In 2007, banks must use their retail delivery channels more efficiently to grapple with a host of business challenges - from rising customer expectations and fraud, to increased regulatory pressures and the quest for organic growth. New research from TowerGroup finds that these factors rank among the top business drivers facing the retail banking delivery channels space, which includes ATMs, physical branches, call centers, online banking and the emerging mobile channel.
"This is the year for banks to make the most of the delivery channel capabilities they have today," said Jerry Silva, research director of the Delivery Channels practice at TowerGroup and research co-author. "In some cases, they will need to invest to improve underlying technologies, such as in emerging markets around the globe. But for the most part, 'efficiency' is the name of the game for 2007. Even in areas where banks must modernize their technology or introduce it for the first time, they will do so with an eye toward squeezing out all possible efficiencies right from the start."
Although banks have never been able to eliminate a previous channel based on the introduction of a new one, TowerGroup research also finds that online banking will ultimately become the predominant channel of choice - even surpassing the ATM - due to its ease of use and low cost.
The top three delivery channel drivers for 2007 are:
- Identity Theft and Fraud: Banks must continue to focus on defending online banking and ATMs against organized crime and uncoordinated attacks - not to mention consumers' own lack of sophistication with technology and safeguarding their own data. At stake is not only direct financial impact through fraud losses (or savings from successful countermeasures), but also brand reputation. Any major loss of customer confidence translates directly into lost retail relationships.
- Customers' Expectations: Seamless service across multiple channels in other industries like retailing is driving consumers to expect their banks to perform at similar levels. This, combined with outside pressures from regulatory agencies, will drive financial institutions to focus more effort in 2007 around the customer experience and customer protection.
- Organic Growth: Perhaps the most significant business driver for delivery channels in 2007 is the push to increase product penetration in households where banks already have relationships.
This driver directly implicates delivery strategies and capabilities, given that the opportunity for organic growth always starts with customer satisfaction.
"Retention and the opportunity for subsequent sales are all driven by a customer's experience at the initial point of interaction," said George Tubin, senior analyst in the Delivery Channels practice at TowerGroup and research co-author. "Ultimately, the full potential of delivery lies in a bank's ability to leverage the individual strengths of each channel in an integrated fashion.
This approach allows each interaction point to play a specific role in the process of retaining and growing the customer base - as well as in expanding the relationship with each individual customer."