Living in a Multichannel World

As banks decide how to allocate approximately $6.5 billion in investments on retail channels this year, they would be wise to look at how customers use those channels, according to Karen Massey, senior research analyst for Financial Insights (Framingham, Mass.) and author of a recent study on consumer channel preferences. "Five years ago, banks had just come off the heels of a period when they hadn't invested in the branch channel," Massey says, pointing to the concentration of investments on interactive Web sites, automated voice response systems and ATMs with enhanced functionality. "Now, they need to realize that the branch is a very strategic channel for them. Customers might use remote channels, but that doesn't mean they won't use the branch ... for the more complex transactions."

While transactions and customers have moved to new channels (with the exception of ATMs, the use of which remains virtually unchanged compared to other channels), such as the Internet, they have not left the branches. Nearly 75 percent of respondents to the Financial Insights' survey say they visit a branch location at least once a month. At the same time, high-net-worth customers (those with $75,000 or more in annual income) used the Internet and ATM channels more than other income groups, demonstrating their need for on-demand banking, says Massey.

But the branch customer and Internet customer are often the same person. So any technologies in which banks invest should be seen as part of a multichannel strategy, asserts Massey. "Consumers will also be multichannel users ... [who expect] a consistent experience from channel to channel, including timely transactional activity," she says.

"Consumers want their banks to offer convenient, secure access, and they want their bank to know who they are," Massey continues. Therefore, she recommends that banks invest in teller information systems that let customer-contact personnel in the branch immediately pull up all of a customer's activity -- from any channel -- with the bank.

Such technology, says Randi Purchia, senior analyst for Aite Group (Boston), allows tellers to determine high-value customers. "The technology spend has to be on providing real-time customer information and something that helps the banker understand what he is seeing," she says. Purchia further recommends branch technology that provides cross-sale prompts for tellers in order to get a larger share of customers' wallets and a better return on branch investments.

The Future of Banking

"The future of an integrated customer view and cross-channel strategy is core technology to support individually priced products and bundled services," Financial Insights' Massey says. She adds that banks with older branch systems will want to add technology to help speed customer time at the teller window. "We see more automation for workflow and imaging at midlevel banks," Massey says, noting that most larger banks already have installed this technology.

Aite's Purchia recommends using digital signage to attract a new generation of customers. Electronic media within the branch, she says, can introduce new products and help brand the bank. Younger customers might prefer remote channels, but they still will come into the branch for mortgages, for example, Purchia notes. "Banks have started to realize that they'll never get rid of bricks and mortar," she says.

According to Massey, branches will remain the most-used banking channel through the end of the decade.