Is it cost savings or convenience that has most area banks offering online services to their customers?
Ask any area banker and you are bound to get the same answer – customer convenience.
"It’s a less expensive delivery strategy, but that’s not why we do," said Glenn Morin, senior vice president of E-business at Citizens Bank. "We felt that we needed to provide this channel to validate our commitment to our customers."
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And it’s not just the larger banks.
"It’s another part of operational efficiency," said Robert Kimmett, senior vice president of marketing for the Rhode Island Credit Union League. "Clearly there is a cost advantage. It’s a lot cheaper to provide a service on the Web, to have customers transfer funds on the Web, than to have a live person do it. But it’s clearly also important to provide members with information when and where they want it."
According to a recently published industry newsletter, more than half the country’s online banks are finding that they can increase customer satisfaction, boost retention, and improve profits by providing Web-based services, and as a result more and more are doing it.
"After seven years of converting the industry, we can finally say that Web banking is a mainstream consumer activity," said Jim Bruene, author of the Online Banking Report. "Consequently, banks that excel in online delivery are better positioned to retain customers and add new ones no matter what the economy does."
Jim Rice, senior vice president of the New Bedford-based Compass Bank, agreed that changes in the industry during the last few years have been the direct result of customer demand.
"We have found that you need to adapt to the needs of your customers," he said. "Ten years ago we didn’t have these services; today we do. A lot of people wanted it, they told us, and we did it."
And while Rice said there are some cost savings for the bank when customers transact online, he said for many customers it’s not the only way to do business.
"There is a segment of the online customers that don’t interact. It’s very difficult to measure the cost savings," he said. "A lot of people just want another way to do their business."
Kimmett agreed.
"The key is the consumer has a wide variety of options," he said. "We are not forcing people out of the lobby and onto the Internet; it’s just opening another channel."
Kimmett added that online banking isn’t for everyone.
"Clearly folks over the age of 65 aren’t going to be doing this," he said. "It’s about demographics. I am sure there are some people over the age of 65 that do it, but for the most part banks need to look at their clientele."
The goal then becomes providing the services deemed necessary and important by customers. According to Morin right now those services are focused in three areas – giving customers the ability to see their accounts, giving them the opportunity to transfer funds, and giving them the ability to pay their bills.
"We constantly look at customer activity," he said. "We have to decide what transactions are most beneficial and work from there."
Already experiencing a cost savings, some banks chose not to charge customers for using on-line services, others charge a nominal fee only for bill payment. Some banks, like Citizens provide online banking as a free service to preferred customers like those in Circle Checking.
"Our strategy in the bank is to build the bank relationship management function," Morin said. "Our strategy is to make as robust as we can the Circle Checking, so we don’t charge those customers."
Where banks have seen some cost increases is with hiring the staff to create, maintain and update these new sites.
Reluctant to talk financials, Morin would say only that Citizens constantly looks at the expense to make sure they are being as direct as they can.
"We are not pushing a lower cost channel," he said. "Clearly there are some advantages right now, but we aren’t going to talk about those in proprietary terms."
According to Rice, the cost of providing online service is simply, "another cost of doing business."
