A Web Revolution that Hasn't Happened

In the world of banking, location matters. But so does web presence. The Puget Sound Business Journal reports that despite the growth of online banking, customers still want a physical bank. Discussing Washington Mutual's plans to close 80 branches and generate new business online, the article notes:

Instead of abandoning its branching strategy, WaMu intends to continue aggressively expanding its base of locations and to bolster the effort with a Web platform that can both generate new business and complement its physical presence.

The WaMu effort illustrates a broader trend. As banks ranging from Regal Financial Bank in Seattle to Cleveland-based Key Bank race to offer high-tech services, they say technology is only one piece of a banking strategy that will be built on physical locations for the foreseeable future. The main reason: Consumers still prefer to do much of their banking in person.

"From our customer research, the main thing (we've learned) is the store is still very important to most consumers," said Ken Kido, WaMu's executive vice president of store distribution.

This is a change from the 1990s, when banks were more aggressive about pushing customers into lower-cost banking channels such as telephone and online banking.

So, instead of emphasizing the Internet alone, banks now employ a multichannel strategy that encourages customers to use a mix of whatever services best suit their needs.

At WaMu, for instance, "we decided that we don't want to try and push customers into a particular channel because it's cheaper for us or easier for us," Kido said. "We want to have available very good service and sales regardless of which channel."

There's an important message here: your mix of channels (whether it's a simple balance on online and offline activity, or also involves resellers, distributors, franchisees, and so on) needs to be driven by your customer.

That doesn't mean you shouldn't try to move your customers to the channels that are most profitable for you - but you need to do it by making those channels attractive to your customers. You can do that with financial incentives; you can do that with convenience (a big factor for online banking); you can do it by taking advantage of a channel's unique features to offer things you couldn't in another venue. But all of these things must give your customer some value... or your customer will respond to being pushed out of a traditional channel by moving on - to a competitor.

There's one other thing I'd like to point out about the quotes from Ken Kido at Washington Mutual. He never says the word "branch." It's always "store."  That's no accident.

I'm a Washington Mutual customer, and I do go into their branches occasionally. They do not feel like banks. There is no row of tellers with a line in front.

You walk in and get directed to a kiosk (at my local branch here in Houston, arranged in a circle) where a casually dressed person helps you. It's a small thing, but it feels very different - more like a retail store than a traditional bank branch.

It seems like Washington Mutual isn't just continuing to use branches as an effective channel, but re-examining their notions of what that channel is supposed to look like.

I worked for a company that sold software to banks when the Internet was supposed to change everything. It did, but not in the way we expected. In the hubris of the 1990s, the Internet was supposed to kill the branch.

That particular revolution didn't happen. But a different seems to be playing out, with branches and the web depending on each other.