Do Business Well

Background

More than a third of the UK’s internet population now use the Web to visit banking sites, according to a survey from the Internet monitoring company Netvalue. Overall, the number of visitors to e-Banks has grown 27 per cent in the first half of 2001 to top 5 million visitors in July, proving that customers are not being deterred by a run of embarrassing technology glitches.

Gandy (2000) notes that while Internet banking currently attracts just 5-10 per cent of the population, demographic trends dictate that the number will naturally increase over time as more people grow up accustomed to using internet technology. It is also predicted that by 2003, 25 million households will use Internet banking, with 6-10 million of them earning at least $65,000 per annum (Boss et al. 2000). In addition, average revenues generated on the Internet from banking services are projected to grow from 2 to 10 per cent in the USA by the end of 2002 (Daranvala 2000)

According to Murphy and Berg (1999), electronic banking strategies are particularly attractive to banks because:

• There is no need to establish a physical presence in new areas, since growth can be accommodated centrally.
• The time-to-market for new products and services is reduced.
• Partnership arrangements (e.g. with retailers) can provide added value for customers at little cost.
• Transactions and updates can occur daily.
• Customers can have access whenever and wherever it is convenient for them.

Consumer behaviour

The Internet revolution is changing consumer behaviour, redefining the role of intermediaries and creating new economic models for business. This sea change poses serious issues for banks, as it places emphasis on two factors: branding and customer satisfaction, neither of which the banks have been particularly good at providing. Banks will have to understand their products and their customers‘ needs if they are to survive the onslaught of the new competition.

(Timewell and Young 1999: 27)

Retail banking customers are more sophisticated and demanding today than they were twenty years ago. Sophistication has come from a greater awareness of financial matters following saturation coverage in the media. Consumers are more demanding as they seek to maximize precious leisure time by leveraging technology in the pursuit of speedy and effective service. Today’s customers require multiple products, a range of channels, seamless service and sound advice from a bank they can trust. But segmenting a customer base in a meaningful way by clustering behavioural and attitudinal traits, lifestyle, familiarity with technology and levels of financial awareness reveals a marked difference in needs. Segmentation and targeting by wealth has revealed that affluent customer groups are more likely to hold a greater number of complex financial products with higher expectations of service excellence and seamless delivery across all channels. This segment is also taking up new technologies faster than the general population and is more active online, leading many banks to create `high net worth’ offerings. In addition, many offline purchases are actually driven by prior online research, so that the benefit of building a ‘virtual showcase’ for financial products is greater than take-up statistics would suggest, albeit difficult to quantify accurately.

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