Wednesday, February 2, 2011

Costs, Capital ... and Delivery Channels

By Michael Scheibach

A recent discussion on LinkedIn's Community Bank Group asked about the top three challenges facing community banks. The answers ranged from costs and capital, to compliance and delivery channels.

In many respects, delivery channels can be considered the fundamental challenge because the costs associated with staying ahead of the technology curve requires capital.

Karen Massey, senior research analyst for IDC Financial Insights and author of a 2006 survey of U.S. consumer channel preference, said "Understanding the dynamics of channel utilization is critical for financial institutions and important as well for the vendors that serve the industry. Simply put, consumers want their banks to offer convenient, secure access, and they want their bank to know who they are."

In 2006, minimal changes were reported in branch and ATM use; however, call centers and online banking were showing significant growth. Since then, the introduction of smartphones has escalated the growth of mobile banking while raising the bar on expectations of the online delivery channel (e.g., e-statements and e-payments), raising questions about branch expansion, and redefining the role of the ATM in a bank's overall delivery strategy.

Another question might be appropriate: What are the three biggest challenges facing community banks in retail delivery channels?