US banking: multi-channel integration key to distribution channel technology
18 Jul 2005, 17:18 GMT - According to a new Datamonitor report, multi-channel integration in US banking is tipped to become a key growth story in distribution technology. Total channel technology spend by year end 2008 is expected to increase by $3.3 billion over 2004 expenditure, creating a $16.5 billion opportunity for vendors.
It has become apparent that, rather than commit to any one channel in particular, many customers are choosing to make use of the full range of channels available to service their accounts, be it to perform basic transactions or research and buy new products.
The bank branch remains the most important channel in terms of revenue generation, with customers preferring to make high-value/complex product purchases face-to-face. eBanking is becoming an increasingly important channel for commodity product sales. Customers are using call center and A channels for basic transactions and to service their accounts.
By investing in process-centric multi-channel architectures and gearing functionality towards channels' strengths, US banks can offer seamless customer service across channels, in addition to improving cross-sell rates and leveraging process synergies to reduce costs. As such Datamonitor expects US banks' investment in channel integration, across all channels, to grow from $13.2 billion in 2004 to $16.5 billion in 2008.
Growth in multi-channel integration spend to outstrip individual channel spend
Datamonitor expects growth in spend on integrating channels as part of a multi-channel strategy to outstrip that of any individual channel, with a compound annual growth rate (CAGR) of 18.4% from 2004 to 2008, to reach an absolute value of $805 million.
Moving away from inflexible, siloed legacy systems and towards a process-centric multi-channel architecture will be the most important area of technology investment for banks, which will in turn enable banks to achieve straight-through-processing (STP) and leverage synergies across channels.
The technology areas of focus will include:
- Developing a multi-channel architecture for a single customer view
- Platform refresh to upgrade channel functionality and flexibility
- Automating processes and enabling STP
- Developing business intelligence and CRM analytic capabilities
- Fraud and regulatory compliance
Implications for vendors
Top-tier and niche banks investing in reengineering their retail banking architectures in order to move to service-oriented architectures (SOA) are likely to develop functionality in their eBanking channels and use it as a platform on which to migrate other channels, thus reducing channel-specific processes.
Mid-tier banks will increasingly opt for packaged offerings that have multi-channel capabilities, but will undertake investment on an incremental basis. Branch and online refresh projects will tend to take precedence, with banks building out multi-channel capabilities to form individual channels.
Many lower-tier banks in the US already outsource channels such as online banking and call centers to application service providers (ASPs), however, they will increasingly look to link channels together to harness the benefits of multi-channel integration. Going forward, lower-tier banks may start looking to outsource the entire channel architecture.