There's a perception out there that consumers are flocking to the Internet to conduct their financial transactions as fast as they are abandoning the traditional bank branch. Quite the contrary, our most recent research proves Internet banking customers - not just their parents - continue to patronize local bank branches.

Therein lies the competitive challenge for the traditional bank: Strategically and creatively integrate Internet banking into your location-based networks and you will find significant opportunity.

Verdi & Co. recently completed an online survey of more than 1,500 Internet users that sheds new light on consumer behavior and Internet banking, and shows how banks can capitalize on this new delivery channel.

Bankers should take heart that their branch networks continue to be valued by Internet users. Internet banking customers in our survey averaged more than three teller visits per month, and 70% said they had visited a branch in the past 30 days.

This tells me that traditional branch-based banks have an opportunity to leverage an integrated network and strongly position themselves in the marketplace. It also reinforces the competitive advantages of branch-based banks: local decision-making, walk-in service, and personal attention.

With the business world abuzz with all things Internet, it's easy for bankers to feel behind the eight ball with regard to online banking. Many of the nation's banks establish an Internet site with the intention of rebuilding it with a more focused strategy and sales approach at some point in the future - perhaps when they've figured out how to price and profit from Internet services.

But our research reveals the way banks integrate Internet services into their product lineups and delivery systems today can significantly impact their competitiveness in days to come. Just as banks are merchandising their branches to capture sales opportunities, they must also design their Internet sites not only as a transaction point, but also as a sales point.

Our study confirms that Internet banking customers are a marketing gold mine - they offer their financial service provider ample opportunity to communicate with and sell to them.

On average, Internet bank customers in our study accessed their accounts online 13 times per month. Those same customers communicated with their bank an average of 26 times a month in the form of branch visits, ATM transactions, telephone calls, and online inquiries, compared with just 18 contacts a month for non-Internet customers.

What this type of customer cries out for - loud and clear - is a coordinated marketing approach throughout a bank's entire delivery system.

To take full advantage of this consumer behavior, banks should cross-promote their branches and Internet site and prepare employees to explain Internet banking services and troubleshoot online problems. It's also a good idea for banks to adopt online marketing strategies, such as cross-promoting their Internet sites with other online service providers and linking to complementary sites to generate traffic.

To boost noninterest income, financial institutions can generate additional revenues by selling advertising space on their Internet sites. An even greater opportunity lies in bundling and selling advertising space on the bank's ATM displays, receipts, and Internet site.

The fact is, despite defections from some Internet banking programs, consumer demand for Internet access to their banks will only increase. One of the key findings in our study was that more experienced Internet users were more likely to be involved in Internet banking. Of the participants who spent two years online, 29% signed up for Internet banking, compared with only 13% of those with less than two years of Internet usage.

That means over the next few years many current Internet users will gain the confidence necessary to try Internet banking. Access to faster, higher-quality connections and sites will only make online service easier and more convenient for consumers. And half of America has yet to come online.

While an Internet site will not necessarily help a bank gain significant market share, it is a competitive necessity - one that offers an opportunity to develop better customer relations. The key to success is creating an integrated channel strategy and a cohesive marketing approach.

Mr. Verdi is president of the Buffalo consulting firm Verdi &Co., a Diebold Inc. subsidiary that specializes in network optimization.

Note to Readers

"Viewpoints" is a regular feature in American Banker, appearing every Friday. It serves as a forum for discussion and debate on a wide range of issues in the financial services industry, including management approaches and strategies, legislative and regulatory matters, and public policy in general.
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