It’s not that long ago that the only way to interact with your bank was via their network of branches. Those were the days of the old-style bank managers, who you had to approach if you wanted to take out an overdraft or a loan.
Then, in 1967, Barclays Bank launched the first Automated Teller Machine (ATM). With the advent of these cash machines, suddenly bank customers had access to their cash 24 hours a day, seven days a week.
In more recent years, we’ve seen the emergence of further self service channels, including Telephone Banking, Internet Banking, and now also Mobile Phone Banking and text alerts.
Back in the 1990s, when Internet Banking was starting to take off, many media writers (and even some industry insiders) were predicting that the rise of these self service channels would mean the death of branch based banking. The argument was that Internet banking was to convenient and capable of offering such better rates (by being a lower cost channel) that there would be a mass migration of customers from the branch counter to their PCs. Ads came out showing people lounging in pyjamas and slippers whilst checking their balance or making a payment.
The reality, however, has been somewhat more prosaic. Yes, Internet Banking has become a mainstream channel but its growth has been slow and steady rather than the overnight revolution that some had predicted. The other really interesting thing has been that Internet Banking has grown as a supplementary channel alongside branch banking and Telephone banking. We know that we live in a convenience culture and convenience’ translates into financial services as wanting to be able to do nearly everything by every available channel. Sometimes it may be best for us to make a payment online but other times we may want to visit a branch and have the reassurance of speaking to a human being.
From the bank’s perspective, the nirvana of having all their customers doing all their transactions via the lowest cost channels may not have been realised. However, there are benefits top them too of this convenience culture. A significant quantity of transactions have migrated to the Internet or Telephone channels. As well as helping them to lower their cost:income ratios (always something that investors like to see!), it has also freed up staff time in branches to focus on customer service and sales. The old complaint about branches was that you had to queue for so long. With some customers now preferring to transact online, there should be less queuing and certainly there is less excuse for it.
It’s worth summarising some of the main benefits that multi channel banking has opened up to the banks’ customers:
More choice where, when, and how to conduct your finances
Reduced reliance on standard bank operating hours’
Created capacity for branches to better service their customers
Caters for customers who find it difficult to get to their branch (including the elderly)
Benefits remote areas, in particular, where branches are few and far between
Reduces costs for banks which, in theory, should enable them to offer better rates and/or be more attractive to shareholders
I think it’s a fairly safe assumption that the future will see multi channel banking become even more entrenched. In particular, the emergence of mobile phone banking and text alert services offers great scope for people to better manage their finances and accommodate their banking needs in a way that best fits their busy lives.