Flawed navigation and customer service frustrate today’s Web banking users, but low-cost design fixes and an ongoing focus on user experience will help firms win sought-after online transactions, according to a new report by Forrester Research (Nasdaq: FORR).

To uncover how European banking sites can improve, Forrester graded the sites of the 20 largest European retail banks according to its user experience review methodology, which evaluates how well sites help users achieve their goals. Significantly, even the best sites don’t pass overall usability, and the top-rated Halifax, Credit Suisse, and Deutsche Bank sites didn’t reach an overall passing grade. British and German bank sites beat Italian, French, and Spanish banks.

“Europe’s top retail banks each spend between €20 million to €50 million annually on their Web sites, and the stakes keep rising as banks gear up to welcome 20 million new European online banking users, building a critical mass of 64 million online bankers by the end of 2002,” said Forrester Analyst Charlotte Hamilton. “Most of Europe’s large retail banks say they focused last year on enhancing navigation and layout, and this year they intend to improve transactions. To monitor their site’s success, most firms track traffic and customer visits, but only 44 percent analyze interactions or sales. At present, most firms apportion a third of their budget to infrastructure and integration, a third to building transactions and tools, and the remainder to fund content, site performance monitoring, and design.”

Banks’ site scores justify the money spent on content, tools, and infrastructure. Two-thirds of firms pass for availability of essential content and function; the leaders display clear product information at each step, supporting users with functions like mortgage calculators. More than two-thirds of sites pass for reliability, but poor navigation and service conspire to spoil the user experience. While most sites’ text and graphics are visible and logically presented, standards for site navigation and service are below a pass, with half of the sites failing to offer alternative access to content through search engines. Finally, customers are offered little or no on-site help at present.

“To leverage their site’s value and reliability, banks must continuously work on the design improvements and use accepted Web design standards, while working hard to keep experienced Web browsers engaged,” Hamilton added. “Rather than putting only one link on the home page to log in to an account, best practice sites will offer frequently used links consistently throughout the site alongside “Help” and “Contact Us.” For users less at ease with Web navigation, firms should offer search as another route to content and functions, and link unsuccessful searchers to the call center. And, crucially, today’s bank sites do little to assuage consumers’ fears about how firms use their data online, with few firms giving clear and consistent access to privacy policies throughout the site. This is the most failed criteria alongside the absence of search engines. Banks must make their users feel comfortable inputting personal and private data, to move customers up the confidence curve.”

For the report “Making Online Banks Usable,” Forrester first spoke with 18 of the largest European retail banks about their Web development strategy, and graded the sites of the 20 largest European retail banks according to their user experience review methodology. To evaluate sites, Forrester graded three tasks: 1) an early adopter applying to purchase a loan or insurance product; 2) a mainstream user transferring funds across accounts; and 3) a technology novice seeking basic information on online banking.