Spurred by customer demands for better service, financial services companies have accelerated the integration of electronic channels such as the Web, e-mail, and automated teller machines with brick-and-mortar channels such as the call center and branch.

Those that get there first will reap significant benefits.

The early success of electronic commerce pioneers such as Amazon.com and E-Trade encouraged many brick-and-mortar businesses to establish on-line-only organizations in a hurry. Barnes and Noble, for example, established barnesandnoble.com.

In the banking industry, the perceived early success of Internet-only pioneers such as Security First Network Bank and Telebank caused the likes of Citibank, Chase, and Bank of Montreal to establish their own such divisions, Citi f/i, Chase.com, and mbanx, respectively.

Initially, the conventional wisdom was these new organizations should be kept separate from their parents. The goal was to provide a lower-cost alternative channel for transactions. This meant that the newly established on-line organizations had to concentrate on customer acquisition and, initially, ignore profits for the sake of market share.

Excellence in customer service was not one of the early priorities, because the Internet channel was not viewed as complementary to the others. Customers, on the other hand, did not consider the Internet channel separate, just as they do not view ATMs as separate. They expected, and still expect, a seamless integration of the channels through which they can transact business.

Lack of service is largely responsible for high attrition rates in the Internet channel. Among on-line retailers, attrition rates over 40% are common. In the case of on-line banks, attrition of more than three million customers has been reported.

The on-line-only organizations passed on their cost savings to customers, but they misjudged the customers' demand for service.

Customers of on-line retailers wanted faster delivery and interaction with customer support representatives for problem resolution and order-taking. Similarly, customers of on-line financial service institutions, particularly banks, wanted human interaction while executing various transactions.

On-line businesses responded to the demands for service by investing in brick-and-mortar channels. Retailers such as Amazon and Webvan started building warehouses. Banks such as Security First started establishing branches. As a result, the costs of on-line-only organizations are rising and are coming in line with those of the traditional organizations.

The on-line and brick-and-mortar channels need to be integrated so that marketing, sales, and service can be provided in a consistent manner to each customer. Here again the brick-and-mortar companies have an advantage, because they have already been working on establishing such an integrated customer experience.

But having the infrastructure is one thing. Exploiting it in an advantageous way is another. Companies will still have to address the following issues:

  • How do you allow for appropriate "ownership" of the customer whenever and wherever that customer chooses to interact? Who takes ultimate responsibility for a particular customer or customer segment, and how do they communicate their customer management strategies in a way that enables each channel to execute appropriately? Resolving these issues will allow the various organizations to determine ho/w to coordinate interaction with each and every customer.
  • How is a customer's value to the institution measured? That value drives the investment that must be made on each customer and prospect, and the decisions about the channels in which to make such an investment. For example, low-profit but technologically savvy customers may be directed to the Web site and be allowed only a few interactions with customer support representatives.
  • How is the customer made aware of and directed toward the various available channels? For example, Wingspan-Bank.com, part of Bank One Corp., launched a mass media campaign to build its on-line brand. Telebank has built its brand mostly through Web-based promotions.
  • Will certain product offers through the on-line channels also be available through the other channels? If so, information about the various offers and promotions must be simultaneously available at every customer contact point. Furthermore, customer contact personnel must be fully aware of the various offers so that they can interact effectively with each customer.
  • Will the customer be able to negotiate with the institution? If so, which customers will be allowed to do so and under what conditions? With the exception of high-net-worth and business customers, financial service institutions typically establish one-way outbound communication with customers and prospects, and such offers are either rejected or accepted.

The disintermediation offered by the Internet, the ability to better understand customer behaviors and characteristics, increased competition for customers, and high attrition rates are leading more institutions to let customers make counteroffers.If this carries over into banking, appropriate decision procedures must be set up for each point of customer contact. Furthermore, such procedures must be consistent across all types of channels, whether self-service or involving human interaction.


By tightly integrating on-line channels with brick-and-mortar, businesses are taking a significant step toward customer-centricity. Essential additional steps include establishing a customer-centric operating processes across the enterprise, integrating all customer data in a way that provides a view of each relationship throughout the enterprise, and adopting enterprise relationship management technologies. Businesses that started with on-line-only operations can achieve customer-centricity much faster, because they typically have better technology and data infrastructures and can institute operating processes and procedures more expeditiously.Channel integration also helps institutions:

  • Provide and manage incentives for customers to use lower-cost delivery systems.
  • Offer customization tools for customers to make and create their own products.
  • Coordinate marketing and promotions across all channels. (Some early-adopting organizations are showing how effective multichannel campaigns improve customer response rates and sales.)

In short, channel integration provides opportunities that are crucial to a company's e-commerce efforts and help drive the entire organization toward customer-centricity. Mr. Simoudis is president of Customer Analytics, a marketing software firm in Dallas.

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