Internet banking initiatives are getting more respect from bank technology budgeters but perhaps not enough attention from strategic planners, a survey said.
Banks are increasing the proportion of their technology budgets spent on Internet banking, said an Ernst & Young survey released this month. But critical portions of their strategies remain vague, concluded the report, which was based on a survey of 100 financial institutions in 26 countries.
Banks "are spending money, but they haven't formulated a clear strategy for how e-commerce is going to benefit their business," said Phil Lawrence, director of e-commerce initiatives in Ernst & Young's financial services consulting group.
In the last year, banks are estimated to have doubled the share of their technology budgets devoted to all types of Internet banking applications, from 3% to 6%, the survey said.
Ernst & Young projected that that share would grow to 14% in 2001, which would be roughly equivalent to what banks spend today on branch technology.
Despite the increased emphasis, the typical financial institution cannot make a clear economic argument for offering Internet banking, said Mr. Lawrence. Many lack the ability to measure improvements in customer retention, savings, or revenue, he said.
Suggesting a lack of strategic planning, 31% of respondents were unsure whether they should price Internet products higher, the same as, or lower than traditional products.
U.S. institutions were the least sure. Seven of 10 were undecided on pricing, compared with 19% of the Europeans.
Mr. Lawrence also noted instances of institutions' clearly not executing economically viable plans. Some banks offering brokerage services at their Internet sites are finding that more people are visiting. But these customers are not making trades that generate revenue, he said.
Banks should hold off on spending until they develop a clear strategic goal, said Mr. Lawrence.
He cited Wells Fargo & Co. in San Francisco as having an Internet banking program that reinforces its approach of letting customers gain access to a consistent, integrated view of their accounts and portfolios.
More than 40% of banks in the survey had not integrated electronic commerce into other delivery channels.
Mr. Lawrence praised the "seamless integration" of Wells' automated teller machine, telephone, Internet, and branch delivery channels. Wells has "a sense of the kind of interaction they want to have with their customers," he said.
