Read Time: 3 minutes
There is no question that online banking offers a slew of benefits to customers.
The convenience of it all is unparalleled, and it generates competition that might otherwise not be possible.
When customers have the option, they can go with better rates and lower fees from a bank that isn’t located anywhere near them. The benefits ultimately form a two-way street. Online banking is at least as beneficial for the banks as it is for customers.
A quick review of some of the most prominent boons reveals that banks generate good returns in a multitude of ways simply by offering online services.
Having an online presence is not free. Consider BB&T’s online banking service as an example. Creating such a smooth, easy-to-use experience required investment in professional web developers and cyber security. Maintaining the experience also comes at the expense of server maintenance and consistent updates. That said, it is an expected cost of modern banking.
Competition has forced even local banks to offer the convenient features that come with online banking, so there is a minimum online overhead associated with all banking. Expanding functionality and capacity for web features is in every case less expensive than physically expanding branch locations. This means that online capabilities enable banks to reach more customers and handle more traffic with less overall cost.
Additionally, expanding deeper into online and mobile operations correlates with a drop in teller traffic. This enables banks to spend less on labor even as business grows. The advantage of reduced overhead and the consequential improved profitability is at the core of every online banking advantage.
Reduced overhead costs make expansions far more affordable. For starters, a bank can afford to massively expand their customer base with very little investment. Since a physical location is not inherently necessary, banks can appeal to demographics without regard to geography. That already leads to massive gains overall, but it’s only the beginning.
An online presence is the foot in the door of modern marketing. That online presence is the key to reaching new customers at the fastest rates in history. Most importantly, this marketing can be done for remarkably small investment. This creates a “double dipping” mechanic for banks that enables them to earn money two-fold. They save operation costs and get access to more customers with one maneuver.
Getting new customers is great, but there is strong evidence that customer retention is the most important metric for profitability. This is just as true in banking as any other service-related industry. Online, especially mobile, features are at the heart and soul of customer retention. The convenience of online banking immediately boosts satisfaction. Skipping lines and having 24-hour access to services and records are mandatory features for banks to stay competitive.
This is compounded by the fact that mobile apps boost customer loyalty by up to 33 percent. Circling back to the concept of double dipping, this further reinforces the overall profitability model. On average, acquiring new customers is five times more expensive than retaining current ones (even accounting for the affordability of online marketing). As each component reinforces the others, online banking breeds benefits that multiply profit margins.
When a business has a nice profit cushion, they can take more chances. This is seen across the country, and many of the most successful businesses in any field are using extra money and comfort to reinvest in responsible practices. Particular to banking, green initiatives have taken strong hold in the past few years. Online banking options are already a first step in that direction as they substantially reduce waste. Saved money is also frequently spend on community outreach programs.
Anything from sponsoring school groups to charitable donations are only made possible when there is cash to spare, and this cash is generated by the repeating returns generated from online banking. It doesn’t hurt that responsible practices often contribute to customer loyalty and offer additional incentive for new customers to join a bank. Once again, each benefit of online banking pushes the potential of all of the others.
Online banking is clearly the future of financial institutions and management. No one doubts that. Still, reinforcing common knowledge with the overwhelming evidence in support of the change makes a powerful statement. Every time a customer takes advantage of a bank’s online banking services, they are contributing to the bank’s success.
That in turn creates more opportunities that benefit the customer and surrounding communities. This feedback loop of success is good for all parties involved with little to no drawback. For what it’s worth, everyone can enjoy online banking to its fullest and feel great about it in the process.