– Thoughts on Strategy and Management

Retail banking via Internet

Due to my professional background I am also very interested in issues of banking in general and of retail banking in particular. Today I found the new research report “Banking online boosts and curbs customer loyalty” by Deutsche Bank Research. In summary most interesting outcomes are:

  1. Online banking customers probably are more loyal. The customer has a higher probability to consider his primary bank for purchase of other products and services.
  2. Consumers are ready to buy more financial products and services online. That might also include complex products such as mortgages.
  3. Emotions can play a major role to transfer a “regular” product into something special. Difficulties occur within the transformation from emotional touch into loyalty.

Well, in particular the second outcome is very stable. My justifications: Technological progress represents a impact factor, mainly Internet technology and the information technology. Both made the industrial production of financial services possible. This can cause further burdens which will appear in retail banks’ traditional business fields. According to a study of Prof. Klaus Klein (FH Munich) higher interest charges will be the reason that traditional retail banks will lose market share (down to 50% from 70 % today) for new loan contracts of housing finance by 2010. So called “direct banks”, independent financial consultants and finance brokers will be the winners of these developments. The considerably higher market share of those financial service providers in other countries (market share of online housing finance providers is over 66% in the USA; in the UK their market share is over 50% ) as well as the positive attitudes by customers according to these kind of service offerings are the fundament of this thesis.

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