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Internet Banking, A Dual Strategy.doc
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Short Description: According to data from the Spanish Banking Association (AEB), at the end ... banking is still far from reaching the deposits of high street banks. ...
Content Inside: Internet Banking: A Dual Strategy Carlos Mora The enormous investments made in the Internet over last few years now seem very far off. With the dot coms in crisis, it seems that the situation is returning to normal following the initial euphoria. This is also true of the banking sector. During the dot com boom, the Spanish banks felt obliged to go online as they faced the perspective of a more global scenario. The banking sector had traditionally been a sector with significant entry barriers generated through the need to acquire an important number of branches. The arrival of the Internet posed a threat to the sector since banks could now operate on the net without the need to create a wide branch network. This threat was interpreted by the large banks as being an opportunity to increase their market by using the Internet as an instrument for expansion. Specifically, the banking sector then undertook two clearly differentiated strategies: they created new banks which operated exclusively online, and launched Internet versions of their banks as an extra channel through which to offer online services. Exclusively Online Banks These online banks started off using very aggressive price strategies and advertising to quickly capture a high number of users. This strategy has not, yet, enjoyed the success envisaged. According to data from the Spanish Banking Association (AEB), at the end of April 2001 deposits in online banks totalled 288,000 million pesetas, representing 0.55% of all the deposits in banks in Spain. In spite of this important growth, online banking is still far from reaching the deposits of high street banks. This delay in the expectations regarding growth has led the banks to observe the ne eds of their users and, in consequence, to adapt their strategy. Today, as is indicated in the study "Online Banks" by PricewaterhouseCoopers and Cinco Días, the majority of online bank users normally use their online accounts mainly to view their statements and request information, to make transfers and to make payments of small amounts. Users prefer to carry out other operations at their branch, even though they have the possibility to do them online. When such large-scale changes appear, users require a period of learning and adaptation which allows them to use the new means with ease and to trust the efficiency and correct working of the basic services on the net, and also to see their advantages. Moreover, users feel there is more security when telepho ne support and physical contact in the branches are available, especially in critical operations such as the opening of new accounts, the taking out of mortgages or loans and in transfers of large amounts of money. This situation has led the majority of exclusively online banks to open up branches in the principal cities or to place customer service stands in shopping centres. This is the case of Patagon, the BSCH's online entity, which has started to place an important number of branches by way of offices or stands in some shopping centres.
