Web 2.0 and Retail Banking: Less Hype Equals Opportunity

Web 2.0 is one of the most misused and abused terms in business today. While consumer expectations advance at a fast pace, a gap between consumer expectations and bank delivery grows. Without a change in strategy, this delivery gap will widen and threaten the bottom line.

Web 2.0 has become a catch-all phrase for anything new on the Internet, or any new technological innovation. Celent defines Web 2.0 as the tipping point in the evolution of the Internet, where consumer behavior and its enabling technology emphasize the Internet user experience and capabilities as engaging, interactive, and collaborative. Web 2.0 represents a departure from the Internet’s legacy of one-way communication and static, disaggregated data.

In a new report, Web 2.0 and Retail Banking: Less Hype Equals Opportunity, Celent seeks to demystify Web 2.0 and remove any lingering hype, while providing a lens through which to view new retail banking opportunities. Key discussion areas include:

• Web 2.0 is not a specific technology; rather it is a shift in consumer behavior (largely online) and the technology supporting it.
• Maintaining and growing customer relationships will require an understanding of why and how consumer expectations and behavior have changed.
• A gap between traditional banking services and the expectations of post-Web 2.0 consumers is significant and grows every year.
• Though some banks will not change for some time, those that respond with evolved product and service offerings will see the greatest returns.
• Closing the gap between an evolving consumer and the traditional bank will require a significant shift in products, services, marketing, and sales methodologies. It may take years to achieve.
• A handful of banks and bank providers are just beginning to change their ways, creating a significant opportunity for banks willing to look at the business in a new way.

"By understanding the experiential aspects of Web 2.0, banks can better comprehend the evolving expectations of consumers, both online and offline," says Celent senior analyst Edward Woods, author of the report. "This understanding will put banks in a position to retain and deepen relationships with existing customers as well as establish ties with the next generation."

The report begins by exploring the experiential and technology themes of Web 2.0 and establishing a case for banks to take Web 2.0 seriously. It then looks at how these themes relate to banking. The report uses examples from other online experiences and examines the challenges banks must overcome to realize the potential of Web 2.0. The final section provides insights into what banks will see in the near future, as the Internet evolves and banks and their near-bank competitors battle to serve the financial services needs of the US consumer.

The report is 62 pages long. A table of contents is available online.

of Celent's Retail and Business Banking research service can download the report electronically by clicking on the icon to the left. Non-members should contact info@celent.com for more information.