Years ago, banks like Citibank and First Chicago took a beating for limiting teller access in an attempt to force customers to use ATMs. Ever since, conventional wisdom has held that firms must let the customer decide where to do business with them.

But that's no formula for profits. We believe that smart firms will encourage receptive customers to use the right channels for the right interactions -- a strategy we call right-channeling. For many routine transactions, the right channels are electronic, and the first step toward right-channeling is to identify the customers willing to move to those channels.

Finding the right customers for electronic channels

To understand which customers are receptive to electronic channels, we developed a new channel-use segmentation. Forty-seven percent of online US households, for example, have tried managing their accounts through an electronic channel like the Web or VRU but tell us they plan to use a human channel in the future.

These "human-inclined" consumers are the largest segment at every top US bank. Persuading these consumers to use electronic channels for high-frequency transactions like balance inquiries will save firms like SunTrust millions in human-assisted service costs.

Encouraging customers to move to electronic channels

How do you encourage customers to view their statements online? Our research shows that financial incentives like free check reorders boost interest in eStatements among online US households by 37%. In Canada, almost two-thirds of online households are ready to give up paper statements for the right financial incentive.

Among large European banks that serve small and midsize enterprises, some 65% use price incentives like discounts on online payments. But discounts won't solve profitability problems. We believe that service enhancements like single sign-on or collaborative advice tools will be more effective for these banks long term.

Right-channeling funds transfers

To move money between their accounts at different firms, most US consumers use paper checks. Interest in online me-to-me transfer services is high -- but consumers won't pay much for it and won't use it often. We think me-to-me is a good fit for a few firms like ING Direct and Countrywide Bank that are trying to grow savings and investment balances. American savers are a rich target: In our most recent survey, 86% tell us they're putting away money for emergencies, retirement, and kids' educations.

Got feedback?

We're very interested in your feedback on our research. Do you have topics to recommend, data you need, or technologies you want assessed? Drop me a line with your input at billdoyle@forrester.com


Bill Doyle
Financial Services Research Director

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