Research conducted by University of Ulster financial services researcher Mark Durkin into the uptake of Internet-based banking has found that banks are embracing the Web in order not to be put at a competitive disadvantage - rather than for any sustainable competitive advantage Internet banking might provide in its own right.
The study conducted with banks in Ireland, Sweden, the UK and the United States, found that managing customer relationships via the Internet is the greatest challenge for banks, and re-emphasised the view that a balanced delivery channel mix is what is required, rather than a wholesale migration towards Internet banking.
Banks throughout Europe had anticipated significant cost savings through such a migration, notes Durkin, but costs have actually risen - because customers choose to adopt all available delivery platforms rather than selecting the Internet over others.
"While the growth of Internet banking is clearly increasing, there will always be a role for the traditional bank branch. The challenge is to manage the total delivery mix, and offer alternative service packages for different customer segments. Such an offer will likely be made on the basis of customer profitability", says Durkin.
Senior bank executives across Europe and America were in agreement that new technological interfaces such as interactive television and mobile phone commerce extend the reach of the Web to a majority of the population - but they remain unsure about customers' actual preferences.
Early indications from ongoing research conducted with bank customers in Northern Ireland shows that it is younger customers who will adopt the Internet most readily for their banking. As age and the complexity of financial needs increase, there is a decline in the adoption levels of Internet banking and an increase in the need for face to face interaction, says Durkin.
Customers feel that the branch will remain as the most important interface in the foreseeable future, he adds.