ALTERNATIVE DELIVERY: GETTING A HANDLE ON WHO USES WHAT

The burgeoning interest in PC-banking, along with the continuing growth in call centers, was one of the big stories last year. But for banks, the advantage of offering electronic channels is better customer service, not cutting costs or generating revenue.

An American Bankers Association survey found that 47% of banks with over $1 billion of assets lose money on electronic banking. Another 18% break even, and just 6% are making a profit. What's more, a full 30% don't know if their home banking efforts make or lose money.

The survey results underscore the difficulties banks face in moving from traditional brick-and-mortar delivery to a future where there will be fewer branches and an even greater reliance on alternative channels. An increasing number of banking companies, notably Citicorp, have been trying to encourage customers to stay away from branches. But on the whole, the industry hasn't been following up on the promise of alternative delivery - a reduction in expenses through branch closings. The overall number of commercial bank branches continues to increase, according to Federal Deposit Insurance Corp. data.

Another recent study, based on actual customer behavior, confirms that the transition will be anything but easy. A study by First Manhattan Consulting Group - which has been championing self-service banking as one way to profitably provide service to money-losing customers - found that consumers who use branches exclusively provide 60% of retail profits. Just 20% of income came from customers with a heavy or partial reliance on electronic channels.

The trick, in short, involves knowing who your best customers are and how they interact with the bank.