Multi-channel banking strategies are failing to convince - CEB TowerGroup

Multi-channel banking strategies are failing to convince - CEB TowerGroup

Banks that invest in ensuring a consistent customer experience across all channels may be wasting their money, according to an analysis by CEB TowerGroup.

The achievement of an integrated multi-channel approach to customer engagement strategies has been something of a holy grail in bank and vendor circles over the past decade.

However, CEB TowerGroup suggests that the effort might be misdirected, achieving only high maintenance costs, convoluted management, and little increase in customer satisfaction.

"Instead, CEOs are realising that channel investments should be tied to specific experience goals and customers should be guided to the channel that best suits their needs," says the analyst group, in a report that outlines executive views from 25 of the biggest banks in North America.

As disenchantment with multi-channel banking grows in the C-suite, the industry is instead beginning to get to grips with the implications of a mass consumer migration from bricks and mortar branches to digital points of contact.

CEB TowerGroup points to an estimated $10.1 billion gap between the income from annual service charges on deposit accounts and the expense of maintaining branch premises and equipment. In addition, non-interest income consistently remains well below pre-crisis levels.

Says CEB TowerGroup: "The branch isn't dead, but the profitability of the network, as well as individual branch footprints, need to be reevaluated."

The move to digital banking platforms is also throwing up new problems, as customers who rely primarily or exclusively on digital channels for their banking needs are up to 30% less engaged than those who rely on the branch.

"In order to prevent a growing portion of the customer base from first switching channels and then switching banks, CEOs are determined to create a distinctive and engaging digital experience," says the analyst house.

With costs rising and profit margins shrinking, banking executives are additionally becoming more picky about the type of customers they want to service.

"The mass affluent comprises 16% of the US population but its total footings exceed those of the mass market by nearly $200 billion," says CEB TowerGroup. "A growing number of retail banking CEOs agree that banks need to shift their focus to this more lucrative customer segment, providing more tailored service for the mass affluent while automating a greater portion of mass market transactions."

Comments: (4)

Michael Fuller
Michael Fuller - None - London 13 September, 2013, 17:39Be the first to give this comment the thumbs up 0 likes

So what do we mean by a "consistent customer experience" anyway? In the past with batch processing and no real time transactions customers could get a different view of their accounts from different systems. This clearly isn't acceptable.

It is quite different however to have the facility to undertake a full range of transactions across all channels and I'm not sure that this has ever been what customers have demanded or expect. From the description of "consistent customer experience" however this seems to be what is being suggested.

Customers want to be able to do what they need to in a way that is convenient to them. That's not the same as having a consistent customer experience or is it?

Alex Bray
Alex Bray - Genpact - London 14 September, 2013, 08:051 like 1 like

I think this research is extremely timely. To paraphrase a line I used in a white paper on multi-channel banking in 2011, trying to deliver a multi-channel experience across all channels and processes is like eating an elephant in one bite. Banks need to break it down into small pieces. They also need to be more focussed on value. Why are they enabling a specific customer journey to be multi-channel?

Mortgage applications are a great example of a process ripe for multi-channel enablement. They are high value transactions which run over a period of weeks. We know customers will want advice and to be able to track the progress of their application. They may want to do this on the phone, in a branch or over the internet. That means that multi-channel enabling long running sales processes like this is very sensible. Not only will a mortgage sale be made – but a relationship will be deepened. Buying a house could not be more important to a customer. Providing a good experience at this time is critical. So in this case, the cost of multi-channel would be justifiable.

However, a bank should not multi-channel enable a process when the benefits case doesn’t stack up. Multi-channel enabling low value sales and transactions will increase costs for a bank without providing a meaningful return. Nor should multi-channel strategies distract from the fact that most customer needs should be fulfilled with a single touch. Most non-sales transactions and many sales process should not require to be multi-channel enabled at all. Instead banks should focus on making it easier for a customer to complete their transaction without needing to move channels.

Multi-channel banking is still an important goal for banks – but it should be implemented judiciously, where it will add value.


A Finextra member
A Finextra member 16 September, 2013, 08:11Be the first to give this comment the thumbs up 0 likes

Point well stated. While most types of transaction should be performed in one go, without hopping from one channel to another (letting the aspect of two factor, two channel authentication aside for a moment), at least it should be possible to get a consistent and current view on the status of the customers current account - regardless of the channel chosen. That's not asking too much in the 21st century ...

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 16 September, 2013, 17:04Be the first to give this comment the thumbs up 0 likes

This resonates well with the concluding remark of my blog post titled "Jumping On The Omnichannel Bandwagon" published almost two years ago: 

"We believe that 100% multichannel support ... is neither necessary nor practical".