Application of Web 20 in Online Banking

The revolution of web 2.0 and the fact that “we are all connected and everybody has a voice” has played a vital role in helping corporations secure a competitive edge in today’s fast changing business environment. Firms are increasingly seeing online services as a potential means of eliminating costs as well as adding value to their customers.
With regards to the banking industry, “Online banking is the fastest growing activity on the Internet today”1. High speed internet connections and improved security has resulted in amplified usage of online-banking by customers. This has created a potential area for IT experts to examine the application of web 2.0 characteristics in online banking.
The popularity of websites such as Wesabe has made banks realize the value of customer-focused features in their online services. According to the Wall Street Journal; “about 16% of US households used some personal finance feature at least once in 2006 . This percentage is expected to rise to an estimated 33% by 2016, with nearly three-quarters of those households using personal-finance tools offered by their financial institution online.”2
This escalated demand for financial management and analysis websites such as (, Wesabe, Geezeo), clearly demonstrates that peoples’ expectations have changed over the last decade and proves that banks should develop ways of turning money management into an enjoyable and easy-to-use procedure and taking advantage of web 2.0 characteristics in order to eradicate the need for these websites.
As a result, banks are left with no choice but to improve the interactivity of their websites in order to facilitate the process of on-line banking. This includes offering online personal financial management through their online banking system in order to generate superior customer interactions resulting in a better quality of customer service which eventually leads to increased customer satisfaction. However, the reality is that most banks are stuck in the past and lack this level of innovation.
In this report, I will try to examine some of the tagging capabilities which can be used to enhance online banking experience in the foreseeable future.

Tagging is a substitute for the organization of categories in a more efficient way. Tags are similar to keywords but are selected by people and do not have a hierarchical structure. According to, “tagging can be a lot easier and more flexible than fitting your information into preconceived categories or folders”.4 Moreover, while traditional subject indexing was created only by professionals, ordinary people can freely select keywords which have made creating, sharing and locating data significantly easier than before.
With regards to online banking, Tags are labels assigned to people’s expenditures and can be used to categorize customers’ transactions. People can easily attach as many labels to their transactions as they want. They can tag them as bills, clothes, groceries, car, travel etc. By tagging their purchases, they can effectively monitor how much they pay out on each of the categories. For example, a customer can discover how much she is spending on groceries yearly? Can she pay her bills? By applying sub labels, the customer can even differentiate how much he/she is spending on alcohol while grocery shopping.
As other customers may label transactions similarly, as soon as the software identifies a pre-tagged transaction, it will apply that tag for all of the users or make it a suggested tag. In addition customers can receive reports of trends based on their labels. Their spending history can contain bar charts which illustrate their expenditure monthly or yearly.
Another interesting dimension of tagging includes the opportunity to rank businesses and find out the public’s perception of these companies.11 It is here that the new “wisdom of crowds” approach applies helping clients spend smarter and make wiser purchasing decisions.
Furthermore, banks can advise customers based on their spending patterns, assisting them to obtain more value for their money when they are shopping. An example of this can be tips on how to save money on food for a customer with high food expenditure. People can also compare themselves with their friends and those in similar age groups with regards to their expenses, savings and mortgages.
Another positive aspect of categorizing expenditure is that customers can set spending targets based on the tags, and monitor if they are exceeding their targets which can be done through emails which will alert them if they go beyond their limit.
Apart from the benefit of tracking their credit or debit cards and bill reminders, consumers can also opt to reveal their transactions to third parties. For instance, by revealing the information in relation to their car expenditure to third parties such as insurance companies, they can get a deal on their car insurance.
Based on these points, it is clear that adopting this characteristic can give businesses the chance to reach their ultimate wish of monitoring consumer behavior and competitors allowing firms to develop business intelligence. This will consequently give organizations a competitive advantage over their rivals and secure their existence in the market.
However, like any new technological innovations, there are certain drawbacks arising from the implementation of web 2.0 characteristics in banking.
As this software deals with personal and critical information, the most crucial problems arise over the areas of personal privacy and business transparency. Given that the banking system holds countless financial information on their account holders, many would argue that the Internet is not a safe place to share critical data. They claim that implementing a username and password is not a secure mode of access.6
Another criticism has been that people would object to the disclosure of their transactions to third parties. However, it can be said that the key to creating trust is providing people with the possibility to opt out from these programs or deactivate this feature as well as restricting of the quantity of information being revealed to third parties.
A further issue arises over the vulnerability of the system to propagated tags as users may feel inclined to tag every entry with every available tag resulting in system failure. This is where reliance on technology for personal finance management can prove hazardous and cause confusion and consequently render accurate decision making more difficult for users.
It should also be noted that, although applying this technology is an excellent way of gathering customer information, the fact is that the new technology itself cannot give companies a competitive advantage. It is merely the foundation which, if used by competent managers and employees, who have the appropriate knowledge to interpret them, can benefit the firm and help managers accomplish business goals.

Considering the fact that Web 2.0 projects are reasonably cheap in terms of design and implementation as opposed to other IT projects which require a larger sum of financial backing, it can be said therefore that this technology “does matter”. As many people are often discouraged by new innovations and technological change, a technology such as this will provide the ideal means by which users can utilize the system in an effective and secure way. The challenge here lies in convincing customers to disclose their personal and financial information, to trust banks and contribute to the exchange of knowledge. The question to be asked is how long it will take banks to start reaping the rewards of their investments and whether such technologies can be sustainable in the long run. The market for this technology is growing and the potential for success is great.