European retail banks are at last taking note of customer demands by investing heavily in high-street branch renewal, according to the report, 'Distribution Channel Technology in European Retail Banking', from industry analyst Datamonitor.
It has been suggested in the past that new media banking channels (such as the internet, interactive digital television [iDTV] and mobile services) would almost completely replace retail banks' high street branches. However, according to Datamonitor, none of those technologies have surpassed the traditional branch in terms of customer usage or business generation.
In fact, the branch has proved to retail banks that it is a channel to be reckoned with, and Datamonitor expects both branch renewal and channel integration to become the most prominent areas of European retail bank investment until 2005.
The total spend on branch renewal is predicted to grow to US$1 billion in 2005 (up from US$790 million in 2002), representing a compound annual growth rate of 9.6%.
However, the report also warns that no single technology vendor has a complete portfolio that can service the banks' entire range of needs. As a result, vendors will need to work quickly to develop a next-generation branch offering to maintain a competitive advantage.
Many industry sources originally predicted that branch networks would gradually decrease, being replaced by the new technological channels. However, the iDTV and mobile channels have failed to generate enthusiasm, and their uptake has remained relatively slow.
According to the report, spend by European retail banks on mobile banking (m-banking) has decreased from an estimated US$73 million in 2001 to US$49 million in 2002. With a slow return on investment, m-banking and iDTV banking have already been shelved by a number of UK banks (notably HSBC and NatWest).
The personal touch
Datamonitor says that the banks are quickly realising that even the most technology-aware customers still prefer face-to-face interaction when dealing with high-value products such as pensions and mortgages.
Consequently, the European banks are making it their priority to equip their branches to perform high-value sales and services while increasing the level of self-service for simple transactions.
In terms of information technology, one key implication of this is the need for next-generation, CRM-enabled branches which allow advisors to access sales and service tools while having access to complete, real-time customer data and product information.