1. A Study of Customer Relationship Management in Financial Services on the Web Dr. Dennis Anderson Dr. Jim Lawler Pace University New York City 2004

2. Outline of Presentation Abstract Introduction Financial Services Market Characteristics of Financial Service Web Sites Research Methodology Analysis of Financial Service Sites Implications of the Study Conclusion

3. Abstract Analysis of Study on Large Financial Businesses Indicates that These Businesses Enable Higher Commerce, Content and Navigational Context, but Lower and Generally Inadequate Communication, Community, Connection and Customization Design on Their Web Sites. Analysis Contributes Important Insight into Competitive Dynamics of Customer Relationship Management for Web Empowered Financial Service Businesses Servicing Affluent Market.

4. Definition of Terms Customer Relationship Management – strategy of optimizing processes of financial service businesses, that enable the marketing, sales and service of products, through innovation of integrated customer channels, including that of the functionality of the Web, in order to effect customer loyalty and financial service profitability.

5. Introduction Importance of Customer Relationship Management on the Web to Businesses in Financial Services Industry Is Unclear in the Research. Industry Is Highly Cautious about Investment in Relationship Management, Due to Economic Constraints and Frequent Failure in Technological Implementation. Non-Academic Studies Indicate Caution Is Contributing to On-Line Functionality of Customer Relationship Management Inconsistent from Off-Line.

6. Introduction On-Line Channel of the Web Continues as an Important Factor in Interactivity Experienced by Customers. Experience on Web in Its Negative or Positive Impact Influences Future Relationship with Financial Service Business. Financial Service Businesses Are Clearly Challenged in Customer Relationship on the Web.

7. Introduction Focus of Study Is to Analyze Effectiveness of Innovation in Customer Relationship Management on Web Sites in Financial Services Industry. Study Attempts to Demonstrate that Web Is Critical for Future of Financial Service Businesses that Compete for Affluent Customers.

8. Financial Services Market 20% of All Large, Intermediate and Small Financial Service Firms Have Commerce or Transactional Sites in USA vs. 40% in Finland and Norway, 20% in UK and 10% in France, Germany, Italy and Sweden.

9. Financial Services Market Studies Indicate Number of Financial Service Sites Domestically and Internationally Increasing Significantly in This Decade. 60 Million Consumers in Europe on the Web in 2003, Increasing to 85 Million in 2007 – US Banker Weekly Bulletin, April 1, 2003

10. Financial Services Market Market for Affluent Consumers Consists of Customers in USA Having Investable Assets of $1 Million or Higher, that Includes Advisor-Directed (20%), Advisor / Self- Directed (50%), and Self-Directed (30%) Customers.

11. Financial Services Market Only 50% of Customers Consider Web Sites of Financial Service Businesses Effective in Relationship Management. 25% Define Effective Sites in Advanced Customer Management Functionality that Facilitates Relationship. Most Customers Define Advisor Availability through the Sites as Important in Their Relationship with the Businesses.

12. Financial Services Market Financial Service Businesses Are Focused on Older Affluent Customers, but Indications of $20 Billion in Revenue in the Decade from Emerging Younger Consumers Are Not to Be Ignored in the Market.

13. Characteristics of Financial Service Web Sites 7 Constructs of Customer Interface on Web: Context, Content, Communication, Connection, Community, Customization and Commerce.

14. Characteristics of Financial Service Web Sites Context - Depth of Comfort and Ease of Navigation; Content – Depth and Quality of Information; Communication – Degree of Dialogue from and to Financial Advisor; Connection – Degree of Connecting to Affiliated Financial Services; Community- Degree of Interaction with Other Investors; Customization – Degree of Explicit and Implicit Personalization; and Commerce – Extent of Commercial Interaction.

15. Characteristics of Financial Service Web Sites Context -Foreign Language -Help -Hyperlink -Search -Real Time -Single Sign-On

16. Content -Account Aggregation Detail -Account Analysis -Account Product Holding -At a Glance Dashboard -Document Imaging -Frequently Asked Questions -Glossary -Household Summary - Performance Reporting - Planning Tutorials - Portfolio Tools - Publications - Research - Transaction History - Watch List Characteristics of Financial Service Web Sites

17. Communication -Alert -Chat -Co-Browsing -Collaboration -Conferencing -Form and Screen Pushing - E-Mail Links - E-Mail Notification - Instant Messaging - Live Web Help - Telephony - Whiteboarding Characteristics of Financial Service Web Sites

18. Connection -Market News and Quotes -Business News -Featured Domestic and International News -Life Style News Syndicates -Links to Preferred Merchants Characteristics of Financial Service Web Sites

19. Community -Customer Bulletin Boards -Continuing Education Forums -Discussion Groups -Event Sponsorships -Expert Investment Seminars Characteristics of Financial Service Web Sites

20. Customization -Account Preferred Dashboard -Alert -E-Mail Notification -My Profile and Watch List -Forums and Seminars -Industry, Life Style and Merchant Links -Recommendations in Products and Services Characteristics of Financial Service Web Sites

21. Commerce -Account and Fund Transfer -Automatic Investment -Bill Payment and Presentment -Brokerage Services -Confirmations -Direct Deposits -Pre-Filled Application Forms -Privacy and Security Services -Transactions on Wireless Characteristics of Financial Service Web Sites

22. Constructs Include Highly Advanced and Fundamentally Basic Functionality that Facilitate Customer Relationship Management on the Web.

23. Research Methodology Methodology Employed Sample of Large-Sized Financial Service Businesses, Consisting of Banks, Brokerages, Investment Banks and Mutual Fund Firms, in 3 Iterative Stages of Analysis.

24. Research Methodology Stage 1a: 13 Financial Businesses in USA Were Selected as B2C Investor Sites, Analyzed by Students for Their Effectiveness in 7 Constructs of Customer Interface, Applying 3-Point Scale of Low, Intermediate or High Functionality in Technology, and the Data Was Collected by the Author. (Sites Included American Express, Bank of America, Citibank, e- Trade, Fidelity, Merrill Lynch, JP Morgan, Morgan Stanley, Northern Trust, Paine Webber, Salomon Smith Barney, Charles Schwab and Vanguard in USA.)

25. Financial Service Sites American Express Bank of America Citibank E*Trade Fidelity Merrill Lynch J.P. Morgan Northern Trust Paine Webber Salomon Smith Barney US Trust Vanguard Wells Fargo Constructs of Customer Interface Context Content Communication Community Connection Customization Commerce Functionality of Sites Low Intermediate High Relationship Effectiveness of Financial Service Sites Consumer Students Spring Semester Summer Semester Winter Semester 2003 Statistical AnalysisContent Analysis Figure 1: Analysis of Financial Service Sites - Stages 1 and 2

26. Research Methodology ( Stage 1b: Financial Service Businesses in Europe Will Be Selected, Observed and Analyzed Comparatively for Their Effectiveness in Similar Constructs and Application); Stage 2: Data from Stage 1 Was Analyzed in SAS to Determine Construct Mean Scores and Statistical Significance; and Stage 3: Domestic USA (and European) Sites Will Be Analyzed in a Survey of Customer Relationship Management Strategies of the Businesses.

27. Analysis of Financial Service Sites From Stages 1and 2, Analysis Indicated Most of Sampled Sites Have Following: - Higher Context, Content and Commerce; - Intermediate Communication, Connection and Customization ; and - Lower Community.

28. Table 1: Summary Analysis of Financial Service Sites Financial Service Firms Average ScoreHigh Functionality Frequency * Score 3 Intermediate Functionality Frequency * Score 2 Low Functionality Frequency * Score 1 Constructs Context2.64132428 Content2.430931638 Commerce2.2264269130 Communication1.763307293 Customization1.756350257 Connections1.635311317 Community1.27102554 * n = 51 Students x 13 Firms

29. Analysis Confirms Practitioner Literature and Proposes Following: Proposition 1. Large Financial Service Businesses Have Higher Context Interactivity, Informational Content and Commerce Functionality on Their Web Sites, Increasing Potential of Relationship Effectiveness. Proposition 2. Large Financial Service Businesses Have Only Intermediate and Lower Advisor Communication, Affiliated Financial Connection, Customized Feature and Investor Community Functionality on Their Sites, Decreasing Potential of Relationship Effectiveness of Sites.

30. Analysis of Financial Service Sites Managers of Sites Will Be Surveyed on Customer Relationship Strategies in Stage 3. Results of Study Will Not Be Final until Completion of Stage 3.

31. Analysis of Financial Service Sites Results of Study Are Helpful in Initially Analyzing Financial Service Business Market.

32. Implications of Study Results Confirmed Non-Academic Sources that Constructs of Customer Relationship Management on Financial Service Sites Are Higher in Commerce, Content and Context, but Lower in Communication, Connection, Community and Customization Functions that Facilitate Interaction on Web.

33. Implications of Study Though Bulk of These Businesses Are Focused on Advisor Interaction in Offices, Complementing Advisor Desirability, Benefit of Effecting Increased Relationship in Customer Interaction from Sites Is Currently Elusive to the Businesses.

34. Implications of Study Sensitivity to Affluent Customers Interfacing Concurrently or Alternately on the Web Channel Is Important to Not Only Self- Directed but also Advisor / and Self-Directed Advisor-Directed Customers.

35. Implications of Study Functionality on the Analyzed Sites Is Inadequate in Both Advanced and Basic Interaction, Despite Evolution in Web Innovation. Implied Interpretation Is that On-Line Financial Service Businesses Continue to Be Indistinguishable in Functionality of Customer Relationship Management.

36. Implications of Study Financial Service Businesses that Initiate Innovation, such as Merrill Lynch, Will Focus on Advisor Friendly Wealth Management Technologies, that Include Customer Relationship Management Tools.

37. Implications of Study Those Businesses that Initiate Technological Transformation of Their Sites on the Web Will Have an Edge in Serving the Affluent Market, an Imperative Implied in Study.

38. Conclusion Large Financial Service Businesses in Affluent Market Are Currently Focused Less on Enhanced Communication, Community, Connection and Customization, and More on Fundamental Commerce, Content and Context Functionality of Customer Relationship Management on Their Web Sites.

39. Thank You!