Magazine article American Banker

Banks Shouldn't Try to Herd Customers to Web Channels

Magazine article American Banker

Banks Shouldn't Try to Herd Customers to Web Channels

Article excerpt

If you have been to any Internet seminar or have read books or magazines on electronic commerce, you probably have seen "The Cost Chart." This simple bar chart illustrates a powerful message: "Use e-commerce to move a customer from a higher- to a lower-cost channel and save a bundle of money."

Some of us working in the banking industry have a feeling of deja vu as we look at the Web as a cost-reduction strategy. Is moving expensive branch transactions to the Internet the same as what banks expected from automated teller machines and call centers? Absolutely.

History has shown us that customers are not cattle that can be "corralled" into a more cost-effective channel. Though cost-reduction potential exists, it is truly only potential.

Branch transactions have not fallen significantly in the past decade, according to Tower Group. Even as the number of U.S. banks has declined in recent decades, the number of branches, ATMs, and call centers has risen. Though the growth has not been dramatic, a consistent 2% annual increase has driven the number of U.S. commercial bank branches into the mid-70,000 range.

Even recent consumer research indicates that the site and availability of branches -- regardless of frequency of use -- remain significant to people selecting a new bank.

What does this mean for banks on the Internet? It means they need to either integrate their channels or come up with a new business model. Channel integration requires making each delivery method an integral part of each customer's experience.

For example, at a small regional bank that has a loyal face-to-face customer base, customer experiences across each channel should be personalized. This can be achieved through personalization technology available from firms such as Broadvision or Vignette. These packages help to replicate through electronic channels the "high-touch" experience offered by a branch. …

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