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35June 2012

Given the intense hunt or growth in a

tight market, this seems improbable.

Yet that is exactly whats happening

at many regional banking companies.

The customers in question are

those who have drited away romthe branch and now do most o their

banking at arms length. Seldom seen

in lobbies, these virtual domiciled

customers have built their bank-

ing lives around alternatives such as

online and mobile banking, automated

teller machines and contact centers.

According to Novantas research,

inrequent branch users now consti-

tute rom 20% to 40% o the retail

customer base at various regional

banks (Figure 1). And their rankslikely will grow, mirroring the trend

in other retail industries, such as

electronics stores and book store

chains, which have seen dwindling

customer trafc in storeront outlets.

Banks need an organized,

deliberate response to this trend. Yet

most have thus ar ailed to eectively

manage the critical virtual domiciled

segment.

To successully retain and grow

this customer group and capture agreater share o wallet, retail banks

must change the way they do business

across fve areas: sales and market-

ing; controlling delivery costs; network

confguration; customer analytics; and

ultimately, organizational structure.

Cross-sell opportunity

Clearly, the near term priority is sales

and marketing. Banks have an imme-

diate opportunity to cross-sell credit to

the deposit customer base. Yet rare isthe bank with a robust multi-channel

strategy to cross-sell virtual-domiciled

depositors. Players that succeed in

capturing this business in the next 12

to 18 months will enjoy a virtually

unassailable lock on the virtual domi-

ciled customer relationship.

While branch lobby-based initia-

tives still deserve considerable atten-

tion, these need to be complemented

with a more deliberate outreach

to the multi-channel customer. Our

research indicates that the major-

ity o new retail customers acquired

over the past fve years seldom see

a bank lobby. Banks need to learn

how to reach these customers on their

own terms, and provide products

that are clearly designed or non-

branch marketing and servicing.

BY RICK SPITLER AND DAVE KAYTES

Retail banking customers increasingly are skipping branch lobbies in favor of remote

alternatives such as online banking. Are they receiving adequate management atten-tion? Are retail banks overlooking a major segment of their customer base?

Virtual Customers: Whos Minding the Store?

We estimate that currently

25% of the retail customer

base is attitudinally receptiveto using alternative channels

as complete substitutes for

everyday branch transactions.

And we believe the receptivity

ratio is destined to increase.

Direct

Credit Union

National

Regional

Community

81%

41%

37%

29%

27%

13%20%23%25%26%29%32%

33%33%36%37%37%

42%57%

99%ABCDEFGH

IJKL

NM

O

1a: Percentage by Bank Category

1b: Percentage by Bank(Disguised)*

*Credit Unions and Community bankshave been excluded rom igure 7b

due to individual bank sample sizes.

Figure 1: Virtually DomiciledCustomer Distributions

COMMENTARY

As seen in BAIBanking Strategies

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