Publications & Resources

September/October 2012
Technology

The Virtual Branch: The Channel of One

By David L. Peterson

The cost savings and geographic benefits that online and mobile banking offer community-focused institutions are resoundingly clear. With today’s technology, both retail and commercial consumers can accomplish most of their banking needs virtually, and many people are identifying the e-channel as their primary banking method. Recent statistics from Javelin show that 75 percent of all transactions already occur outside the physical branch. Yet, most community banks have not adjusted their business plans to accurately reflect the value of this resource. Considering the e-channel as a branch of its own – a virtual branch – enables banks to embrace changing preferences, experience cost savings and deliver the level of convenience and control consumers demand.

Keeping connected with your virtual customers

Identifying online banking as a virtual branch rather than a supplementary resource requires a bank to first fund the operations of the virtual branch as it does for physical branches; secondly, place a senior officer in charge of the virtual branch’s success; and finally, create a plan for connecting with, educating, and providing equipment maintenance for online customers. Upholding high levels of engagement begins with a bank’s senior management, who must view the virtual branch with equal importance as a physical location.

Even the savviest online customers will quickly become frustrated if they experience challenges executing remote transactions and will associate these problems with the bank. For example, if a check scanner malfunctions because it was not maintained properly (the customer’s responsibility), he or she might still develop a negative association with the institution issuing the technology. Banks can counter this issue by sending periodic equipment upkeep reminders and cleaning cards. While this direct communication involves more effort, it results in long-term success for both customers and the institution. Banks can easily justify this, and any expense associated with the operation of a virutal branch, by consiering the cost savings created by customers who primarly interact via the online channel instead of the branch.

Savvy online banking customers still need education and support

Traditionally, banks have not provided a great deal of education to customers on their services. Yet, a virtual branch empowers customers with a self service option for most transactions, putting equipment under their control. E-channel training should focus on how to operate and maintain systems and equipment, such as mobile apps, check scanners and POS devices. A virtual branch’s customer support must parallel the bank’s in-branch service.

Online education and support should emphasize the competent, efficient instruction and one-stop problem solving. No one likes to be shuffled from one person to another when in a physical branch, and via the phone or online this can cause a bank to lose the customer altogether.

Don’t let security concerns hold you back

Cybercrime discourages some banks from the e-channel, and mobile in particular, especially since self-service puts transaction information and sensitive data directly into consumers’ hands. Rather than avoid online and mobile banking altogether, focus on providing a strong anti-fraud risk management program that includes behavioral analytics to govern and protect customers’ online transactions.

Changing image of a branch

It is important to note that the shift to self-service banking is not a declaration that the physical branch is dead. Rather, the physical branch is transforming as customer preferences change and the establishment of a virtual branch is part of a bank’s overall strategy to serve customers’ ongoing needs .

A strong virtual branch is a combination of systems designed to efficiently handle online transactions along with highly skilled online staff. Successful financial institutions have senior management that acknowledge the cost savings and income that these customers represent, and allocate resources accordingly to provide a superior customer experience. A change in thinking, and a subsequent change in business focus, can provide the virtual branch foundation that community banks need to better compete in the marketplace by yielding more satisfied customers and increasing revenue opportunities.

David L. Peterson is executive vice president of customer experience and innovation for Q2ebanking, a provider of highly secure electronic banking solutions for banks throughout the U.S. He can be reached at dpeterson@q2ebanking.com.