Connecting Channels Key to Online Banking

More consumers are incorporating online banking into their daily routines, according to research from the TowerGroup, even though the predictions of explosive growth for e-banking have proven a disappointment.

Forty percent of U.S. households agree that online banking offers significant advantages over traditional modes of banking. But that doesn’t mean U.S. banking customers are prepared to move all of their bank interactions online. Consumers remain decidedly multichannel in their approach to banking — with a majority using either two (26 percent), three (24 percent) or four (20 percent) different delivery channels to conduct their financial services business. Nearly 44 million households can be classified as primarily remote users (using non-branch channels) or mixed-remote users in their banking habits. Nearly 60 percent of the 19 million households that are deemed affluent are primarily remote banking users.

U.S. consumers clearly find value in online banking. According to TowerGroup, a growing percentage of consumers find significant value in online banking when used in conjunction with other PC-based finance activities, such as the management of household finances or online tax preparation. TowerGroup found that 44 percent of U.S. households with PCs are using those computers for financial transactions or management.

The future of online banking, and whether it can retain customers that try it as well as entice new users, rests on satisfaction, which must be driven both by enhanced customer service and access to a greater range of services.

“Financial services firms must expand the range of services they provide online,” said Frank Caruana, vice president of the e-banking and Mobile Financial Strategies research and advisory services at TowerGroup. “They must strive toward excellence in their customer service functions, so that online support is easily accessible and provides effective and prompt problem resolution. Institutions must also carefully watch their online performance to ensure that they provide online users with at least 99.9 percent up-time.”

Several banks have passed the threshold of 3 million online accounts in 2001, attaining volumes that provide sufficient returns to compensate them for the investment in, and maintenance of, Web-based offerings. A few of these banks are seeing growth of over 100,000 online accounts per month, according to TowerGroup. Bank of America has publicly stated that it expects its online customer base to grow 61 percent in 2001 to reach 5 million by year’s end, which will account for 33 percent of the total checking account customers at the bank. Wells Fargo is reporting similar growth in its online customer base. In the online-only realm, E*Trade has reached over $7.7 billion in online banking deposits and nearly 500,000 active banking customers as of August 2001.

“The marketplace is clearly demonstrating a still-growing appetite for many of the key characteristics of online banking, such as convenience and self-service,” Caruana said. “With the Web-based channel now a firm part of the financial services landscape, our research finds online banking entering a new stage in its evolution. It is a stage where consumers will become much more demanding in terms of service, reliability and access to enhanced transactional capabilities.”

Financial institutions that want to take advantage of their online offerings must learn to handle one of the same problems that has been faced by multichannel retailers: They must find effective ways to aggregate information about what consumers are doing online with data across all channels, providing institutions with a complete picture of their customers’ needs and preferences.

“The Web will have an increasingly important part to play in delivering value to the consumer,” Caruana said. “Ultimately, the goal remains to offer consumers their choice of delivery channels, and then to ensure that their experiences are integrated no matter which point-of-contact they select at a given moment.”

Related reading