Four of Germany's largest banks recently announced plans to expand their Internet offerings and transform some of their Web sites into financial Internet portals.

American banks are picking up on the trend, too. First Union plans to launch an Internet portal site that would offer online banking, shopping and other services. Citigroup has reportedly reserved the domain name "finance.com" and plans to launch a comprehensive financial site. And, in a Bank Technology News interview, four top community bank executives said that, in the not-so-distant future, their Web sites will become "one-stop shops" that meet all the customer's financial needs. 

Now that the competitive playing field has opened up to include insurance companies and brokerage houses, progressive banks and credit unions are looking to the Web for new ways to improve customer service, solidify brand identity, and create new revenue streams. With 5 million more consumers joining the online community in just the first quarter of this year, the potential to reach customers through this medium gets better every day. 

Although there is some debate about what types of products and services should be offered through bank and credit union Web sites, the financial portal appears to be the next step as banks evolve past basic service offerings and assume a broader role on the Internet. 

What is an Internet portal?

A portal is basically a "door" to the Internet. Yahoo!, Excite, and AltaVista are all portals. These pages are "alive" with constantly updated content, such as news feeds, stock quotes, sports scores and other links the user can specify. Portals usually include search engines, calendars and other popular features. 

The beauty of a portal is that it can be customized. The user can choose specific content from a list of available "modules." They can also, to some extent, customize the page's layout and colors. The portal can be set up easily, so that it's the first page to load when the user signs on to the Internet.

Why are institutions interested in portals?

Financial institutions are developing portals to make their sites "sticky." (Sticky is Internet parlance for the ability to attract and keep visitors.) Banks and credit unions already are drawing customers to their sites with Internet banking. But, beyond this feature, they've had limited success creating content that keeps visitors coming back for more. With this in mind, some bankers are asking, "Why not merge the banking function with the standard portal fare and create a site that gives users everything they want in one place?"

There is little doubt that merging online banking with nonfinancial content provides a compelling reason for customers to use a financial portal. Financial institutions hope the expanded content will lead to better customer relationships and subsequently create more cross-selling and marketing opportunities. 

Building a portal also can generate new fee income for the financial institution. When a customer makes a purchase of a nonfinancial product through the portal, the sponsoring bank or credit union shares in the profit. Institutions will have a chance to earn fees ranging from 5 to 30 percent on purchases made from their sites. 

Given the tremendous growth expectations for e-commerce sales, this is a lucrative opportunity for banking institutions. The average U.S. buyer will purchase $627 worth of goods online in 2000, and that figure will increase to $1,033 by 2003, according to a study by eMarketer, an online business research firm. 

Another reason proponents believe financial portals will be effective is security. In spite of the overwhelming popularity of online shopping, concern about entering credit card information online is common for even the most experienced users. Conducting business through the financial institution's Web site transfers some of its tradition of stability and trust to cyberspace. 

"Studies show that when it comes to Internet purchases, consumers feel safe conducting business at their bank or credit union Web sites," says John A. Burns, CEO of FundsXpress, a leading provider of online banking solutions for financial institutions. "It makes sense for financial institutions to offer recognized consumer products in addition to Internet banking, brokerage, insurance, and lending."

In addition to security, expanded online offerings can have other very practical applications for the institution . . . and its clients.

On Harbor Bank of Maryland's Web site, small business clients can sign up for a program that gets them office supplies, overnight shipping, long distance telephone service and more -- all at specially discounted prices. It stands to reason that this scenario benefits everyone involved. Harbor Bank customers get valuable supplies and services at a reduced cost, and the bank profits from a revenue-sharing agreement with these partners. 

Overcoming obstacles

Critics claim that going beyond financial information on a bank portal doesn't make sense to consumers and, even worse, could harm the bank's brand. The primary concern is that banks will add hyperlinks to sites where customers might have a bad experience and, consequently, blame the bank. To avoid this, many portal-hungry institutions are foregoing a piecemeal strategy and forging partnerships with technology partners. The problem is that most technology companies are just that -- techno-wizards. They are not marketers and often don't understand the unique relationships banking institutions have with their customers.

To build a successful financial portal, institutions need more than technology, data, network access and software; they need a comprehensive marketing approach. By teaming up with an experienced alliance marketer who knows how to combine technological wizardry with marketing know-how, financial institutions can greatly reduce the risks of alienating customers and bring their portal online faster than their competitors. And, we all know the importance of speed in today's business climate. 

If financial institutions decide to reinvent their Web sites as portals, they must choose their partners wisely and make sure they affiliate only with companies that thoroughly understand the financial industry and whose products are consistent with the image the bank wants to convey to its customers.