There are signs that the clouds of hype surrounding the Internet are beginning to dissipate. That's good news for banking, because a general clearing of the air will allow bankers to take a more sober and productive look at interactive technology in general, and the Internet in particular. In the process, they will be able to distinguish the genuine opportunities that the Internet and its multimedia offspring, the World Wide Web, are presenting.
The first step will be to disregard all the exaggerated claims and naive expectations trumpeted over the last two or three years. The Internet is not going to make traditional banking disappear. Not overnight; not ever.
Overblown predictions have obscured the very important fact that on-line interactive technology like the World Wide Web does represent a major new medium for banking activity. Banks that fail to capitalize on the real opportunities this new medium presents will lose profitable customers to more perceptive competitors.
The Web already offers banks a major new retail distribution channel, potentially as important as automated teller machines or telephone banking services. The Internet will also be important in wholesale banking, as an increasing number of cash management, funds transfer, and investment transactions migrate to the new medium.
It is this distribution aspect of the Internet that has captured most of the attention in banking, and development of Web-related services, like home banking, have received the lion's share of media attention. But another side to the Web will become even more important to banking in the long-term: its unique capacity for interactive and virtually instantaneous communication between banks and their customers.
This capacity gives banks the opportunity to develop a completely new type of customer relationship. We not only have an entirely new channel for transmitting information to customers in any market, we also have a revolutionary ability to have customers send us information about their interests and needs. This information-gathering capability will allow us to market financial products more effectively than ever before.
Properly used, the Web is a bank marketing tool of remarkable power. For relatively little outlay, a bank can discover exactly what its customers really want, when they want it, how they want it delivered, and how much they are willing to pay for it. The bank can gather this vital marketing information on a continuous basis in forms that can be automatically compiled and analyzed. And it will get its information from customers who have already qualified themselves by active participation in the process.
At this point, skeptics will ask the critical question: just why will busy customers make the effort to provide the bank with such a valuable flow of information? The answers are simple. Because it will be easy and fun. Because the customers will gain valuable information in the process. And, ultimately, because the bank has become a vital member of their on- line community.
Interactivity is the defining capability of the Web. An on-line connection must offer prospective customers an interaction of sufficient value to make them return. The two-way flow of information is the critical component required to create and sustain on-line relationships. A bank must offer customers an interactive experience that will make them log in, hang around, and come back again.
The easiest way to accomplish this aim is by providing Web banking sites that provide desirable information and enjoyable interactions along with menus of banking activities. It may be tax tips, or information on retirement planning options for baby boomers turning 50, or volunteer opportunities for seniors or singles. It may even be a contest, game, or customer survey.
We already have examples of banks that are building on-line banking relationships in just these ways. One leading superregional features a "Retirement" button on its Web home page. A click on this button introduces information on the investment strategies the bank can support.
A West Coast institution has taken a more visual tack. The bank's Web site offers access to an on-line "Art Gallery" of western scenes where visitors can view high-quality images associated with the bank's long presence in western history. The site also provides an on-line store offering branded Western paraphernalia or T-shirts emblazoned with the same art work.
One major New York bank has developed a Web site focused on recreational vehicle financing. The site incorporates an on-line quiz, travel tips, and a newsletter from a couple touring America in their own RV.
This site incorporates several powerful strategies for building on-line relationships within a well-defined market segment. Other banks are also featuring interactive games or quizzes in their Web sites, and at least one is actively consulting with video-game developers. Several banks plan to build customer education and employee training into their Web sites, and many plan to include customer survey tools. Every Web site should invite direct feedback through a menu or, at the very least, an E-mail address.
The key to effective use of the Web will be the creation of on-line banking relationships through interactive involvement techniques such as these. Other examples could include hosting on-line "cafes" where visitors can chat with expert hosts about special topics, such as qualifying for mortgages. Or seminars on the pros and cons of borrowing against home equities.
Just about any activity that serves the needs or interests of an identifiable group of customers will contribute to the growth and maintenance of on-line relationships. Once on-line relationships are established, customers will look to their preferred on-line site for solutions to all their financial needs.
Because the cost of supporting on-line relationships through a Web site will be low, it will be possible for a single bank to support a variety of sites aimed at specific market segments. We might develop special "pages" especially for first-time homebuyers, or imaginative games designed to introduce graduating students to the realities of modern financial life.
If this description sounds too visionary, consider that the World Wide Web is already a going concern for electronic commerce. Almost 10 million Americans have access to it, and some World Wide Web sites now report as many as one million "hits," or contacts, per day. During the first six months of 1995, nearly one-third of all Internet users conducted some form of business transaction on-line, at an average value of $235 per transaction. Growth rates for Web activities are exponential, and surveys suggest that consumer resistance to on-line banking is actually lower than many banks assume.
The tools required to tap into this expanding marketplace are all commercially available. The software and equipment required to support sites on the World Wide Web are relatively inexpensive. With more than 275,000 sites already in operation, there is certainly no dearth of expertise and experience to draw on.
The trick, of course, is to create a Web site that is simple, quick, and fun to use, one that offers users the opportunity and incentive to exchange information of significance. There are a number of simple principles that will help. Elaborate images, for example, take far too long to transfer over the modems that most members will be using; effective designs keep graphics simple and clean.
There is one other advantage of the Web that is noteworthy. We in banking have always thought of ourselves as dedicated to the service of our communities. The Web offers us a powerful new tool to fulfill our social commitments. We can reach and serve special constituencies by establishing Web sites which address their special needs.
Among the other opportunities it provides us, the Web may be offering us a rare chance to make both our regulators and our stockholders happy with the same imaginative programs.
Mr. Adelman, a former marketing executive at Chase Manhattan Corp., is the chief executive officer at Dot.Com, an interactive marketing and consulting firm.
