The number of consumers banking online in Europe has grown from 39 million in 2002 to 63 million in 2005. Yet traditional channels remain widely used by customers, and the internet’s potential still remains unfulfilled by both providers and end-users. While banks’ main focus so far has been on how to encourage customers to self-serve via the internet, the challenge now is how to push online sales.
Germany has the highest number of customers banking online, with 15.4 million, followed by the UK with 12.1 million, in 2005. The Nordics, however, continue to be one step ahead of the other European countries in terms of internet banking penetration. Datamonitor estimates that 43% of banking customers in the Nordic region bank online.
For customers, ease, convenience, and speed have been the key differentiators between traditional brick and mortar banking and online banking. On the provider side, banks have encouraged the rise of online banking as it has both opened up a new sales channel and provided a service channel that is less costly than the branch or contact center.
The development of the online channel is expected to continue to be a strategic focus for European banks and IT spend for the online channel looks set to increase at a sustained rate. Online banking IT spend for the UK is expected to grow 17.5% between 2006 and 2009, from $600 million to $705 million.
The fact remains, however, that the online channel is mainly used by customers banking online as a servicing channel rather than a sales channel.
Fraud is perhaps the major issue affecting the online channel. While all channels are vulnerable to fraud, remote channels such as the internet tend to be the major focus of fraudsters. The fact that the online channel allows them to target multiple accounts across multiple countries without leaving their computers has made this channel a choice of preference for criminals.
Channel integration has not been fully achieved – banks are still struggling to integrate the internet within a seamless multi-channel framework. A large proportion of European banks have now achieved some level of channel integration but, in many cases, this remains confined to the transactional level, rather than in terms of achieving integrated business processes and a single customer view across multiple channels.
This not only has a negative impact on the e-banking customer experience – for example a process commenced in the branch cannot be easily completed online – but also prevents banks from gathering valuable data regarding customers’ interaction histories.
Finally, dormancy levels remain high. Inactive customers remain an issue as many customers are still reluctant to bank online. While banks have been relatively successful in signing up customers to online banking via various marketing approaches, the fact remains that a significant proportion of these customers do not actively use the service.