snapshot E-Banking Managing multichannel - the reinvention of customer retention Internet & New Economy Economics June 2002 No. 2

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1 Internet & New Economy June 2002 No. 2 Editor Antje Stobbe antje.stobbe@db.com Technical Assistant Sabine Loetto sabine.loetto@db.com Frankfurt am Main Germany Internet: marketing.dbr@db.com Fax: Managing Directors Axel Siedenberg Norbert Walter E-Banking snapshot Managing multichannel - the reinvention of customer retention 1. In Germany, online banking has become a firmly established channel offered by virtually all banks. The same holds true for most other European countries, though the Nordic countries are ahead of the Mediterranean laggards. 2. The number of online banking clients will increase further, whereas the number of branches has decreased and will continue to do so in the future. But branches will remain important for clients. 3. Financial-services customers in Germany consider many different channels to be significant for them, with branches, ATMs and the internet being the major ones. Multichannel is therefore state-of-the-art.. In the medium term the multichannel approach will play an even larger role in banking. This is also valid for brokerage where the number of multichannel clients will grow faster than the number of pure online brokerage clients. 5. Customers who show a preference for online transactions are typically middle-aged, higher-income and male and these clients provide the potential for a wide range of cross-selling activities. 7. The very rich, the so-called high net-worth individuals, demand a multitude of channels for their financial transactions. For them consultants are very important. Moreover, new channels the internet and mobile access in particular have high potential among this group. 8. As clients of financial service providers have raised their requirements, they have also become less loyal to their banks. 9. If banks want to continue to exploit the efficiency potential of the online channel, they should make it relatively more attractive. The elimination of deficits as perceived by the clients will play a major role in this context. Jürgen Schaaf, (juergen.schaaf@db.com)

2 Managing multichannel - the reinvention of customer retention Banks offering Web banking ( of retail banking customer base) In Germany, online banking has become a firmly established channel offered by virtually all banks. The same holds true for most other European countries, though the Nordic countries are ahead of the Mediterranean laggards. Portugal Italy Germany France Finland United Kingdom Source: Forrester, 2001 Online and offline trends in the German banking sector Branches (left) m Online users in Germany (right) The number of online banking clients will increase further, whereas the number of branches has decreased and will continue to do so in the future. But branches will remain important for clients Online banking users in Germany (right) Sources: Deutsche Bundesbank, 2002, DB Research forecast, Jupiter MXX,

3 Importance of access channels for customer s loyalty to own bank < Branch ATMs Internet (incl. e- mail) < 5 < 5 Telephone banking In-store bank branches Mobile distribution through advisers 3. Financial-services customers in Germany consider many different channels to be significant for them, with branches, ATMs and the internet being the major ones. Multichannel is therefore state-ofthe-art < 3 Interactive TV banking < 3 Mobile terminals Base: persons aged 16 and over (719 interviews) - multiple responses accepted Unimportant Not so important Important Very important Extremely important Source: CONTEXT, 2001 Development of online brokerage and multichannel brokerage clients in Germany until 2005 m Pure online brokerage clients Source: Forrester, Multichannel brokerage clients In the medium term the multichannel approach will play an even larger role in banking. This is also valid for brokerage where the number of multichannel clients will grow faster than the number of pure online brokerage clients. 3

4 The typical online banker is middle-aged, higher-income and male Online banker Internet user All Male Average age (years) High education High income Household assets (EUR) 92,000 85,000 7,000 Online experience (years) N/A Technology optimist Career-motivated Customers who show a preference for online transactions are typically middle-aged, higherincome and male... Source: Forrester, 2002 Online bankers own more financial products "Which of the following financial products do you have?" (multiple responses accepted) Life insurance Other insurance Insurance products Car insurance Pension funds Investment funds and these clients provide the potential for a wide range of crossselling activities. Shares Investment products Savings account Personal loan Mortgage Credit card Credit products Use online banking Do not use online banking Source: Forrester, 2002 Communication channels preferred by high net worth individuals, now and in future Portals/virtual marketplaces Mobile channels (e.g. WAP) Client information centre/call centre Internet (ebanking/brokerage) Consultant (visits client) Consultant (at bank) Consultant (telephone) 7. The very rich, the so-called high net-worth individuals, demand a multitude of channels for their financial transactions. For them consultants are very important. Moreover, new channels the internet and mobile access in particular have high potential among this group Use now Will use within the next year Will use in three years Source: PWC, 2001

5 Online banking customers - business with numerous banks Only one bank banks banks banks Homebanking users All bank customers 8. As clients of financial service providers have raised their requirements, they have also become less loyal to their banks. 5 banks and more 1 Base: Germany; bank customers aged 1 to 6 Source: ACTA, 2001 Pull factors (for online banking und brokerage) "What would be an incentive for you to use online banking services?" The banks assume security risks 58 Higher interest rates or credits 51 If it were no longer convenient to get to a bank branch 50 If services at the branch got more expensive If I could get telephone support when needed If I understood more about the internet If banks want to continue to exploit the efficiency potential of the online channel, they should make it relatively more attractive. The elimination of deficits as perceived by the clients will play a major role in this context. No interest Other reasons 3 Base: 513 Germans (multiple responses accepted) Source: Forrester,

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