Banking on Multimedia

Costs just 60 percent those of traditional banks Layering electronic channels on top of branches is the wrong answer Cashing in on three waves of technology As recently as a year ago, CEOs of banks, brokerage firms, and insurance companies worried mostly about competition within their own industries. Today, however, personal financial services providers see themselves pitted against a whole set of new players: information, software, electronic payment, transaction processing, and multimedia companies. Microsoft, First Data Corporation, ADP, and ATT to transform costly and cumbersome business processes; and to increase their limited resources and reach more customers through alliances. Many industry leaders are now wondering, however, whether their efforts have gone far enough, and are asking: * How will multimedia play out for us? * What pace of change is appropriate? * Is it better to attack or defend? * Who are the likely winners? * Where will the money be made? * How should we reshape our company culture? These are tough questions. As in all multimedia, how quickly things will change and how they will end up are impossible to predict. Yet despite the uncertainty, key factors - current technology, evolving consumer preferences, and the cost advantages of interactive and electronic transactions - indicate that the new multimedia competitors will transform the way in which financial services are delivered to consumers. And they will do so soon. The new financial institutions that are evolving will have delivery economics far superior to those of existing retail banks, as well as offering consumers much greater convenience. They will be especially attractive to younger and more affluent customers. With strengths like these, they pose a real threat to traditional financial institutions. In response, banks and other established providers will have to transform their branch-based delivery systems and at the same time make investments and build skills in order to compete against these powerful new entrants. What is a multimedia bank? A multimedia bank looks nothing like a traditional financial institution. It need have neither branches nor tellers (although it might choose to set up low-cost "microbranches" in busy locations to handle customers who want personal service or advice). It gives consumers easy access to a wide variety of financial services - credit cards, bill payment, insurance, investments, and brokerage - in a single integrated account. It offers products from many different providers: a bond fund from Fidelity, a credit card from Visa, a mortgage from Countrywide. Customers communicate with the multimedia bank through a range of devices including phones, PCs, faxes, and ATMs. All the information in their accounts is automatically downloaded and updated in real time as transactions take place. The advantages over conventional banking are numerous. Clearly, multimedia banking offers customers real convenience. It also gives financial institutions the opportunity to use information residing in the new integrated accounts to carry out highly tailored marketing. …