The Future for Alerts in Retail Financial Services
12 May 2003
Bradford Adrian

As retail financial services providers recognize the benefits of sending alerts to their customers, careful planning and an understanding of what makes an alert useful will be critical for gaining customer acceptance.

Analysis

Why should a financial services provider consider providing alerts for its customers?

Sending proactive alerts to customers, if done properly, can benefit both the customer and the financial services provider (FSP). Customers benefit from and appreciate the ability that alerts provide to keep up-to-date with their financial services accounts. Examples of the customer benefits of alerts include:

• Money savings — The costs of an unauthorized debit or nonsufficient funds penalty can be avoided through the rapid intervention that alerts provide.
• Time savings — By notifying a customer that additional information or signatures are needed on an insurance claim, the alert can shorten the waiting time for a claim reimbursement.
• Greater sense of control and involvement — Many consumers desire the ongoing involvement with their financial accounts that alerts can support.
• Enhanced security — Providing alerts of account activity can deliver early indication of unauthorized access, fraud or identity theft.

FSPs also stand to gain from rolling out appropriate alert programs:

• Money savings — By proactively conveying information to customers, an alert costing less than $0.50 can preempt an inbound call to the contact center, which costs the FSP about $5.00 to handle.
• Time savings — Claims processing can be accelerated by rapid response from customers whenever their attention or input is needed.
• Deepened relationships — Alerts can afford frequent customer engagement and deliver the image that their provider “cares” enough about them to keep them informed.

How widespread is the use of automated alerts in retail financial services?

The use of automated alerts within the financial services industry is not new; brokerages throughout the world have been offering trading alerts to their agents and consumers through various media (such as wireless and e-mail) since the advent of pagers and the Internet. In addition, the original purpose of positive pay was to alert companies of suspicious checks, allowing the company to decide whether or not to pay the item.

However, other sectors, such as retail banking and insurance, have made relatively little use of alerts. In North America, fewer than 10 percent of midsize and large retail banks provide any form of content-bearing alerts (as opposed to notification of the availability of electronic statements). And, among those that do offer such a service, fewer than one in 10 customers actually opts to receive any form of alert. Research has shown, however, that such seemingly low consumer utilization of alerts stems from the fact that very few FSPs have implemented alerts systems that deliver information of the type and form that customers feel they can really use.

What types of alert information should FSPs consider sending to their customers?

Historically, most of the alerts offered by FSPs provide very generic market data, such as stock prices, or very general overviews of account status, such as account balances. However, it is transaction-related information that customers worry about most, and which can provide the most immediate value to customers. Receiving an alert daily with a checking account balance, for example, can give customers a hobbled means of monitoring their general financial status; conversely, receiving an alert immediately whenever a debit is posted allows them to respond quickly to potential fraudulent use of their accounts.

Some types of transaction-related information that customers value include:

Retail Banking

• Pending transactions that will result in nonsufficient funds
• Debits or credits exceeding a prescribed limit
• Automatic deposits or withdrawals
• Upcoming bills due via online bill payment system

Insurance

• Claim status updates
• Requests for additional information for claims
• Upcoming premium payments due

Brokerage

• Automatic transactions
• Confirmation of transactions

Other than making sure that the right type of information is being shared, what alert features do FSPs need to incorporate to help drive adoption?

The leading-edge FSPs that have been successful in driving adoption of their alert systems have learned that consumers find the greatest value in alerts that they can personalize to their own preferences, and that can be delivered through a variety of media or devices.

Personalization has been the keystone of alert programs such as Granite Bank's, for example. More than 10 percent of Granite's customers opt to receive alerts on an ongoing basis because they can configure, via a Web interface, alert specifics such as:

• Types of alert triggers — Customers can choose which activities they want to alerted to, such as large deposits or withdrawals, and can set the transaction sizes that will trigger an alert.
• Timing of alert delivery — Customers can customize the time of day that alerts are delivered; some types may be desired immediately, others only after work hours, for example.
• Routing of alerts — The specific device type or channel can also be selected. Some customers prefer Short Message Service (SMS) notification, for example, while others prefer e-mail or telephone alerts.

Delivery through a variety of media is an important component of Electric Insurance's new alert initiative. To ensure that its customers receive their alerts about upcoming premium payments due, claim status and inclement weather warnings, Electric Insurance can deliver messages via a wide variety of media and devices:

• E-mail
• SMS and other text messaging formats
• Instant message or ICQ
• Fax
• Telephone

In the case of Electric Insurance, the company was able to reduce policy lapses by 29 percent by means of proactive alerting of upcoming premium dates.

Appropriate supporting technologies beyond those for actually sending the alerts are required. Providing effective alerts depends on the FSP's ability to understand its customers' channel utilization and preferences and on the availability of customer data for establishing alert triggers. Channel integration strategies and technologies are critical for this, as are tools for customer analytics, modeling and real-time event processing.

FSPs need to understand that even though financial services alerts have been around for years, they can still deliver benefits to both the customer and FSP. However, FSPs will be able to garner customer adoption in the future only if their alert programs incorporate next-generation requirements for personalization, new information types and flexible delivery.

Key Issue
How can FSPs evaluate, measure and implement technologies and processes to ensure competitiveness and efficiency?

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