May 21, 2007

If you are of a certain age you are old enough to remember the "33 percent wall," -- the almost-mythic barrier to consumer acceptance of automated teller machines that prevailed through the 1980s and even into the early '90s. The challenge of getting more than one-third of retail banking customers to start using ATMs was for many years the subject of considerable analysis and debate at industry conferences and in the pages of publications such as Bank Systems & Technology.

That quest seems very long ago indeed when one looks at banking today. To mix metaphors, at some point a tipping point was reached and the "wall" was crossed. People stopped wondering when there would be a critical mass of ATM users. The reality is that the ATM industry ultimately matured more rapidly than anyone might have imagined in 1987.

Then the discussion shifted to the topic of the future of the branch and, eventually, to the viability of creating and managing a multichannel retail banking environment. But even those conversations, spurred by the emergence of the Web as well as competitive challenges from nonbanks, seem a bit quaint in light of new research from TowerGroup. Pointing to evidence that online banking is increasing in use at an annual rate of 27 percent -- compared to 7 percent for the call center, 1.4 percent for the branch and only 0.5 percent for ATMs -- the TowerGroup report, by research director Jerry Silva, describes online banking as "the most powerful retail channel banks have ever deployed."

The dominance of the online channel notwithstanding, the TowerGroup study finds that "consumers are interacting with their bank more than in previous years," regardless of channel. The opportunity (or challenge) for bank executives will be to increase collaboration across channels to create "a more synergistic environment."

Now there's a familiar message. If there is a wall metaphor to be applied to online banking, it's a barrier that banks, rather than customers, are going to have to surmount. To truly profit in a long-term, sustainable way from the online channel, banks have to do much better in terms of anticipating, understanding and supporting the customer's desire for a multichannel banking experience -- essentially, catching up with consumers who, a generation after the ATM boom, are the ones taking the lead.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & ...