More Fodder For The Branches Versus Online Channel Discussion

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Everywhere I turn, I keep reading things like this from Vernon Hill, former CEO of Commerce Bank:

The bank branch is the cornerstone, not the millstone, of retail banking. The point of a bank branch is to reflect your brand and to open new relationships. How do you build a relationship with a machine?”

But now, along comes a new study from ForeSee Results that found that:

Customer satisfaction with online banking sites has risen significantly over the past five years. This year, the index registered a score of 82 out of 100 for online banking, up 12 percent, or 9 points, from a score of 73 in 2003. The reading of 82 was higher than customers gave banks overall — 78 in 2007 — suggesting they are more pleased with banks’ online operations than with branches and call centers.” (emphasis added by me)

Now before you dismiss this study because it focuses on satisfaction, and not net promoter score, the survey did show that highly satisfied online banking customers are 31% more likely to buy additional services from the bank and 54% more likely to recommend the bank to others.

My take:
The Foresee study furthers my belief that, increasingly, great in-branch customer service is becoming less important to consumers. Consumers want to do bank with firms that don’t force them into needing customer service in the first place. If you don’t screw up, customers don’t need to talk to anybody — and are happier.

Meanwhile, the online channel is becoming the new front-line for customer support. The branch and the call center are the second line of support — the back up in case the online channel fails or doesn’t offer service functionality for a particular issue.

But that doesn’t diminish the importance of the branch and call center nor raise the importance of the online channel.

On a call with some folks from a large bank today, one of the participants said “online banking is a profit drain. It offers cost savings potential, but it’s still a cost center. It’s a necessary evil, a cost of doing business.”

Well, sure, it’s a “cost” center since no one buys “online” services — they buy products like checking accounts, savings accounts, loans, investment, etc., and possibly interacts with those products, and gets service for them, through the online channel.

What it means: All points of service delivery are cost centers, not profit centers. Claiming that one point of delivery is the “cornerstone” of the relationship — in general — is absolutely ridiculous, since different channels are more important to different customers.

What’s missing in most banks is: 1) a measurement infrastructure that captures the relative influence of channels on sales, and the combination of the channels and marketing efforts (advertising, direct mail, email) impacts sales, and 2) an integrated approach to service delivery that optimizes investments across channels.

It’s hard enough to do these things — but nearly impossible when senior managers cling to the outdated notion that the branch is the cornerstone of the relationship.

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