Getting personal still counts for customers

By MARK FRYER

Branches, not bandwidth, may be the key to success for financial institutions.

An international survey of more than 120 institutions, by management and IT consulting firm Cap Gemini Ernst & Young, says that next year they expect to make almost 70 per cent of their sales through branches and agencies, and only 8 per cent via the internet.

"New sales and the majority of transactions will still flow through physical locations for many years to come," says the survey.

"What a change from just a few years ago when banks were reducing hours and looking for the ATM to take up the slack, and when branch closure programmes were so common."

In the Asia-Pacific region, three-quarters of the firms surveyed say customers' reluctance to switch from more traditional channels is the main reason why the internet has not been more successful.

New technology has also been a disappointment as a cost-cutting plan. Institutions say e-commerce trimmed costs by 1 per cent last year compared with the 8 per cent predicted in earlier surveys.

"It's not that e-commerce has been a failure, it's more a case of market readiness," says Ciaran McMullan, Cap Gemini's vice-president of financial services Down Under.

"Internet will continue to be a key part of the delivery strategy of all financial services. I just think they'll be more sophisticated in the use of the internet together with branches and other channels."

Sales through branches continue to dominate, especially in banking and insurance, although the net is making inroads in broking.

In Britain, some banks have gone as far as setting up coffee shops inside branches to attract customers.

Cap Gemini Ernst & Young says financial institutions face a choice between becoming niche providers or supplying customers with a "total experience".

To achieve that goal, says the survey, firms will have to offer customers the best products and services, even if they are provided by a competitor.

So far, most financial institutions have yet to embrace the idea of selling anything but their own products.

But Mr McMullan says this is changing in the United States and Britain, and it will happen in the Asia-Pacific region.

Some are considering selling competitors' products, as long as they can still make a profit.