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


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.


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