RSS FeedBy M. Isi Eromosele
Traditional banks can use the Internet to leverage their established strengths: huge customer information files, multi-channel delivery systems and control of the payment systems.
But they must learn to compete against a new generation of nimble Internet competitors who could quickly take away their customers and cripple their profitability.
To succeed in this new Internet-based environment, traditional banks must swiftly develop customer-centric organizations, integrate their multi-channel delivery systems and build virtual marketing alliances.
The Internet and Banking
The advent of the Internet has resulted in the structural transformation of the global banking industry. Spurred by deregulation and rapid technological change, banking has undergone a wave of continuous and extensive consolidation during the past decade.
While these mergers have increased the resources of the largest banks, consolidation has also burdened them with the immense problems of merging large and complex organizations.
Consolidation was expected to extend the reach of these newly merged institutions by expanding their customer and product range and creating new opportunities for cross-sales. It has not worked out as planned.
Massive integration costs and post-merger customer attrition has largely offset projected savings. Equally significant, the mega-banks’ strategy for one-stop shopping faces major organizational, strategic and technological challenges.
Businesses Challenges
In practice, consolidation has greatly complicated the task of cross-selling by doubling the systems, products and channels that must be restructured and integrated.
Retail banks in the U.S. have traditionally tried to optimize efficiency by building self-contained product silos, a strategy that impedes the implementation of cross-selling. In this system, each silo manages its relationship with each customer separately, resulting in the duplication of marketing functions.
In this context, the advent of the Internet provides a strategic opportunity for traditional banks. The interactive marketing capabilities of the Web offers banks their best chance to reconfigure their marketing and delivery operations to meet each customer’s total financial needs.
This strategy requires banks to replace their traditional product and channel silos with a customer-centric approach to the market.
Traditional banks that make this transition will reap economies of scale and scope that could radically reduce distribution costs and facilitate proactive relationship marketing.
The institutions that build strong interactive brands can increase their market share quickly at the expense of less agile competitors. These brands should appeal to younger, more affluent and financially active consumers who may provide a disproportionately large share of retail banking profits in the coming decades.
A Strategic View Of The Internet And Banking
The Internet is not simply a new channel – it is an entirely different business environment. To compete effectively and successfully, traditional banks should formulate a vision of how their firms can fit into this environment.
Banks should begin by evaluating their current capabilities against the following strategic criteria:
Know your customer
The banks’ customer information provides the raw data for conceiving and assessing new value propositions. Banks must study their customers closely to evaluate new opportunities for customization and personalization on the Web.
The Internet’s most immediate advantage is that it provides firms with an efficient platform to track and engage their customers electronically. Banks should begin by building Web services that are, first and foremost, interactive.
Experiment and Evolve
Electronic economies of scale, scope and distribution allow firms to build and test new value propositions cheaply and quickly. This streamlines the process of market experimentation, shortens product cycles and quickens the pace of competition among firms.
To compete in this environment of accelerating change, banks must closely monitor the strategies and offerings of competitors against the behavior and feedback of their own customers.
To prepare for the future of banking and drive business growth, banks need to integrate value-added, second generation Internet services, including mobile distribution channels.
This solution helps to deliver real time online banking applications to meet customers’ needs. Additionally, banks need to structure their banking services to provide high levels of service and information integrity across a variety of access devices and delivery channels.
M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance
Copyright Control © 2011 Oseme Group
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