Winning Online Financial Services Depend on 'Traditional Values'.

Thousands of financial services companies are active on the Internet today hoping to reap rewards amid the chaotic competition of the online marketplace. Ironically, whether they operate in the business-to-consumer or business-to-business space, the winning online companies in securities trading, banking, insurance and other financial areas appear to have learned from and built on key attributes of successful brick-and-mortar businesses.

Attributes such as deep knowledge of the consumer, precise target marketing; the engineering of maximum consumer convenience; and ensuring top-quality customer service have proved to be the key differentiators. Technology is vital of course -- it constitutes the price of admission to the online world -- but the best programs are those that support the delivery of these key attributes.

Segmenting Markets, Understanding the Consumer

Examples of well-designed financial services sites abound in many sectors. For example, in the world of online securities trading, Charles Schwab's success stems from its laser focus on the do-it-yourself trader. Schwab.com features no-nonsense access to relevant information and easy-to-execute online functionality for fast, convenient trading. Schwab correctly understands the desires of the potential "do-it-yourselfer" to earn a better return through improved knowledge and by cutting the costs of dealing through a traditional broker.

In online banking, precise target marketing combined with providing maximum convenience have made E*Trade Bank (a.k.a. Telebank) the leader in its field. The bank targets traditional bank customers who want high-yielding accounts without sacrificing safety. It heavily promotes the themes of higher yields available due to lower costs, the safety of FDIC insurance and its excellent independent ratings. The online bank backs up these claims with superior online user experience and offline customer service.

In insurance, the challenge is creating, as well as targeting "do it your selfers' in a market space riddled with commoditization, self serving commissioned brokers and confusing information about complicated products. Winning platforms help consumers understand their unique insurance needs and quickly vector them into prescreened product selections from multiple name-brand providers. If more data is desired, the consumer can drill down or reach a salaried, unbiased licensed customer representative on the phone 24 hours a day.

Knowledge of the ultimate end user is a critical ingredient for successful companies in both the B2C and B2B market arenas. Whether they are delivering online banking, insurance or other financial services, these companies must design technology platforms to serve the needs of both intermediate players in the product delivery chain as well as the ultimate end user. For example, Answer Financial Inc., a provider of insurance and financial services, provides its consumer-oriented platform to third-party distributors, such as the giant CIGNA health insurance company. CIGNA in turn can offer many of Answers products -- without charge -- as a service to the nearly 25 million employees it insures nationwide.

Convenience and Service will he Hallmarks of Future Success

The online financial services winners will be companies that provide their customers with convenience born of personalization and top-quality customer service. Convenience will be achieved through one-to-one marketing, whose concepts were originated in the offline world, but today are being refined and enlarged with zeal by online marketers.

When online customers sign on to a financial services site, they generally answer brief questionnaires or fill in simple data forms. One-to-one marketers retain this data and use it to build dynamic customer profiles that are updated each time the customer returns. Very soon the site has developed a profile of user needs, service requirements, lifestyle milestones and ultimately appropriate products for the end user, whether an individual, or a business.

Some of the winners in online financial services augment the information gained directly from the user with third-party data to further develop that individuals profile. The upshot is that better targeted products are presented to the consumer, increasing the ease of shopping and the overall utility of the site to the consumer.

Lessons learned from retailers like Publishers Clearinghouse, a pioneer of one-to-one marketing, are quickly being applied by companies like Schwab and E*Bank to present financial services targeted to their customers' needs. These firms are constantly re-inventing their platforms to ensure the best use of technology to improve the convenience, value and efficiency of the online experience.

Finally, customer service is the make-or-break factor for future success online. As E-loan and many other B2C financial service merchandisers have learned, consumers want the security of knowing that they can speak to a knowledgeable customer representative at any point while using online systems. Those dot-corns that skimped on pre- and post-sales service discovered quickly how elusive customer loyalty on the Internet can be.

In insurance especially, consumers almost always opt to go off line at some point during their transactions to corroborate what they have learned. In response, the top online insurance services providers and infomediaries have established integrated Web-telephony.

The service phenomenon is equally true in B2B. If a site does not integrate with easily accessible live help, the online provider will likely see user frustration turn abruptly into lost sales.

While cost-savings, speed to market and volume were the initial mantras of online financial services businesses, time has proven that winning players built their foundations on customer knowledge, convenience and service -- just as their brick-and-mortar predecessors did.

Alan C. Snyder, is president and CEO of Answer Financial Inc., an integrated Web-based provider of insurance and personal financial planning tools and products, based in Encino.