Multi-channel banking has become the norm for customers. Rekha Menon reports on developments in the four crucial areas of ATM, call centre, internet and bricks-and-mortar branches.
Providing a multi-channel experience to customers is no longer an
option for banks but an imperative, created by competition,
technological developments and customer expectations. Despite a
never-ending development of devices through which banking transactions
can be conducted – such as WAP-enabled phones – essentially, most banks
focus on four critical delivery channels: ATM, call centre, internet
and the bricks-and-mortar branch.
“Multi-channel banking has been the focal point of our strategy,” says
Chanda Kochhar, executive director at ICICI Bank. Banking in India was
primarily restricted to branches until less than five years ago, unlike
in other global regions, where ATMs and tele-banking have been around
for a long time. Through its multi-channel focus, ICICI Bank has
propelled itself into the position of being the country’s second
largest bank, despite having less than 5% of the number of branches
that the largest commercial bank has. ICICI has 450 branches, 1700
ATMs, an 1800-seat call centre and an internet user base of more than
three million.
Innovation strategies
Although a first-mover strategy works well initially – as in the case
of ICICI Bank – banks have to innovate continuously. This is especially
true in mature markets, where nearly all banks currently offer a
multi-channel experience as standard.
A number of differentiation strategies are possible. Call centres work
as an important channel to reinforce the personal experience of
customers. Essential for outbound telemarketing campaigns, call centres
can also be used for cross-selling purposes. ATMs, although still
primarily a channel for cash withdrawal, have evolved over time to
enable banks to offer a variety of services depending on customer
attitudes and preferences. From simple cash-dispensing machines to full
self-service kiosks, a range of options is available. At ICICI Bank,
almost half of all transactions take place through the ATM, including
bill payments, donations to religious organisations and mobile
phone-top ups.
Internet power
Offering the lowest cost per transaction, personalisation and a true
“anytime, anywhere” banking experience, the internet is the most recent
of the four main delivery channels. And for Bo Harald, vice-president
and head of electronic banking at Nordea, it is also the most powerful.
At Nordea, the largest financial services group in the Nordic and
Baltic regions, the emphasis is primarily on electronic banking. “A
majority of our customers prefer to do banking over the internet,” says
Mr Harald. “The bank has more than 3.6 million active net banking
customers. In Sweden, 80% of active customers who use us as the main
bank have signed up for the internet and the corresponding figure in
Finland is 75%. This year, an estimated 150 million payment
transactions will be conducted over the internet, which is probably the
highest number worldwide.”
It is no surprise that net banking has caught on so well at Nordea, as
it started PC banking in 1982 and was among the first banks to offer
internet banking in 1996. It has also introduced innovative concepts
that enable the internet to work as the main delivery channel, such as
doing away with physical cheques and ensuring that loan agreements can
be signed electronically. Currently, 84% of student loans in Finland
are paperless and take place on the internet. Also, although mortgage
loans can be signed electronically, the bank is working to ensure that
the mortgage deed is made paperless as well.
“E-business is the way ahead for banks everywhere. It is convenient and
saves time and money for both the bank and customers,” says Mr Harald.
While his conviction is reminiscent of the mid-1990s, when the internet
boom and growth of online banking gave rise to predictions that
physical branches would become obsolete, he also says that the branch
is essential for a successful multi-channel strategy.
This statement finds resonance in banks across the world that have
realised that their customers still need occasional face-to-face
contact. The bricks-and-mortar branch is now being given its due; what
has changed is its role. Non-critical banking transactions, such as
cash withdrawal and deposit, funds transfer, standing instructions and
so on, are being shifted to other channels, giving branches more time
to sell sophisticated and high-value services to customers, such as
wealth management products and loan products.
A different feel
Banks are changing the look and feel of branches to create a more
retail environment, a place where customers might want to stay longer –
and, hopefully, discuss their financial product requirements. UK high
street bank Abbey has been a forerunner in this area. Three years ago,
in a move to attract customers back into the branch, it re-invested in
its bank branches by introducing the concept of “cappuccino banking”
with Costa Coffee outlets in some of its main branches. It has since
halted development of this approach but others, such as Wells Fargo in
the US and Dutch bank ING Direct, continue the
practice.
With branches now able to focus more on sales than on processing
transactions and administrative tasks, investment in branch personnel
and branch technology is key. Branch personnel, being in a unique
position to develop personal relationships with customers and
cross-sell products to them, need to be multi-product oriented and to
have a sales and service attitude. They also require up-to-date
technology systems to execute their job requirements efficiently.
Most bank branches, however, are based on obsolete mainframe systems –
investment in automation technologies is therefore necessary. According
to estimates by financial technology analyst Tower Group, global IT
spending on branch systems is expected to increase from $16bn in 2001
to $19bn in 2005 (see graph).
Unified approach
Although developing each delivery channel is essential, a critical
ingredient for multi-channel success is a unified view. The aim is to
give customers a consistent sales and service experience across all
delivery channels. To integrate delivery channel systems that were
developed individually at different times, banks are opting for
specialist middleware solutions. These enable seamless flow of customer
information to and from any delivery channel. ICICI Bank, for example,
has deployed Microsoft’s EAI solution BizTalk for this purpose.
Improving customer convenience, reducing operational cost and extending
customer reach are some of the reasons put forward for banks adopting a
multi-channel strategy. However, it is increasingly obvious that
adopting multiple channels is not enough. Banks must take a holistic
approach and develop each channel innovatively and according to
customers’ preferences if they are to make their multi-channel strategy
work for them as a strategic differentiator in the marketplace.