somethings will eventually not see Viagra ads, and the elderly will be not informed about about the latest flavor of caffeinated Budweiser. The era of national ad campaigns is dying. The better option is targeted web advertising. It's easier to track, more effective, and can be more enticing with whole websites acting in support of the ad.

Banks, in exchange for services or discounts, can make money by providing information to help target customers in this new advertising world.

I envision them replacing broadcast networks as the major target of ad purchases, maybe through partnerships with telecoms. That is a fun topic for another time.

What the Ads may look like

It makes sense for the bank to get into the advertising business for a number of different reasons. Up to the minute checking account information will be highly prized. Advertising possibilities that would make sense are:

Event Triggered Ads

Upon checking your balance on payday, depending on your micro demographic, you may receive ads for happy hour specials in your area, sales on larger purchases that fall within your budget, or notification that the movie you saw a few months ago was just released on Blu-Ray. Retailers know that your attention will be on your funds. If an event may trigger thoughts about your balance, it is in their best interest to want to advertise during that time.

This could be annoying to consumers. Ads need to be relevant and service oriented. A new parent should get ads for diapers around payday and not movie previews. A person who does not drink should not be notified of happy hour specials. Ads should be expected and not obtrusive. Know the customer.

Proximal Ads

With GPS enabled devices and an omnipresent web, the ability to sell ads that meet certain preset parameters becomes a possibility. For example, Applebees may need to increase it's lunch crowd. Selling ads to air during the lunch hour to consumers on their cell phones who are within a predefined radius from an Applebees location is the most direct way to meet that business goal. With info from the bank, a the massage could be tailored to only include office park dwellers, or blue collar types. Limits would be in place for the amount of ads per micro demographic. Rates would rise and fall according to demand.

Ads for towing services sent to motorist who have been idle for 5 min on a highway. Reminders projected on your windshield from the grocery store about a gap in your milk purchase routine as you drive by it. The combinations are limitless.

This common sense approach focuses the billboard on a targeted demographic. This maybe a way for the lucrative, local advertising scene to play a role in the new economy. The chance to purchase GPS enabled ads could be a facet of the overall small business suite of services offered.

Advertising Heir Apparent

Using your personal checking account information, banks will sell targeted and personalized advertising through pairings with cell phone companies and telecoms.

Why is this a good idea? The customer's personal information(your information) is a valuable, largely untouched asset. With advertising migrating towards more targeted ads at clearly defined groups through the internet, the type of information that a consumer checking account holds becomes a commodity. Money is to be made on who the customers are and not just on their balances and mistakes. Fees as we know them may be a thing of the past.

This type of arrangement would need to be a partnership. Customers will need to willingly want to be a part. Otherwise, sharing information as nuanced as purchases(what, where, when, how, who, how much) will alarm privacy advocates and scare advertisers.

To sweeten the pot, banks should provide incentives. Aimed largely at the net savvy, offering specialized account tools and discounted overdraft rates would sway many. But it must be enough to entice a critical mass to sign up, otherwise advertisers would not pay enough for access